The Council of Economic Advisers

August 2020

September 29, 2017

Evaluating the Effects of the 

Economic Response to COVID-19
CEA • Evaluating the Effects of the Economic Response to COVID-19 1

Executive Summary

In response to the COVID-19 pandemic, the U.S. Federal government acted with unprecedented 

scale, speed, and coordination, surpassing past efforts to mitigate previous crises. The Council 

of Economic Advisers finds that these historic policy responses, coupled with a strong prepandemic economy, ameliorated a stark economic contraction while improving expectations 

for a recovery in 2021 and protecting the economic well-being of the Nation’s most vulnerable 

households and industries. 

In particular, measures designed to maintain employer-employee matches, most notably the 

Paycheck Protection Program (PPP), have helped stabilize labor markets and facilitated

recovery by allowing firms to retain workers and to rehire them as conditions improve. As a 

result, an estimated 80.6 percent of layoffs are likely to be temporary rather than permanent.

Coupled with other relief provisions, these measures have likely helped avert small business 

bankruptcies from April to June from a predicted spike of 154.9 percent to a decrease of 1.8 

percent year-over-year. Small business bankruptcies in these months were even below 

February and March levels, counter to expectations given the dire state of the labor market.

Total Chapter 7 bankruptcy filings for consumers and businesses are down 13 percent from 

October 2019 to July 12, 2020, compared with the same period a year ago, with nearly all the 

decrease occurring since the end of February. In addition to the PPP, the U.S. Department of 

Agriculture’s Coronavirus Food Assistance Program provided $16 billion in direct payments to 

suffering farmers, which the CEA finds stabilized forecasts for net farm incomes.

The CEA further finds that income replacement and cost mitigation cushioned the shock to 

household incomes, as disposable income increased 5.4 percent starting in February, largely

due to expanded unemployment insurance (UI) and economic recovery rebates. Low-income 

households benefited the most from these measures. Economic recovery rebates were 

sufficient to keep a family of four out of poverty for 1.5 months—even if they lost all other 

income. Moreover, households in the bottom 10 percent of the income distribution received 

enough assistance, on average, to replace 2.8 months of income per household. Without these

provisions under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a household 

at the 10th percentile of the income distribution would have experienced a 13 percent 

reduction in income in March and April 2020 compared with its February 2020 level. However, 

because of expanded UI and the one-time checks, these households’ monthly income was 165 

percent ($1,901) higher in April and 14 percent ($157) higher in May compared with February 

2020. UI helped the most vulnerable workers; those industries that were hardest hit by COVIDinduced shutdowns saw the largest share of workers receiving higher compensation from UI 

than from employment. More than 9 in 10 workers in the accommodation and food services 

industry, which lost 3.9 million jobs from February to June, were eligible to receive more from 

UI benefits than from working. In the retail trade industry, which lost 1.3 million jobs from 

February to June, nearly 83 percent of workers could receive more from UI benefits than from 

working. 
CEA • Evaluating the Effects of the Economic Response to COVID-19 2

Throughout the pandemic, current evidence suggests that borrowers have been able to find 

various forms of loan relief. Consumer debt and credit indicators have not yet shown the 

deterioration expected, given the unprecedented loss of private income experienced by 

households. Severe delinquency rates remain low or have fallen across all types of debt, 

possibly due to an increase in loan accommodations, most drastically for student loans. Bank

card balances also fell, while lenders have kept credit limits constant, in contrast to when they 

cut credit limits during the Great Recession. Even so, these early indicators have the potential 

to change rapidly.

Finally, the CEA finds that additional measures to stabilize financial markets—including loan 

forbearance, as well as the unparalleled provision of liquidity by the Federal Reserve, 

augmented by the Department of the Treasury under the CARES Act—effectively alleviated 

emerging stresses in credit markets, averting a financial crisis such as that observed in 2008–9.

It is important to note that the results presented in this report are current as of the middle of 

July 2020. As we obtain new data, we will continue to update the report and monitor the 

recovery. However, it does appear as of now that the increase in transfer payments resulting in 

a marked increasein personal income and savings, and the expanded liquidity measures aimed 

at firms, will likely provide a buffer to households and businesses for the next few months, 

allowing them to weather the worst of the crisis.
CEA • Evaluating the Effects of the Economic Response to COVID-19 3

Introduction

Beginning in February 2020, the United States experienced its worst macroeconomic shock 

since the 1930s.1 As a direct result of the arrival of severe acute respiratory syndrome 

coronavirus 2 (SARS-CoV-2) and consequent measures to contain and mitigate viral 

transmission, real output was on pace to contract by as much as 8 percent in 2020,

2 marking 

the worst economic contraction since 1932. With the S&P 500 index facing its worst decline 

since the financial crisis of 2008–9 from February 19 to March 23 (–33.9 percent), the median 

private sector forecaster was projecting that unemployment would reach 19.0 percent in May 

2020, its highest level since the Great Depression and almost twice its peak in the aftermath of 

the 2008–9 crisis. 

In the face of this exogenous economic shock of historically unprecedented scale and speed, 

the U.S. Federal government responded with equally unprecedented scale and speed. Within 

a week of the first reported COVID fatality, Congress passed, and President Trump signed into 

law, the Coronavirus Preparedness and Response Supplemental Appropriations Act. Within 

four weeks, Congress passed, and the President signed into law, two further pieces of 

legislation, including the CARES Act, which provided $2.2 trillion in direct financial support to 

American firms, households, medical establishments, and State and local governments. At the 

same time, the Federal Reserve expanded its balance sheet by more than $3 trillion to ensure 

sufficient liquidity in financial markets.

In this report, the CEA finds that the historic policy responses to the adverse shock of COVID-19 

mitigated what was on pace to be a macroeconomic contraction on par with the Great 

Depression. In particular, measures designed to maintain employer-employee relationships, 

most significantly the Paycheck Protection Program (PPP), played a key role in allowing firms 

to retain workers on leave. By limiting eligibility to small and medium-sized enterprises, PPP 

targeted this aid to those employers most at risk of having to terminate employees. PPP may 

thus have helped avert bankruptcies as well by giving employers the economic cushion they 

needed to weather the economic fallout of COVID-19.

The CEA also finds that income replacement and cost mitigation helped to cushion the shock 

to household incomes and thereby facilitated a stabilization and recovery in consumer 

spending, which alone constitutes 70 percent of the U.S. economy. In particular, expanded 

unemployment insurance and pandemic assistance benefits, as well as rebate checks for 

households earning below set thresholds, largely offset coincident declines in household 

compensation as a result of economic shutdowns. The CEA finds that income replacement 

rates were highest at the lower end of the income distribution, indicating that relief was 

targeted toward households that were more vulnerable to an adverse income shock.

 

1 This report reflects data available as of the week of July 13, 2020.

2

In May, the average of the 10 most pessimistic forecasters from the Blue Chip Panel was 8.2 percent. 
CEA • Evaluating the Effects of the Economic Response to COVID-19 4

Finally, the CEA finds that additional measures to stabilize financial markets—including loan 

forbearance for student loans and mortgage payments, as well as the unprecedented provision 

of liquidity by the Federal Reserve, augmented by the Department of the Treasury under the 

auspices of the CARES Act—effectively alleviated emerging stresses in credit markets. By 

mitigating the transmission of a real economic shock to credit markets, Federal responses to 

COVID-19 may have helped in averting a situation, such as observed in 2008–9, in which 

financial markets amplified the macroeconomic effects of the adverse hit to real output.

We begin, in chapter 1, by documenting the timeline of the COVID-19 shock and associated 

public health responses, noting that at the peak of the shutdowns, more than 90 percent of 

Americans were subject to shelter-in-place orders. Employing high-frequency economic data, 

as well as real-time forecasts, we also quantify the magnitude of the economic disruption and 

situate it within its historical context, including comparisons with past economic and financial 

crises. We then proceed, in chapter 2, to analyze the effects of the CARES Act on halting the 

deterioration in the outlook for output and unemployment, as well as attenuating predicted 

small business bankruptcy filings and adverse shocks to household incomes, particularly at the 

lower end of the income distribution.

In chapters 3 and 4, we examine in greater detail specific provisions of the CARES Act and 

contemporaneous policy measures to stabilize labor and capital markets. First, we estimate 

income replacement by income percentile and sector, further documenting the targeted 

nature of income replacement toward lower-income deciles and sectors. Second, we similarly 

quantify the distribution of PPP lending among firms, demonstrating that PPP aid skewed 

toward smaller firms and loan amounts. Third, we more closely evaluate the impact of fiscal 

and monetary interventions on averting small business bankruptcies and credit market 

disruptions more generally.

We conclude by situating the fiscal and monetary responses to the COVID-19 shock within its 

historical context, in particular relative to the economic crisis of 2008–9 and attendant policy 

responses. We find that along multiple dimensions, the magnitude and speed of the economic 

shock adversely affecting the U.S. economy in 2020 exceeded that of the 2008–9 financial crisis, 

and likely constituted the most severe economic shock since the 1930s. We further document 

that both the speed and scale of the response to that shock were historically unprecedented, 

and were furthermore targeted toward firms and households most vulnerable to adverse 

income disruptions. This may have helped alleviate the magnitude of the shock for households 

and firms, at least in the short run. As the Nation’s economy recovers slowly from this crisis, it 

is imperative that we continue to monitor the health of households and businesses to ensure 

that all necessary steps continue to be taken to get the country back on track.
CEA • Evaluating the Effects of the Economic Response to COVID-19 5

CHAPTER 1

Origins of the COVID-19 Pandemic, Economic Impact, 

and Policy Timeline

On January 7, Chinese researchers announced the discovery of a new virus, severe acute 

respiratory syndrome coronavirus 2 (SARS-CoV-2), which causes the disease COVID-19, in 

Wuhan, a travel hub city in China.3 On January 21, the first case of a person contracting the new 

COVID-19 virus after traveling from Wuhan was reported in the United States.4 By late-February, 

the Centers for Disease Control and Prevention (CDC) had confirmed the first possible instance 

of community transmission in the United States, and the S&P 500 had begun a sharp sell-off 

that continued through March 23, losing 33.9 percent of its value compared with its peak just 

before the outbreak.5

The Trump Administration responded by promptly putting in place nonpharmaceutical

intervention policies to contain the virus.6 Travel restrictions on China were imposed on 

January 31, and the restrictions were subsequently expanded to 26 countries in Europe and 

several other countries by mid-March.7 On March 13, President Trump declared COVID-19 a 

national emergency.8 The adoption of a host of social-distancing measures—which included 

school closures, bans on group gatherings, and closures of restaurants—became prevalent 

across States shortly thereafter. By March 23, Statewide school closures and restrictions on 

bars and restaurants had affected over 90 percent of the U.S. population (figure 1). By March 

30, 30 States had issued stay-at-home orders, with an additional 13 States having issued these 

orders in parts of the State. By early April, over 90 percent of the U.S. population lived in a State 

that had issued a stay-at-home order.

9

 

3 Chinese researchers isolated and confirmed a novel coronavirus after identifying a cluster of acute respiratory 

illnesses in Wuhan on December 31, 2019 (Patel and Jernigan 2020).

4 The CDC announced the first case in the United States when a traveler sought treatment after returning from 

Wuhan to Washington State a few days earlier; see https://www.cdc.gov/media/releases/2020/p0121-novelcoronavirus-travel-case.html.

5 The first case of COVID-19 with no prior travel to infected regions was confirmed by the CDC; see

https://www.cdc.gov/media/releases/2020/s0226-Covid-19-spread.html.

6 The CDC defines nonpharmaceutical interventions as actions, apart from vaccination and taking medicine that 

people and communities can take to slow the spread of illnesses like the COVID-19 pandemic. 

7 Proclamation on suspending non-U.S. citizen travelers from China; see 

https://www.whitehouse.gov/presidential-actions/proclamation-suspension-entry-immigrants-nonimmigrantspersons-pose-risk-transmitting-2019-novel-coronavirus/. With respect to the expansion of the travel ban to the 

Schengen Area, see https://www.whitehouse.gov/presidential-actions/proclamation-suspension-entryimmigrants-nonimmigrants-certain-additional-persons-pose-risk-transmitting-2019-novel-coronavirus/

8 COVID-19 declared a national emergency; see https://www.whitehouse.gov/presidential-actions/proclamationdeclaring-national-emergency-concerning-novel-coronavirus-disease-covid-19-outbreak/.

9 After the Administration’s efforts to inform the American public, States began introducing restrictive mandates 

and regulations dictating protective behavior. The CEA finds that 67 to 100 percent of the observed total increases 

in a variety of protective behaviors appears to have been driven by the American people’s voluntary decisions and 
CEA • Evaluating the Effects of the Economic Response to COVID-19 6

Studies of the economic impact of past pandemics have indicated that there are three main 

channels through which pandemics affect economic activity:

10 (1) increased mortality, (2) 

illness and absenteeism, and (3) avoidance behavior to reduce infection. These shocks reduce 

the size of the labor force, aggregate productivity, and aggregate demand. Consistent with 

those observations, the economy has experienced sudden, large, and simultaneous shocks to 

both supply and demand since the COVID-19 outbreak in the United States. On the supply side, 

many businesses were shuttered by social-distancing measures that were put in place or 

voluntarily adopted by businesses to stop the spread of the virus and “flatten the curve.”

11

Those that remained open faced supply disruptions that prevented them from operating 

normally. On the demand side, many consumers faced stay-at-home orders or voluntarily 

limited their economic activity to reduce the risk of contracting the disease.12 Consumers also

 

the Administration’s efforts to encourage these voluntary decisions, and only 33 percent to be accounted for by 

restrictive State mandates.

10 Jonas (2013); Kilbourne (2006); Burns, van der Mensbrugghe, and Timmer (2006); Verikios et al. (2011); McKibbin 

and Sidorenko (2006); CEA (2019); McKibbin (2009).

11 For example, on March 11 (before President Trump’s announcement of COVID-19 as a national emergency), the 

NBA had already suspended basketball games indefinitely. The following day, Major League Baseball delayed the 

start of its season, the National Hockey League suspended games, and March Madness was canceled.

12 Baqaee and Farhi (2020) model the distinct shocks to supply and demand and study how the combination of 

supply and demand shocks explains the data. They argue that without the negative shock to aggregate demand, 

the United States could have experienced stagflation, or a combination of rising unemployment and rising prices. 

Instead, the negative shock to aggregate demand has limited inflation. 

Shelter orders

School closures

Limit bars and 

restaurants

0

10

20

30

40

50

60

70

80

90

100

3/13/20 3/20/20 3/27/20 4/3/20

Figure 1. Percentage of U.S. Population Under Statewide Restrictions, 

2020

Population (percent)

Sources: New York Times; State policy announcements; CEA calculations.

U.S. COVID cases 

pass 20,000 CARES Act signed

U.S. COVID cases 

pass 200,000 4/9/20
CEA • Evaluating the Effects of the Economic Response to COVID-19 7

changed the composition of their demand; for example, they replaced restaurant meals with 

home-cooked meals and increased their demand for cleaning supplies.

High-frequency indicators that proxy for demand across various economic activities show the 

downturn began in early March, in some cases before Statewide social-distancing measures 

were implemented, and reached its trough at the end of April. Daily credit card spending 

started plunging in mid-March, bottomed out at -30 percent year-over-year growth rate at the 

end of March, and has since recovered to slightly above zero percent growth in June (see figure 

2). Daily traffic congestion (figure 3) and seated diners (figure 4) across all States had already 

dropped over 20 percent compared with the same time a year before when restaurants were 

limited and shelter-in-place orders extended, and had begun to recover in late April. However, 

recent surges in cases have led seated diners to plateau at about 60 percent below 2019 levels 

nationwide. Similarly, weekly hotel occupancy had dropped 56 percent year-over-year in the 

week these measures began, and has continued to recover since mid-April (see figure 5). 

-40

-30

-20

-10

0

10

02/01/20 02/29/20 03/28/20 04/25/20 05/23/20 06/20/20

Figure 2. Retail Spending, Seven-Day Average, 2020

Year-over-year change (percent)

Source: Proprietary spending data.

Note: "Restrictions" refer to shelter-in-place and dining restrictions. The CARES Act was signed into law on March 27, 

2020.

Restrictions

begin

First wave of states lift 

shelter-in-place orders 

7/13/20

CARES Act 

signed

Retail spending 

data
CEA • Evaluating the Effects of the Economic Response to COVID-19 8

-80

-60

-40

-20

0

20

40

03/06/20 03/20/20 04/03/20 04/17/20 05/01/20

Figure 3. Traffic Congestion, Median Across All States, Seven-Day 

Average, 2020

Year-over-year change (percent)

Sources: TomTom; Exante; CEA calculations.

5/10/20

Shelter-in-place and dining 

restrictions begin

First wave of states lift

shelter-in-place orders 

-100

-80

-60

-40

-20

0

20

02/24/20 03/16/20 04/06/20 04/27/20 05/18/20 06/08/20 06/29/20

Figure 4. OpenTable Seated Restaurant Diners in the U.S., SevenDay Average, 2020

Year-over-year change (percent)

Sources: OpenTable; New York Times; CEA calculations.

7/13/20

Shelter-in-place and

dining restrictions begin

First wave of states lift

shelter-in-place orders
CEA • Evaluating the Effects of the Economic Response to COVID-19 9

Supply indicators—the number of small businesses opened, number of hourly employees 

working, and number of hours worked—also saw the steepest year-over-year contraction in 

March and April. Figure 6 illustrates how these indicators compared with a January pre-COVID19 baseline, as reported by Homebase.13 After shelter-in-place orders became widespread in 

mid-March, the number of employees working fell from about 15 percent below normal 

conditions to about 55 to 60 percent below normal conditions. As States begin to lift their 

shelter-in-place orders, hourly employees are beginning to go back to work. As of July 13, 

employees working at small businesses using Homebase are about 25 to 30 percent below 

normal conditions.

 

13 Homebase is a company that provides software to help small business owners manage employee timesheets. 

Since the start of the pandemic, Homebase has maintained a database of U.S. small business employment using 

data from more than 60,000 businesses that use their software. The data cover more than 1 million employees 

that were active in the United States in January 2020. Most Homebase customers are businesses that are

individually owned or operator managed in restaurant, food and beverages, retail and services.

-70

-60

-50

-40

-30

-20

-10

0

10

01/04/20 02/01/20 02/29/20 03/28/20 04/25/20 05/23/20 06/20/20

Figure 5. Weekly U.S. Hotel Occupancy Rate, 2020

Year-over-year change (percent)

Sources: STR data; CEA calculations.

7/11/20

Shelter-in-place and 

dining restrictions begin

First wave of states lift 

shelter-in-place orders
CEA • Evaluating the Effects of the Economic Response to COVID-19 10

As the indicators discussed above show, the restrictions on mobility and the shift toward social 

distancing played a major role in defining the state of economic activity. As restrictions have 

eased, and the move toward reopening has begun, employees are returning to work;

businesses that were the hardest hit, such as restaurants, have started to take customers again;

and people are starting to travel, stay in hotels, and spend again. 

Comparison with Earlier Shocks

While the long-term effects of COVID-19 on the economy are uncertain and depend on how the 

disease progresses, the initial negative shock was unprecedented. Due to their short reporting 

lag, initial claims for unemployment insurance (UI) provide timely information on how the 

COVID-19 pandemic and containment measures affect the labor market. In March, job losses 

occurred at a level not seen since the Great Depression, with weekly UI claims spiking from 

282,000 the week ending March 14 to 6.9 million two weeks later (figure 7). This recent peak in 

UI claims dwarfs the Great Recession’s peak. However, UI claims during the Great Recession 

rose much more gradually, taking more than a year after the recession began to peak and 

several years after to return to precrisis levels. Weekly initial UI claims remained high but 

steadily decreased throughout the following months, with the total number of individuals 

receiving UI benefits peaking at 24.9 million on May 9, representing over 16 percent of the 155 

million non-self-employed civilian labor force reported in February 2020 (figure 8). These

unemployment numbers do not include individuals receiving assistance through the Pandemic 

Unemployment Assistance (PUA) in the CARES Act. Although the unemployment rate reached 

14.7 percent in April, the highest rate since official data were first collected in 1948, 

unemployment declined to 13.3 percent in May despite expectations of an increase and 

continued to fall to 11.1 percent in June, marking the two largest over-the-month drops in the 

Hours worked by hourly employees

Local businesses open

-70

-60

-50

-40

-30

-20

-10

0

10

03/02/20 03/23/20 04/13/20 05/04/20 05/25/20 06/15/20 07/06/20

Figure 6. Percent Change in Small Businesses Open and Hourly 

Employees Working, 2020

Percent change (relative to January base)

Source: Homebase.

Note: All the rates compare that day vs. the median for the day of the week for the period January 4, 2020, to January 

31, 2020.

7/13/20

Holiday activity

Shelter-in-place and 

dining restrictions begin

First wave of states lift 

shelter-in-place orders

CARES Act 

signed
CEA • Evaluating the Effects of the Economic Response to COVID-19 11

series’ history. In particular, we estimate that 80.6 percent of the increase in unemployment 

from February to May was likely due to temporary rather than permanent layoffs, after 

accounting for workers who should have been counted as temporarily laid off rather than 

employed but not at work and adding in workers who are newly out of the labor force but want 

a job. Still, the shock to the labor market was unprecedented, and the unemployment rate 

remains above the Great Recession high of 10.0 percent in October 2009. 

CARES Act signed

Great Recession peak

1

2

3

4

5

6

7

8

1/1/2020 2/1/2020 3/1/2020 4/1/2020 5/1/2020 6/1/2020 7/1/2020

Figure 7. Initial Unemployment Insurance Claims by Week, 2020

Initial UI claims, regular programs (millions)

Sources: Department of Labor; CEA calculations.

7/11/20

CARES Act signed

Great Recession peak

0

5

10

15

20

25

30

1/1/2020 2/1/2020 3/1/2020 4/1/2020 5/1/2020 6/1/2020 7/1/2020

Figure 8. Insured Unemployment by Week, 2020

Insured unemployment, regular programs (millions)

Sources: Department of Labor; CEA calculations.

7/4/20
CEA • Evaluating the Effects of the Economic Response to COVID-19 12

Data on total economic output also reflect the enormous negative shock the COVID-19 

pandemic and containment measures had on the economy. While the advance estimate for 

gross domestic product (GDP) in the second quarter of 2020 will not be released until July 30, 

in the first quarter GDP fell at an annualized rate of 5.0 percent and forecasters predict that the 

COVID-19 pandemic and containment measures have dealt the economy a significant blow.

The Organization for Economic Cooperation and Development (OECD) estimates that the 

COVID-19 pandemic and containment measures will decrease U.S. real GDP by 7.3 percent in 

2020 in the absence of a second wave in the fall (single-hit scenario), or 8.5 percent if such a 

wave does occur (double-hit scenario). This forecast is more pessismistic than those provided 

by the Congressional Budget Office (CBO) and the Blue Chip survey of the private sector (table 

1). Still, all forecasts expect the initial effect to be more comparable to the 8.6 percent decline 

in GDP at the onset of the Great Depression in 1930 than the more modest 0.1 percent decline 

experienced in 2008 at the onset of the Great Recession (figure 9). Many of these forecasts do 

not incorporate any further policy stimulus through the course of the year, which may alter 

their predictions.

Unlike during the Great Depression, however, U.S. GDP is presently projected to rebound the 

following year, with the OECD projecting 4.1 or 1.9 percent growth in 2021 in the single- and 

double-hit scenarios, respectively. The estimates from the private sector (4.0 percent) and the 

CBO (4.8 percent) are much more in line with the single-hit scenario. As a result, the level of 

GDP in 2021 would fall below pre-COVID levels to about the level of GDP seen in 2018. This is 

consistent with the OECD single-hit, CBO, and private sector estimates, but in the case of a 

double-hit scenario, the OECD estimates that GDP would fall near the level of GDP in 2016. Most 

forecasters do not provide predictions of GDP growth in 2022. However, based on the initial 

decline and rebound predicted by the OECD, an annualized 3.6 percent growth rate would 

return GDP to pre-COVID-19 levels by 2022 in the single-hit scenario or 2023 in the double-hit 

scenario, while the more optimistic CBO and Blue Chip forecasts suggest that GDP could return 

to pre-COVID-19 levels by 2022 if growth is at least 1.7 percent. 

The recession induced by COVID-19 is fundamentally different from the Great Recession and 

the Great Depression because it had a noneconomic cause. The closest epidemiological 

analogue, the 1918 Spanish Flu, had a much smaller effect on GDP, with growth rates of 0.4 

percent and –1.5 percent in 1919 and 1920, respectively. Further comparisons with the Spanish 

Flu are complicated by the the context of World War I and the changes that the U.S. economy 

has undergone in the past century. In terms of the public health response, the 

nonpharmaceutical interventions in 1918 and 1919 were in many ways similar to those of 

today. 

Action was primarily taken at the local rather than the national level, with cities as the primary 

actors. In an analysis of 43 cities’ responses, Markel and others (2007) find that all cities 

adopted some form of intervention, including 79 percent that implemented concurrent school 

closures and bans on public gatherings. This combination of policies was in place for between 

1 and 10 weeks, with a median duration of 4 weeks, which is shorter on average than the 
CEA • Evaluating the Effects of the Economic Response to COVID-19 13

duration of similar policies put in place for COVID-19. Such interventions were associated with 

reductions in excess deaths, with cities that implemented policies earlier and kept them in 

place longer experiencing fewer deaths.

Table 1. GDP Growth Effects of Previous Shocks, 1919–2021

Event First year 

considered

Real GDP growth

Year 1 Year 2

Spanish Flu 1919 0.4% –1.5%

Great Depression 1930 –8.6% –6.4%

Great Recession 2008 –0.1% –2.5%

COVID-19 (CBO forecast) 2020 –5.9% 4.8%

COVID-19 (Blue Chip consensus forecast) 2020 –5.5% 4.0%

COVID-19 (OECD single hit scenario) 2020 –7.3% 4.1%

COVID-19 (OECD double hit scenario) 2020 –8.5% 1.9%

Sources: FRED; OECD; HISTSTAT; CBO; Blue Chip; CEA calculations.

Spanish Flu 

1918–23

Great Depression 

1929–34

Great Recession 

COVID-19 2007–12

2019–21

60

70

80

90

100

110

120

0 1 2 3 4 5

Years after crisis

Figure 9. GDP Recovery from Previous Crises

Real GDP (percent of precrisis baseline)

Sources: FRED; HISTSTAT; OECD; CEA calculations.

Note: Dotted line represents the OECD GDP forecast for a single-hit scenario.
CEA • Evaluating the Effects of the Economic Response to COVID-19 14

CHAPTER 2

The Effect of the CARES Act on Averting Bankruptcies, Sustaining 

GDP, and Aiding Low-Income Households

The preceding chapter shows that the immediate U.S. economic losses of COVID-19 were 

concentrated in 2020:Q2, when shutdowns were widely practiced in the United States. One way 

that short-term damage could stretch into the longer term is if what began as a liquidity crisis 

becomes a solvency crisis for many U.S. businesses, resulting in waves of firm bankruptcies, a 

stubbornly higher level of unemployment, and, ultimately, a lower level of production. 

Evidence presented in this chapter suggests that the timely Federal response to provide 

liquidity to households and firms through the prompt passage of the CARES Act mitigated the 

damage to GDP and ultimately the livelihoods of all Americans. 

Impact on the Stock Market and GDP

To the extent that stock market valuations reflect the present value of firms’ expected future 

net earnings, the reaction of the S&P 500 index to news about the CARES Act suggests that the 

markets expected the law to have a significant and positive impact on the U.S. economic 

outlook. Figure 10 shows the S&P 500 index with highlights on days when movement in the 

market was driven by news about the CARES Act. The declining trend that started as a result of 

the COVID-19 outbreak began a reversal on the day that Congress began to finalize the CARES 

Act. In the week that the bill was passed, the market capitalization value of the S&P 500 rose 

by $2.6 trillion, or 13.3 percent, between March 23 and March 27. 

2,000

2,200

2,400

2,600

2,800

3,000

3,200

3,400

3,600

01/01/20 02/01/20 03/01/20 04/01/20 05/01/20 06/01/20

Figure 10. S&P 500 and the CARES Act, 2020

Index 

Source: Standard & Poor's.

Expectations for the 

CARES Act began to rise 

(3/10)

Expectations for the CARES 

Act continued to build (3/17)

Congress began to finalize

the CARES Act (3/24 & 3/26)

6/12/20
CEA • Evaluating the Effects of the Economic Response to COVID-19 15

A growing economics literature is studying the impact of the COVID-19 pandemic and 

containment measures on the U.S. economy. Some of this literature seeks to project the 

impact on the 2020 GDP, in light of social distancing and other mitigation measures. Economic 

models include predictions for the impact on end-of-year GDP that range broadly depending 

on modeling assumptions (Alvarez, Argente, and Lippi 2020; Baker et al. 2020; and 

Eichenbaum, Rebelo, and Trabandt 2020). For example, Eichenbaum, Rebelo, and Trabant 

(2020) develop a model that predicts GDP losses of anywhere from 7 percent to 22 percent that 

increase with the severity of containment measures. 

While the above-mentioned academic studies did not incorporate the impact of the CARES Act 

in their projections, market forecasts do and are frequently revised to reflect changes in 

policies. As of June 15, the consensus market forecast is more optimistic than the projections 

in those academic studies. The Bloomberg median consensus forecast (out of a sample of 80

to 90 analysts) expect -5.7 percent for 2020 (as of June 15), and the Blue Chip Consensus 

forecast (as of July 10) projects –5.5 percent for 2020. 

Figure 11 shows the weekly evolution of these market forecasts. The GDP contraction for 2020 

primarily reflects analysts’ deteriorating outlook for 2020:Q2, which has been continually 

revised down since mid-March as social-distancing practices became prevalent and as analysts 

began to take into account new information provided by high-frequency economic indicators 

pointing to the steeper depth of the downturn. Conversely, market analysts have continued to 

revise the forecasts for 2020:Q3, 2020:Q4, and 2021 upward, particularly since the passage of 

the CARES act (figures 11 and 12). 

2020:Q2

2020:Q3

2020:Q4

-40

-30

-20

-10

0

10

20

30

1/1/2020 2/1/2020 3/1/2020 4/1/2020 5/1/2020 6/1/2020

Figure 11. Evolution of Median Forecasts for 2020 Quarterly GDP

Annualized quarterly growth (percent)

Source: Bloomberg.

Note: PPP and HCE Act = Paycheck Protection Program and Health Care Enhancement Act.

CARES Act passed 

in Senate

PPP and HCE Act 

passed in Senate

6/15/20
CEA • Evaluating the Effects of the Economic Response to COVID-19 16

Many are asking how much worse the GDP outlook would be in the absence of the CARES Act. 

The evolution of the GDP forecasts by market analysts is consistent with the idea that the 

CARES Act helped to raise the GDP outlook. In the weeks preceding the CARES Act vote, as 

analysts revised down the forecast for 2020:Q2, they also made only small upward revisions to 

2020:Q3 and 2020:Q4, and marked down the growth rate for 2021 (figures 11 and 12).14 This

suggests that analysts were generally pessimistic about the recovery even as they saw a 

steeper downturn in 2020:Q2. Once the CARES Act cleared the crucial Senate vote, market 

analysts began to sharply revise up GDP growth in 2020:Q3, 2020:Q4, and 2021. In the week 

after the bill’s passage, the median market forecast by leading economic forecasters for 

2020:Q3 and 2020:Q4 GDP growth was revised up by 6.5 and 3.1 percentage points respectively 

compared with just before its passage. The projection for 2021 GDP growth was also revised up 

by 1.5 percentage points (from about 2.0 percent to 3.5 percent), corresponding to about $300 

billion in dollar terms. Though these upward revisions could in part be due to the rebound 

effect from continual downward revisions in 2020:Q2 GDP, we find a positive and significant 

effect of the CARES Act on revisions for 2020:Q4 and 2021, even after controlling for the 

rebound effect.15 

 

14 The sample in our survey of private banks consists of forecasts reported by the research team of nine major 

banks: Barclays, Wells Fargo, Goldman Sachs, UBS, Deutsche Bank, IHS Markit, Bank of America, JPMorgan Chase, 

and Citigroup. 

15 The dependent variables of the regression are the weekly forecast revisions for the GDP growth rate horizon 

under consideration. The controls included are concurrent revisions for the previous quarter, changing economic 

fundamentals as proxied by weekly credit card spending changes, and a dummy for the passage of the CARES Act. 

Median of major forecasters

Bloomberg consensus

1.5

2.5

3.5

4.5

1/1/2020 2/1/2020 3/1/2020 4/1/2020 5/1/2020 6/1/2020

Figure 12. Evolution of Forecasts for GDP in 2021

Year-over-year growth (percent)

Source: Bloomberg.

Note: PPP and HCE Act = Paycheck Protection Program and Health Care Enhancement Act.

CARES Act 

passed in Senate

PPP and HCE Act 

passed in Senate

6/15/20
CEA • Evaluating the Effects of the Economic Response to COVID-19 17

The Impact on Unemployment

As early signs of labor market turmoil became apparent in late March, forecasters began 

revising their expectations of unemployment upward. As States continued to pursue lockdown 

measures, unemployment continued to rise as expected. After March’s jobs report showed 

evidence of a labor market collapse, forecasters quickly revised their expectations upward to 

levels not seen since the Great Depression. After the unemployment rate rose to 14.7 percent 

in April, some economists were expecting unemployment rates to soar above 20 percent in May

(figure 13). The market consensus forecast for May’s unemployment rate was 19.0 percent, with 

the most optimistic forecasters still projecting 16.0 percent unemployment. However, May’s

unemployment rate declined to an unexpected 13.3 as the economy reopened and businesses 

recalled workers. This is consistent with the idea that the CARES Act helped workers stay 

connected to firms and helped those firms be in a position to hire workers back as lockdown 

measures continue to be lifted. Recent research by Autor et al. (2020) using administrative 

payroll data from ADP finds that the PPP saved between 1.4 and 3.2 million jobs through just 

the first week of June. However, because PPP has also stemmed business closures, the total 

employment effect is likely to be considerably larger over time as those salvaged businesses 

re-hire furloughed workers. In total, S&P U.S. Chief Economist Beth Ann Bovino estimates that 

PPP could have saved upwards of 13.6 million jobs.16

 

16 See: https://af.reuters.com/article/credit-rss/idUSL2N2F00MR

Survey median

Actual

0

5

10

15

20

25

Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20

Figure 13. Consensus Market Forecast for the Unemployment Rate, 2020

Percent

Source: Bloomberg. 

Note: Gray shading denotes the market forecast range.

Jun-20
CEA • Evaluating the Effects of the Economic Response to COVID-19 18

The Impact on Small Business Bankruptcies

A concern in any crisis is the impact on business bankruptcies and failures, which can then lead 

to even higher levels of sustained unemployment. In this section, we attempt to model whether 

COVID-19 has led to high rates of small business failures, and whether the passage of the CARES 

Act may have mitigated the impact of COVID-19 on insolvencies. Real-time forecasting of the

small business bankruptcy rate during COVID-19 is complicated by a number of factors. First, 

some broad measures of macroeconomic activity like GDP that could be used for more reliable 

forecasting are reported infrequently and with a lag. Initial UI claims can potentially serve as a 

proxy for a macroeconomic shock, as they are the highest-frequency labor market indicator. 

However, issues of reverse causality arise; increasing unemployment could fuel bankruptcies 

as income and demand fall and businesses close and lay off workers, but layoffs also help 

businesses stay afloat. Moreover, historical relationships between unemployment and 

bankruptcies may not hold true during COVID-19 because of social distancing measures that 

delay filings, as well as a greater share of unemployed workers that are only temporarily 

furloughed. The latter can be seen as a successful consequence of the swift passage of 

historically large fiscal relief through the CARES Act. In particular, the combination of expanded 

unemployment insurance, loan forbearance provisions, and the creation of the novel PPP 

(discussed below) could have helped businesses absorb a shock to cash flows without being 

forced to declare bankruptcy. 

One way to forecast small business Chapter 11 bankruptcies is through a vector autoregression

estimate of UI claims with three-month lags from January 2006 to December 2019. An 

advantage of this approach is that it can determine the lag between the negative economic 

shock and its effect on bankruptcies. In figure 14, the gap between actual and predicted 

bankruptcies represents “averted bankruptcies.” Small business bankruptcies for the second 

quarter as a whole were predicted to increase by 154.9 percent, while actual filings actually 

decreased by 1.8 percent. The analysis predicts chapter 11 small business filings would spike

by 307.2 percent in June alone, but the actual change thus far is only 12.2 percent in the month

of June (figure 14). We will continue to monitor Chapter 11 small business filings as more data 

become available.
CEA • Evaluating the Effects of the Economic Response to COVID-19 19

It is important to point out that this gap between predicted and actual bankruptcies could arise 

from a number of factors. First, the social-distancing mechanisms may have affected filing 

rates, both for the court systems and debtors. If business owners are unable to connect with 

lawyers or face difficulties submitting electronic filings, this could lead to filing delays that 

could show up as higher filings later in the data. At the same time, courts’ ability to take on 

cases might be affected by State restrictions. A second important factor is the PPP’s role in 

enabling businesses to stay afloat. By giving businesses loans that can be forgiven, PPP allows 

them to meet expenses while facing a demand shock. With this liquidity, many businesses that 

would have filed for bankruptcy are able to sustain themselves. 

Finally, other elements of the CARES Act might have helped businesses avoid bankruptcy. For 

instance, sole proprietors and small business owners can also claim expanded unemployment 

insurance, which also provides liquidity. Their employees would be able to claim expanded UI 

as well if they are placed on temporary furlough. The loan forbearance provision additionally 

enables businesses to defer certain expenses, such as rental and mortgage expenses. In other 

words, the PPP and other elements of the CARES Act have likely played a significant role in 

helping businesses avoid bankruptcy. However, with the preliminary data we have thus far, it 

is difficult to show exactly how much of the “averted bankruptcies” can be explained by the 

PPP and the CARES Act.

The findings presented in this section suggest that the CARES Act will lead to improved 

prospects for the U.S. economy over the next year and a half compared with the pre–CARES Act 

trajectory. By providing a short-term financial bridge to American households and businesses, 

-50

0

50

100

150

200

250

300

350

2007 2009 2011 2013 2015 2017 2019

Figure 14. Actual versus Predicted Chapter 11 Small Business 

Bankruptcy Filings, 2007–20

Year-over-year change (percent)

Sources: Department of Justice; Department of Labor; CEA calculations.

Note: Predicted filings are based on vector autoregression results of a three-month lag using initial UI claims. 

Jun-20
CEA • Evaluating the Effects of the Economic Response to COVID-19 20

businesses and households were able to stay afloat longer than might have been expected, 

contributing to a more resilient recovery.

The Impact on Low-Income Households

Two of the key components of the CARES Act—expanded unemployment insurance benefits 

and Economic Impact Payments—provided income directly to Americans. This is especially 

important for lower-income households with the lowest capacity for borrowing or reducing 

consumption. Parolin, Curran, and Wimer (2020) estimate that these CARES Act’s provisions 

could lower the poverty rate to 11.3 percent if households have high access to these benefits, 

below the 12.5 percent precrisis poverty rate and the 16.3 percent poverty rate projected in the 

absence of the CARES Act. Han, Meyer, and Sullivan (2020) study income data and find that the 

policy response to the pandemic protected low-income workers from a significant shock and 

decreased poverty. 

Figure 15 simulates the trajectory of household income at different points on the income 

distribution—with and without these two major income replacement programs in the CARES 

Act (see the appendix for the methodology). Without these CARES Act provisions, a household 

at the 10th percentile of the income distribution would have experienced a 13 percent 

reduction in income in March and April 2020 compared with its February 2020 level. However, 

because of expanded UI and the Economic Impact Payments, its monthly income was 165 

percent ($1,901) higher in April and 14 percent ($157) higher in May compared with February 

2020. The spike in income in April under the CARES Act is largely a result of the Economic 

Impact Payments, while the continued elevated income in May is a result of expanded UI. While 

the impact of the CARES Act is substantial for higher income households as well, it is relatively 

much smaller than that for the lowest income households. For example, absent the CARES Act, 

the 25th percentile household would have experienced a 6 percent and 5 percent decline in 

income in April and May, respectively, compared with February, and the 50th percentile 

household would have experienced a 4 percent decline in April and May. However, because of 

the CARES Act, their incomes substantially increased, especially in April.
CEA • Evaluating the Effects of the Economic Response to COVID-19 21

Because figure 15 includes all households, it does not show how important the CARES Act was 

in preserving the income of specific households experiencing job loss. Figure 16 provides a 

more specific example of an illustrative household with two adults and two children, with one 

worker who loses their job starting in April 2020 and where all income is assumed to come 

from earnings (see the appendix for the methodology). The worker in the “low-wage” 

household is assumed to earn $500 per week, and the worker in the “high-wage” household is 

assumed to earn $1,500 per week. 

Without expanded UI and the Economic Impact Payment under the CARES Act, the illustrative 

low-wage household would have experienced a 50 percent reduction in income in April and 

May, while the illustrative high-wage household would have experienced a 68 percent 

reduction in these two months. As a result of the CARES Act, the low-wage household instead 

experiences a 240 percent increase in income in April and a 70 percent increase in May, relative 

to February. The high-wage household instead experiences a 28 percent increase in April and 

a 28 percent decrease in May. Thus, the CARES Act provided greater income protection for lowwage households than high-wage households.

0

50

100

150

200

250

300

Feb Mar Apr May Feb Mar Apr May Feb Mar Apr May Feb Mar Apr May Feb Mar Apr May

10 25 50 75 90

Household income percentile

CARES No CARES

Figure 15. Index of Household Income by Percentile, 2020

Index of household income (100 = February 2020)

Sources: Census Bureau; Current Population Survey, Monthly and Annual Social and Economic Supplement; CEA 

calculations.

Note: See the appendix for the methodology.
CEA • Evaluating the Effects of the Economic Response to COVID-19 22

The examples given above do not account for several other provisions that would have helped 

vulnerable households as well, such as expanded funding for SNAP, housing assistance, and 

other welfare programs. In the next chapter, we study the impact of CARES on households and 

firms in the aggregate.

CHAPTER 3

The Impact of the CARES Act on Households

To ensure sufficient liquidity for households in light of the crisis, Congress put forward several 

sources of cash support targeted at those who are the most vulnerable and those who lost their 

jobs because of the pandemic lockdowns. These include direct transfers to households in the 

form of Economic Impact Payments, an expanded unemployment insurance benefit, and an 

extended duration of time over which unemployment benefits could be claimed. In addition, 

the PPP helped businesses with cash support to pay rents and other expenses, while providing 

incentives for small businesses to retain their employees. Many of these workers were placed 

on temporary furlough while businesses were waiting to reopen. The success of this approach 

is evident in the latest jobs report. As of the time of writing of this report, the unemployment 

rate declined from a high of 14.7 percent in April to an unexpected 11.1 percent in June, 

according to the Bureau of Labor Statistics, as millions of workers went back to their employers 

as businesses reopened. In parallel, there has been a continuing decline in the number of 

workers claiming regular UI benefits; and during the first week of June, over 20 million workers 

0

100

200

300

400

Feb Mar Apr May Feb Mar Apr May

Low-wage household High-wage household

CARES No CARES

Figure 16. Index of Household Income for Example Households, 

2020 

Index of household income (100 = February 2020)

Sources: Census Bureau; Current Population Survey Monthly and Annual Social and Economic Supplement; CEA 

calculations. 

Note: Low-wage household earns $500 per week. High-wage household earns $1,500 per week. See the appendix for 

further details. 
CEA • Evaluating the Effects of the Economic Response to COVID-19 23

are receiving unemployment insurance. Before the COVID-19 shutdown, the unemployment 

rate was below 4 percent, so we still have a long way to go in recovering lost ground. Therefore, 

it will be important to ensure that the decline in the unemployment rate continues over the 

next several months and that these temporary layoffs do not result in large permanent job 

losses (Barrero, Bloom, and Davis 2020). We estimate that the improvement in the 

unemployment rate in May was almost entirely due to some of those who had been temporarily 

laid off returning to work. In other words, the jobs report showed that most temporary layoffs 

went back to work rather than becoming permanent layoffs and there was no significant 

increase in new permanent layoffs.17

In addition to direct cash support, Congress provided additional benefits to Americans to 

protect against economic insecurity. All workers at firms with fewer than 500 employees 

(though firms with fewer than 50 employees may qualify for an exemption) were provided with 

expanded paid sick days and medical leave benefits so that they could take time off to recover 

from the illness themselves, look after those in their family who were suffering, or care for 

children whose child care programs or schools were closed. Firms were provided with PPP

loans to enable them to keep workers on their payroll while meeting other expenses as well.

Households with federally backed mortgages were also helped by generous mortgage 

forbearance rules so that if homeowners were facing difficulty making payments, they would 

not be subject to penalties. In short, numerous aspects of the relief bills, particularly the CARES

Act, were aimed at helping households cushion the economic impact of the lockdown. While it 

will be several months, and possibly years, before the country fully recovers from the COVID19 downturn, it is important to track whether the economy is moving in the right direction.

Overview of Provisions in the CARES Act to Assist Households

Economic Impact Payments. The CARES Act authorized the Department of the Treasury to make 

Economic Impact Payments to eligible individuals by direct deposit, check, or debit card. Each 

adult could receive up to $1,200 and $500 for each dependent child, phased out at higher 

incomes. A family making less than $150,000 a year with two parents and two children would 

receive $3,400. The Internal Revenue Service (IRS) recently reported that it has sent out nearly 

$267 billion in payments to 159 million Americans. 

Expanded unemployment insurance. The CARES Act also authorized an expansion of

unemployment insurance designed to replace a worker’s lost wages and salaries that will cost 

an estimated $268 billion, according to the CBO. Every beneficiary of unemployment insurance 

would receive an additional $600 per week in unemployment benefits from March 29, 2020, 

through July 31, 2020, called Federal Pandemic Unemployment Compensation. Further, 

individuals who exhaust their regular State benefits are eligible for another 13 weeks of 

 

17 We estimate at least 94 percent of the decline in unemployment from April to May was due to a decline in 

temporary layoffs, after incorporating those workers who were classified by the Bureau of Labor Statistics as 

employed but not at work but who may have actually been on temporary layoff, and including workers who are 

not in the labor force but say they want a job. 
CEA • Evaluating the Effects of the Economic Response to COVID-19 24

Pandemic Emergency Unemployment Compensation under the CARES Act, for a total of 39 

weeks of coverage. Workers previously noteligible for unemployment insurance benefits, such 

as self-employed workers or gig workers, are now able to receive unemployment insurance 

benefits under the PUA program as well. As of early July, nearly three-quarters of the estimated 

cost has been received by households, even as the surge in claims increased the administrative 

challenges faced by States in processing claims and sending people the checks.

Mortgage forbearance and credit. Under the CARES Act, borrowers with federally backed 

mortgages who experience financial hardship due to COVID-19 can suspend payments for up 

to 180 days with the possibility of an extension up to an additional 180 days. During that period, 

no interest or fees are accrued. The CARES Act also prohibited foreclosures on homes with 

federally backed single-family mortgages for at least 60 days starting on March 18, 2020 (and 

prohibited evictions of tenants in certain Federally-supported rental properties for 120 days 

starting March 27, 2020). To allow families to borrow money if needed, holders of individual 

retirement accounts (IRAs) adversely affected by COVID-19 are eligible under the CARES Act to 

take a distribution from their IRA and treat this distribution as a tax-free rollover, provided they 

recontribute the amount within threeyears. The CARES Act also ensured consumers’ credit did

not suffer due to the virus; if consumers have an agreement with their lender to delay payments 

or make a partial repayment, they will not receive a negative credit report. 

Protection for student loan borrowers. The CARES Act also included provisions to protect 

student loan borrowers. Employers were provided with the ability to make up to $5,250 in 

student loan payments through December 31 for each employee without incurring taxes. In 

addition, through September 30, student loan payments and interest accruals for Department 

of Education-held federal student loans are suspended, and involuntary collections related to 

student loans through wage garnishments, tax refund reductions, and negative credit 

reporting are also suspended for loans held by the Department of Education. 

Federal waivers for welfare programs. Through legislation and guidance from Federal agencies, 

transfer programs now offer higher benefits to more families. Congress authorized and 

provided funding, under the Families First Coronavirus Response Act (FFCRA) and CARES Act, 

respectively, for States to electronically issue nutrition benefits via Supplemental Nutrition 

Assistance Program (SNAP) cards to families whose children would ordinarily receive free or 

subsidized school lunches, and allowed the U.S. Department of Agriculture (USDA) to 

temporarily waive work requirements for nondisabled, childless adults. In addition, legislation 

allowed the USDA to temporarily raise SNAP benefits up to the maximum level for each

household size. Similarly, the Department of Health and Human Services has encouraged

States to utilize the flexibilities currently available under the Temporary Assistance for Needy 

Families (TANF) program to respond to the COVID-19 emergency. These flexibilities include

temporarily increasing cash benefits; recognizing “good cause” exemptions from work 

requirements for TANF participants who cannot go to work or training activities because they 

are ill, caring for a child whose school or day care is closed, or because the work or training site 

is closed; and allowing families who have recently lost income to access benefits through 
CEA • Evaluating the Effects of the Economic Response to COVID-19 25

streamlined eligibility determination processes. Congress gave financial assistance to State 

Medicaid programs, and the Centers for Medicare and Medicaid Services has allowed States to 

expedite the process of enrolling individuals in Medicaid. 

Paid medical and family leave. The FFCRA requires certain employers with fewer than 500 

employees to provide their employees with paid sick and family leave, financed through 

refundable tax credits. Workers are entitled to 2 weeks of paid sick leave covering up to 100 

percent of wages, and to an additional 10 weeks of paid family and medical leave covering up 

to 67 percent of wages.18

The Impact of the CARES Act on Incomes and Jobs

Increased aggregate disposable personal income. Absent a strong policy response, the COVID19 recession would have likely caused a dramatic reduction in disposable personal income as 

workers lost jobs and businesses shut down. The April unemployment rate was 14.7 percent, 

the highest it has been since the Great Depression, and the rate for May was 13.3 percent.19 In 

surveys, households reported high levels of concern about their financial security, with nearly 

half reporting significant losses of both income and wealth (Coibion, Gorodnichenko, and 

Weber 2020). 

Yet, according to data from the Bureau of Economic Analysis, disposable personal income rose 

substantially in April after a large reduction in March and remained elevated above prepandemic levels in May. While employee compensation fell drastically in March and April, 

disposable personal income experienced its largest one-month increase on record in April due 

to government transfers through the CARES Act. By far, the largest factor in raising disposable 

personal income in April were the payments made to individuals under the CARES Act. In May, 

disposable personal income remained elevated above pre-pandemic levels, but the boost from 

government transfers came primarily from unemployment insurance, though economic 

impact payments continued in May (see table 2). Illustrating the extent of support these 

programs provided, real disposable income excluding government transfers experienced the 

largest one-month decline on record in April and remained suppressed in May. As seen in figure 

17, disposable personal income was 5.4 percent above February’s level in May. This was almost 

entirely driven by government spending through unemployment insurance and economic 

impact payments in response to the pandemic. 

 

18 Workers qualify for up to two weeks of paid sick leave replacing 100 percent of their wages, up to a daily 

maximum of $511, if they are currently experiencing COVID-19 symptoms and seeking a diagnosis or are under 

quarantine in order to prevent the spread of COVID-19. Workers can alternatively take these two weeks of paid 

sick leave with 67 percent of wages replaced, up to a daily maximum of $200, if they are providing care to an 

individual with COVID-19 or are caring for a child due to the closing of a school or childcare program. Workers 

qualify for an additional 10 weeks of family and medical leave—replacing 67 percent of their wages, up to a daily 

maximum of $200—if they are caring for a child whose school or child care program is closed.

19 Some estimates put the rate at higher than the official U-3 rate. See, for example, Fairlie, Couch, and Xu 2020. 
CEA • Evaluating the Effects of the Economic Response to COVID-19 26

While incomes grew, real personal consumption saw a dramatic downturn in April, the largest 

one-month decline on record.20 Real personal consumption rose in May but remains much 

lower than pre-pandemic levels. This could suggest that much of the additional government 

transfers acted more as a financial cushion than a household stimulus. This assumption is 

reasonable given that the lockdown requirements restricted the number of spending 

opportunities, such as meals at restaurants, along with households facing a large amount of 

economic uncertainty due to the COVID-19 pandemic. Personal saving saw its largest onemonth increase on record in April, pushing personal saving as a percentage of real disposable 

income to 33 percent, a record high. Personal savings saw a decrease in May but remains 

elevated. 

Direct Economic Impact Payments to individuals, not including the additional extra 

unemployment payments to individuals, accounted for $215.7 billion, or 13.8 percent, of April’s 

disposable personal income and $50.5 billion, or 3.5 percent, of May’s. Pandemic

Unemployment Compensation Payments accounted for $12.5 billion of April’s disposable 

personal income and $70.2 billion in May. PUA, Pandemic Emergency Unemployment 

Compensation, and student loan forbearance played much smaller but still-important roles in

increasing personal income in March, April and May, as seen in table 2 below. IRS data through 

June 3 suggests that over 60 percent of people over 16 years old have received the Economic 

Impact Payments, while the Department of Labor finds 10.8 percent of workers have a 

 

20 A recent paper by Chetty et al. (2020) shows that the largest declines in consumption spending came from the 

richest income households. As of June 10, high-income households cut spending by 17 percent while low-income 

households cut spending by only 4 percent. This is likely a function of Economic Impact Payments as well as 

unemployment benefit receipt.

Disposable 

personal income 

(less transfers)

Government transfers (less UI & EIPs)

Economic 

Impact Payments

Unemployment Insurance

600

800

1,000

1,200

1,400

1,600

Jan-20 Feb-20 Mar-20 Apr-20 May-20

Figure 17. Monthly Disposable Personal Income, 2020

Dollars (billions)

Sources: Bureau of Economic Analysis; CEA calculations.

5.4 percent

increase 

from 

February
CEA • Evaluating the Effects of the Economic Response to COVID-19 27

continued unemployment insurance claim for the week ending on July 4, not including workers 

who qualify for and are receiving Pandemic Unemployment Assistance, for self-employed and 

gig workers. Some problems remain to be addressed in distributing these benefits to everyone 

who qualifies, but more and more households are able to take advantage of these provisions 

each week. 

Table 2. Effects of Selected Pandemic Response Programs on Personal 

Income in March, April, and May 2020

Program Billions of dollars 

(annualized)

Share of DPI

(percent)

Billions of dollars 

(not annualized)

Pandemic Unemployment Assistance 160.5 1.0 13.4

Pandemic Emergency Unemployment Compensation 8.1 0.0 0.7

Pandemic Unemployment Compensation Payments 991.7 5.9 82.6

Economic Impact Payments under CARES 3,194.2 19.1 266.2

Student loan forbearance 93.4 0.6 7.8

Total income from pandemic response programs 4,447.9 26.6 370.7

Total disposable personal income, 2020:Q1 16,735.7

Sources: Bureau of Economic Analysis; CEA calculations. 

Expanded unemployment insurance helped the unemployed. As table 2 shows, the combination 

of the economic impact payments, the increase in UI benefits, and the extension of benefits to 

workers not traditionally covered by these payments was a big factor behind the increase in 

disposable personal income. In addition, UI has been particularly beneficial for lower-income 

households. Lower-wage workers are relatively more likely to be employed in sectors that have 

been the hardest hit due to COVID-19, such as the retail and the leisure and hospitality sectors. 

Adding an additional $600 to weekly unemployment insurance benefits has benefited workers 

in low-wage industries, particularly those who have seen the greatest job losses (see table 3). 

One reason for this is that UI benefits are currently replacing prior earnings at rates above 100 

percent for many workers, and this is especially true for workers in lower-wage industries. 

Based on a similar analysis, Ganong, Noel, and Vavra (2020) estimate that 68 percent of 

unemployed workers receive more from unemployment than they would from working—for 

the median worker, 134 percent of earnings are replaced.
CEA • Evaluating the Effects of the Economic Response to COVID-19 28

Table 3. Jobs Lost and Unemployment Insurance Benefits by Industry, 

2020

Industry

Jobs lost from February 

to June 

(thousands)

Share with UI benefits 

greater than earnings 

(percent)

Accommodation and Food Services –3,917 90.9

Healthcare and Social Services –1,426 70.6

Administrative, Support, Waste Management, and 

Remediation Services –1,299 81.0

Retail Trade –1,273 82.9

Art, Entertainment, and Recreation –909 82.3

Manufacturing –757 62.9

Other Services (except Public Administration) –752 79.8

Transportation and Warehousing –499 71.2

Construction –472 67.7

Professional, Technical, and Scientific Services –432 40.4

Education Services –388 65.7

Wholesale Trade –317 62.3

Information –315 55.4

Real Estate –200 64.8

Management of Companies and Enterprises –99 61.7

Mining, Quarrying, and Oil and Natural Gas Extraction –87 40.4

Finance and Insurance –37 50.4

Utilities –9 45.9

Total –13,189 68.1

Sources: Department of Labor; Bureau of Labor Statistics; Saving to Invest; CEA calculations.

During the first week of June, 20.5 million workers were currently receiving regular 

unemployment benefits and 11.9 million were receiving either PUA or Pandemic Emergency 

Unemployment Compensation, even as States faced administrative challenges in processing 

and disbursing benefits. As more workers start to receive benefits, the income support 

provided to households will increase. Data from 2013 to 2016 indicate that providing 

household liquidity through unemployment benefits significantly smooths consumption (see 

Ganong and Noel 2019). However, the current crisis is unique because of the dramatic drop in 

consumption coming from social distancing instead of just lost income or precautionary 

saving. Deciphering the impact of unemployment benefits on current consumption is therefore 

likely to prove more difficult.

Economic Impact Payments especially supported lower-income households. As discussed, the 

CARES Act provided one-time Economic Impact Payments of $1,200 per adult and $500 for each 

dependent child, with amounts beginning to phase out at $150,000 of income for joint tax filers. 

These payments especially helped preserve liquidity for low-income families. For example, a 

married couple with two children and income below $150,000 would have received $3,400. 
CEA • Evaluating the Effects of the Economic Response to COVID-19 29

Since the annual poverty line is $26,200 for a family of four, the recovery rebate is enough to 

keep a family of four out of poverty for 1.5 months even if it lost all other income.

Table 4 shows that Economic Impact Payments are especially important for low-income 

households. For example, households in the bottom 10 percent of the income distribution 

received enough to replace 2.8 months of income. On average, these households have monthly 

incomes of less than $1,000. Hence a payment of $1,200 or higher can provide a significant 

boost in incomes for over 2 months.

The economics literature also demonstrates how economic stimulus payments especially 

supported lower-income households. Research indicates that a significant fraction of 

households behave as if they are liquidity constrained and are thus highly responsive to 

increases in liquidity (Fuster, Kaplan, and Zafar 2020). Baker and others (2020) show that within 

10 days of the receipt of Economic Impact Payments, nearly 30 percent of the payment was 

spent on food, rent, bills, and nondurables. The results were most pronounced for those with 

low incomes and low savings. During the Great Recession, households spent $0.25 of every $1 

on nondurables from the 2008 stimulus payments (Kaplan and Violante 2014). Taking into 

account durables, the consumption response in 2008 exceeded $0.50 (Parker et al. 2013). 

Compared with that situation, the current consumption response is higher for food but smaller 

for durables (Baker et al. 2020). Chetty and others (2020) find that Economic Impact Payments 

had a large effect on spending by low-income households, allowing them to return their 

spending levels to pre-COVID levels, by May 10 (Chetty et al. 2020).

The Paycheck Protection Program helped keep workers employed. Another reason that workers 

have received stable or rising incomes is due to the PPP. Established under the CARES Act, the 

PPP authorized $349 billion to support payroll and other expenses for America’s small 

Table 4. Monthly Income, CARES Recovery Rebate, and Months of Income 

Replaced by Rebate by Household Income Decile 

Household income 

decile

Mean monthly income 

(dollars)

Mean rebate

(dollars) Months of income replaced by rebate

1 628 1,749 2.8

2 1,695 1,904 1.1

3 2,640 2,174 0.8

4 3,651 2,351 0.6

5 4,737 2,498 0.5

6 6,008 2,687 0.4

7 7,544 2,809 0.4

8 9,566 2,872 0.3

9 12,786 2,916 0.2

10 26,023 795 0

Sources: Census Bureau; CEA calculations.

Note: All values are simulated based on 2018 reported income and CARES Act legislated payments.
CEA • Evaluating the Effects of the Economic Response to COVID-19 30

businesses, self-employed individuals, Tribal business concerns, and nonprofit or veterans’

organizations during the COVID-19 crisis. As part of the PPP and Health Care Enhancement Act, 

an additional $310 billion was appropriated to the program. While the funds are loans, the 

funds can be fully forgiven if no less than 60 percent (originally 75 percent) of the funds are 

used for payroll. The remaining 40 percent can be used for other eligible business expenses like

paying rent, utilities, or mortgage interest obligations. PPP borrowers have 24 weeks to use the 

loan proceeds for forgiveness as well.

As discussed above, the latest jobs report surprisingly showed a decline, rather than an 

increase, in the unemployment rate, from the 14.7 percent peak in Aprilto 11.1 percentin June. 

This was largely the result of temporarily furloughed workers being recalled by their 

employers. We estimate that more than 80 percent of the increase in unemployment from 

February to May was due to temporary layoffs and nearly all the decline in unemployment from 

April to May was due to workers returning to their jobs from temporary layoff, as stated above. 

To the extent that these workers were furloughed by employers that were using their PPP 

money to keep workers on their payroll, at least some of this decline in unemployment can be 

attributed to the PPP program. Company-specific data on PPP loan receipts and employment

provided an insight into the role the program played in keeping workers attached to their 

employers, before which the extent was unclear.

21 Recent research by Autor et al (2020) using 

administrative payroll data from ADP finds that the PPP saved between 1.4 and 3.2 million jobs 

through just the first week of June. However, because PPP has also stemmed business 

closures, the total employment effect is likely to be considerably larger over time as those 

salvaged businesses re-hire furloughed workers. In total, S&P U.S Chief Economist Beth Ann 

Bovino estimates that PPP could have saved upwards of 13.6 million jobs. 

After this July 6 release, loan-level data show companies that were approved for a PPP loan 

employed just over 51 million workers. This number comes with caveats of the accuracy of the 

data, because some businesses claim they were approved for smaller amounts than what the 

released data indicate.22 Further, the jobs number comes from businesses that report the 

number of employees on their payroll at the time of their application. This is just a box on an 

application, and some lenders did not report it to the U.S. Small Business Administration (SBA).

The process of loan forgiveness will determine the most accurate estimate of jobs supported 

by PPP loans, for it will indicate how many workers stayed on the payrolls of these businesses. 

Through July 10, SBA approved more than 4.9 million loans, for a total of more than $517.4

billion. The average loan size was about $105,000. The loans were overwhelmingly distributed 

to small businesses with few employees. Over 86 percent of the total approved loans, 

corresponding to over one-quarter of the total approved loan amount, were for an amount of 

$150,000 or less (table 5). Over 94 percent of the total approved loans, corresponding to more 

 

21 Analysis by Chetty et al. (2020) shows a limited impact of PPP on employment levels at small businesses. 

However, their analysis is also constrained by the lack of firm-level data on PPP loan receipt and employment.

22 Multiple media outlets, including Bloomberg and CNBC, have reported on some of these caveats.
CEA • Evaluating the Effects of the Economic Response to COVID-19 31

than 43 percent of the total approved loan amount, were for an amount of $350,000 or less. 

Since the maximum loan a business can apply for is a function of its total payroll costs, the vast 

majority of PPP loans were approved for small businesses and organizations with very few 

employees. 

Table 5. PPP Loan Size by Amount, First and Second Round Combined 

(data as of 7/10/2020)

Loan size

Approved loans 

(count)

Approved loan total 

amount (billions) Percent of count Percent of amount

$50K and under 3,289,259 58.9 67.0 11.4

$50K - $100K 673,105 47.9 13.7 9.3

$100K - $150K 290,329 35.5 5.9 6.9

$150K - $350K 374,674 84.1 7.6 16.3

$350K - $1M 198,518 112.9 4.0 21.8

$1M - $2M 52,931 73.5 1.1 14.2

$2M - $5M 24,164 71.9 0.5 13.9

Greater than $5M 4,675 32.6 0.1 6.3

Total 4,907,655 517.4

Source: Small Business Administration.

The first round of the PPP, ending April 16 when funds ran out, approved fewer loans but 

consisted of a larger share of the total loan amounts (figure 18). Round two has had a change 

in the composition of who is receiving the loans, with a shift toward smaller businesses. The 

average loan size fell from $185,500 in round one to $61,800 in round two.

35.3

62.1 64.7

37.9

0

10

20

30

40

50

60

70

Loan count Loan amount

Round 1 Round 2

Figure 18. Share of Total PPP Loan Counts and PPP Loan Amounts by 

Round

Percent

Sources: Small Business Administration; CEA calculations.

Note: The loan counts and amounts for round 1 are derived using SBA's June 20 update that shares round 2 specific data.
CEA • Evaluating the Effects of the Economic Response to COVID-19 32

As of July 10, healthcare and social assistance; professional, scientific, and technical services; 

construction; and manufacturing account for 48 percent of the total amount of approved 

dollars in both rounds of PPP (table 6). When looking at the percentage of employment 

recovered from April, there is a strong correlation, with an R

2 of 0.66, showing that industries 

that received more PPP loans grew closer to their pre-COVID levels faster from April to June.23

Table 6. PPP Loans by Industry 

NAICS subsector description

Approved 

loans

Approved dollars

(billions)

Percent 

of loans

Percent of 

amount

Health Care and Social Assistance 508,145 66.8 10.4 12.9

Professional, Scientific, and Technical Services 641,118 65.9 13.1 12.7

Construction 468,156 64.1 9.5 12.4

Manufacturing 230,003 53.7 4.7 10.4

Accommodation and Food Services 368,311 41.9 7.5 8.1

Retail Trade 451,441 40.1 9.2 7.7

Other Services (except Public Administration) 535,476 30.9 10.9 6.0

Wholesale Trade 167,698 27.5 3.4 5.3

Administrative and Support and Waste Management and 

Remediation Services 241,866 26.2 4.9 5.1

Transportation and Warehousing 194,794 16.9 4.0 3.3

Real Estate and Rental and Leasing 247,091 15.4 5.0 3.0

Finance and Insurance 169,475 12.0 3.5 2.3

Educational Services 81,800 11.9 1.7 2.3

Unclassified Establishments 221,914 9.8 4.5 1.9

Information 69,358 9.2 1.4 1.8

Arts, Entertainment, and Recreation 119,310 8.0 2.4 1.5

Agriculture, Forestry, Fishing and Hunting 139,729 7.9 2.8 1.5

Mining 21,616 4.5 0.4 0.9

Public Administration 13,459 1.7 0.3 0.3

Management of Companies and Enterprises 8,937 1.6 0.2 0.3

Utilities 7,958 1.5 0.2 0.3

Total 4,907,655 517.4 100 100

Sources: Small Business Administration; CEA calculations.

 

23 This was done by taking the natural log of loan amounts approved by industry and taking the correlation with 

the number of jobs gained from April to June divided by job losses from February to April. A strong relationship 

exists, showing that a 10 percent increase in loan dollar amounts leads to 2.7 percentage points more jobs 

recovered.
CEA • Evaluating the Effects of the Economic Response to COVID-19 33

Figure 19 shows the states by percent of 2.5 months’ worth of small business, defined as 

employment of 1 to 499, payroll covered by PPP.24 States with most if not all of their small 

businesses payroll covered by PPP are predominantly in the southeast, and midwest. When 

looking at retail consumer spending and PPP loan amounts, PPP loans did go to states that 

saw more drastic falls in consumer spending.

 

CHAPTER 4

The Impact of the CARES Act on Businesses, Farmers, and the 

Financial Sector

In this chapter, we focus on provisions specifically aimed at businesses that improved access 

to financial resources and allowed businesses to weather the crisis. In a positive development, 

the small business optimism index compiled by the National Federation of Independent 

Business (NFIB) showed a 3.5 point improvement in May, relative to April. The combined index 

is a combination of several subindexes, most of which showed an improved outlook when it 

came to sales, capital investment, and hiring. Of the businesses surveyed in May, a net of about 

8 percent more businesses were optimistic about creating jobs than not. This represents a 7-

 

24 An early analysis of the PPP program shows that allocation of loans was largely uncorrelated with the level of 

economic distress in the geographic region (Granja et al. 2020).

Sources: SBA; Census; CEA calculations.

Note: The amount of payroll comes from Census' 2017 

SUBS survey adjusted to 2019 dollars then reduced to 2.5 

months worth. Small businesses are defined as 

employment of 1 - 499. Sole-proprieterships also received 

PPP loans, so some states received more than 100% of this 

payroll.

Figure 19. Percent of 2.5 Month Small Business Payroll 

Covered by PPP, data through July 10

77.6% to 85.1%

85.1% to 89.7%

89.7% to 92.9%

92.9% to 102.9%
CEA • Evaluating the Effects of the Economic Response to COVID-19 34

percentage-point increase from April. NFIB attributes some of this to the loan forgiveness 

condition associated with the PPP. Small businesses have begun to increase compensation 

and plan to continue to do so; a net 14 percent more surveyed firms reported increasing

compensation for their employees than reported decreasing compensation for employees 

over the past three months, while a net 10 percent more firms planned to increase 

compensation over the next three months in May. 

Summary of Policies That Affect Small Businesses

Paycheck Protection Program. As discussed above,the CARES Act authorized $349 billion in PPP 

loans to support payroll and other expenses for America’s small business, self-employed 

individuals, Tribal Business concerns, and nonprofit/veterans’ organizations. As part of the 

PPP and Health Care Enhancement Act, an additional $310 billion was authorized, bringing the 

total amount authorized for the PPP to $659 billion. While the funds will be used to guarantee 

and forgive loans, a condition for making the loans fully forgivable is that no less than 60 

percent (originally 75 percent) of the funds be spent on payroll expenses within a 24-week 

(originally 8-week) period. 

Federal Reserve Facilities. Federal Reserve facilities are supported by the Treasury Department 

to ensure that the Federal Reserve will not have to absorb losses. This collaboration enhances 

business liquidity through the establishment of 11 financial facilities. (In the case of the PPP, 

the collaboration also includes the Small Business Administration.) In these facilities, various 

Federal Reserve Banks lend to private firms or to State and local governments. In general, the 

Treasury offers capital under the authority of Title IV of the CARES Act to support the various 

macroeconomic facilities established by the Federal Reserve under section 13(3) of the Federal 

Reserve Act. The facilities can be divided into two groups: those that are aimed at the supply of 

credit to the macroeconomy (which rely on CARES Act capital funding), and those that aimed 

at funding markets (which are backed by funding from the Treasury’s exchange stabilization 

fund or secured by collateral): 

Facilities aimed at the supply of credit to the macroeconomy:

 Primary and Secondary Market Corporate Credit Facilities to provide liquidity for 

corporate bonds,

 the Term Asset-Backed Securities Loan Facility that will support the issuance of assetbacked securities (ABS) backed by student loans, auto loans, credit card loans, and 

loans guaranteed by the Small Business Administration,

 the Municipal Liquidity Facility to help State and local governments manage cash flow 

pressures after the municipal bond market showed signs of stress, and

 the Main Street Lending Program and the Paycheck Protection Program Liquidity 

Facility to support lending to small- and medium-sized businesses. 
CEA • Evaluating the Effects of the Economic Response to COVID-19 35

Facilities aimed at funding markets: 

 The Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding 

Facility (backed by capital from the Treasury’s Exchange Stabilization Fund), and the 

Primary Dealer Credit Facility to support the flow of credit to short-term funding 

markets (where loans are collateralized). 

A recent analysis shows that despite the large increase in liquidity demands by firms on banks 

in March 2020, in anticipation of the impending crisis, banks were largely able to meet the need. 

This was a consequence of timely funding flowing in from the Federal Reserve and depositors

(Li, Strahan, and Zhang 2020).

In this section, we explore how the availability of forgivable loans and grants has allowed small 

businesses to avert delinquencies and bankruptcies, and also track the state of employment, 

reopenings, and revenues for small businesses. In a survey of small businesses conducted in 

late March and published in April, economists found that of the 5,800 small businesses 

surveyed, about 43 percent had temporarily closed, and many businesses had seen 

employment decline by 40 percent since January. The survey also found that within the subset 

of firms with monthly expenses over $10,000, the median firm had enough cash to cover two 

weeks. Many of these firms were looking to seek assistance through the CARES Act (Bartik et al. 

2020).

How Small Businesses Have Responded to the CARES Act

Small Business bankruptcies have not spiked. One indicator that we can monitor is small 

business bankruptcies. Using data from the Department of Justice, we are able to monitor 

weekly changes in small business bankruptcies (specifically under Chapter 11) and also 

compare the monthly totals for 2020 with the same month in prior years to see if small business 

bankruptcies have spiked as a result of the crisis.25 Whilethe May bankruptcy data arerelatively 

higher than the May average for 2017 to 2019, the overall trend in filings this year has been 

declining since February. The totals for February and March, due to a new Subchapter 5

provision that came into effect in February, rose to high levels that outpace totals for April, May, 

and June.

26

In addition to small business Chapter 11 bankruptcies falling, aggregate Chapter 7 bankruptcy 

filings have fallen by 13 percent from October 2019 to July 12, 2020, compared with the same 

period a year ago. Aggregate Chapter 7 filings refers to the actual liquidation of assets for 

businesses and consumers, as we are unable to differentiate between the two. Nearly all this 

 

25 When referred to as “small business,” the data reflect businesses that classify themselves as small when they 

are filing for a Chapter 11 bankruptcy.

26 Subchapter 5 of Chapter 11 makes it easier for smaller businesses to reorganize under Chapter 11 bankruptcy. 

Under the CARES Act, the threshold debt level for businesses that could apply for Subchapter 5 bankruptcy was 

raised further, allowing more small businesses to be eligible for this chapter.
CEA • Evaluating the Effects of the Economic Response to COVID-19 36

drop has been felt since the end of February, as filings from October to February averaged a 

monthly year-over-year increase of 2 percent.

Small business Chapter 11 bankruptcies fell in April compared with a year before, and 

remained much lower at an annualized rate than they were during the recovery from the 

financial crisis. There was an uptick in filings in May and June, mainly due to the new 

Subchapter 5 provision, according to the Department of Justice. This decline in April is counter 

to the expected increase in small business Chapter 11 bankruptcies, given historical trends and 

current economic conditions, and possibly suggests that the strong pre-COVID economy and 

PPP may have helped businesses avoid bankruptcy. However, given the elevated business 

uncertainty and potential delays in filing due to social-distancing measures, it may be too early 

to draw a definitive conclusion on the overall effectiveness of PPP or its long-term effect on 

Chapter 11 bankruptcies. 

As shown in figure 20, small business Chapter 11 bankruptcies decreased 23.4 percent in April 

compared with the average of April for 2017 to 2019. However, filings increased 14.5 and 18.2 

percent, respectively, more than usual in May and June compared with the average of 2017–

19. For February and March, the total was 48.1 and 37.3 percent, respectively, higher than the 

average for the same months over the years 2017 to 2019.

The higher number of small business Chapter 11 bankruptcy filings in February and March is 

likely due to the Subchapter 5 provision of Chapter 11 introduced in February that made it 

easier for smaller businesses to reorganize under Chapter 11. There was also a week in May 

that saw a large increase that is attributed to the new provision as well. It is interesting that

6.0

48.1

37.3

-23.4

14.5

18.2

-40

-20

0

20

40

60

January February March April May June

Figure 20. Total Small Business U.S. Chapter 11 Bankruptcy Filings, 

2020

Percent change from 2017–19 average

Sources: Department of Justice; CEA calculations.
CEA • Evaluating the Effects of the Economic Response to COVID-19 37

despite Subchapter 5 being available to small businesses during the current crisis, April, May, 

and June saw a decrease relative to February and March. It is particularly surprising as a new 

Census Bureau survey found over 40 percent of surveyed small businesses still experienced a 

decline in revenues the week of June 27, down from over 70 in early May.

27 Hence we need to 

be cautious and not read too much into these early weeks of data.

Table 7 illustrates the percentage of small businesses that have accessed different programs 

and liquidity measures since March 13, per the Census survey. In addition to these programs 

and liquidity measures, Economic Impact Payments and UI may also have been accessed by 

small businesses as well. As stated in chapter 3, April data on personal income show how real 

personal disposable income increased 13.6 percent due to public assistance through the 

CARES Act. When excluding transfers, disposable income fell 6.3 percent. In May, disposable 

income excluding transfers recovered slightly but remained suppressed, while continued 

public assistance through the CARES Act allowed real personal disposable income to remain 

elevated above pre-pandemic levels.

Table 7. Liquidity Programs for Small Businesses during COVID-19

Program

Percent of small businesses

receiving assistance

Paycheck Protection Program (PPP) 72.4

Economic Injury Disaster Loans (EIDL) 21.3

Small Business Administration (SBA) loan forgiveness 6.8

Other Federal programs 2.6

This business has not received financial assistance from 

any Federal program 23.0

Sources: Census Bureau; CEA calculations.

Note: The sum of these do not equal 100 as businesses could select multiple answers. Survey results for the period 6/21-6/27. Census 

defines a small business as “a single location business with employment between 1 and 499 and receipts of at least $1,000.” The 

sample consists of about 885,000 businesses.

Many unique aspects of the COVID-19 pandemic and containment measures render it difficult 

to assess the reasons for this apparent decline in filings. Some of this difference in small 

business Chapter 11 bankruptcy filings may be due to owners being unable to physically go 

and file for bankruptcy due to distancing measures, or courts being unable to accept filings for 

the same reason (Tett 2020). Businesses may also be waiting until they see how the current 

economic uncertainty unfolds before they file for bankruptcy (Keshner 2020). Additionally, the 

strong economy pre-COVID may have put businesses in a position to survive for some time,

even with COVID-related disruptions to their business models. Interestingly, a recent academic 

paper simulates the effect of a PPP-type program in a general equilibrium model and shows 

that that program, along with a Main-Street-Lending-type program, would be successful in

preventing corporate bankruptcies (Elenev, Landvoigt, and Van Nieuwerburgh 2020).

 

27 This preliminary estimation comes from weekly surveys conducted by the Census Bureau since April 26; see

https://portal.census.gov/pulse/data/.
CEA • Evaluating the Effects of the Economic Response to COVID-19 38

The PPP program also helped small businesses avert bankruptcies because just over 70 

percent of small businesses, defined as a firm with employment between 1 and 499 workers,

received PPP loan assistance, according to the Census Bureau’s Pulse surveys. First, the SBA 

specified that businesses that are currently filing for bankruptcy are not eligible to receive 

potentially forgivable PPP loans; hence, businesses may be putting off filings in order to receive 

the money.28 Second, receipt of PPP loans allows businesses to stay afloat and adopt a “wait 

and see” attitude until the reopening of the economy.29

Figure 21 shows which States have seen an uptick in small business Chapter 11 bankruptcies 

so far in fiscal year (FY) 2020 through July 5, compared with their 2017 to 2019 averages. There 

are 29 States with higher FY 2020 annualized small business Chapter 11 bankruptcies than their 

averages between 2017 and 2019. These States account for 67.4 percent of total small business 

Chapter 11 bankruptcies so far in FY 2020.

 

28 Official SBA forms have prohibited debtors in bankruptcy that would otherwise qualify from receiving PPP loans 

(Parlin 2020).

29 The executive director of the American Bankruptcy Institute argued that Congressional and executive branch 

action has staved off an initial wave of bankruptcies due to the pandemic (ABI 2020).

Sources: Department of Justice; CEA calculations.

Note: Alabama and North Carolina have no data available as 

they are not under the jurisdiction of the United States 

Trustee Program. The legend shows the 25th and 75th 

percentiles with a break at zero between the two.

-57.9% to -14.7%

-14.7% to 0%

0% to 81.5%

81.5% to 2,254.8%

Figure 21. Percent Change in Small Business Chapter 11 

Bankruptcies, Average, 2017–19 to FY 2020 through July 

5, Annualized
CEA • Evaluating the Effects of the Economic Response to COVID-19 39

We can compare these data to longer-run historical trends in bankruptcy filings, starting from 

the Great Recession. Figure 22 uses annual data on small business filings provided by the 

Department of Justice.30 There was a large increase in small business Chapter 11 bankruptcies 

during 2009 and 2010, with falling small business Chapter 11 bankruptcies as the recovery 

continued. Beyond the PPP’s potential role, strong economic fundamentals pre-COVID—

including record-high small business optimism—may have played a role in small business 

Chapter 11 bankruptcies staying below the levels most would expect during an economic 

disruption as large as COVID-19.

Small business employment is trending back up. Beyond bankruptcies, small businesses may 

show other signs of distress, such as an inability to obtain loans, an increase in delinquencies, 

and a decline in employment and job openings. Several databases track conditions for small 

businesses nationwide. Here, we review data from Homebase and Opportunity Insights. The 

Homebase data and Opportunity Insights data indicate that small businesses are beginning to 

reopen and more employees are coming back to work. 

Homebase is a company that provides software to help small business owners manage 

employee timesheets. Since the start of the pandemic, Homebase has maintained a database 

of U.S. small business employment using data from more than 60,000 businesses that use their 

software. The data cover more than 1 million employees that were active in the United States 

in January 2020. Most Homebase customers are businesses that are individually owned or 

operator managed in restaurant, food and beverage, retail, and services. 

 

30 The numbers for 2020 are annualized using data provided thus far for this fiscal year.

10

20

30

40

50

2008 2010 2012 2014 2016 2018 2020

Figure 22. Number of Chapter 11 Small Business Bankruptcies per 

100,000 Small Businesses, FYs 2008–20

Bankruptcies per 100,000 small businesses

Sources: Department of Justice; Census Bureau; CEA calculations.

Note: FY 2020 is annualized with data through July 5.

2020
CEA • Evaluating the Effects of the Economic Response to COVID-19 40

The Homebase data show the dramatic impact of the COVID-19 pandemic on small businesses. 

Figure 23 illustrates the daily change in the number of hourly employees working at small 

businesses using Homebase compared with a January baseline. After shelter-in-place orders 

became widespread in mid-March, the number of employees working fell to a level about 55 to 

60 percent lower than normal conditions. As States begin to raise their shelter-in-place orders, 

hourly employees are beginning to go back to work. As of July 13, employees working at small 

businesses using Homebase are about 24 percent below normal conditions.

CARES Act signed

-70

-60

-50

-40

-30

-20

-10

0

10

03/02/20 03/23/20 04/13/20 05/04/20 05/25/20 06/15/20 07/06/20

Figure 23. Change in the Number of Small Business Hourly 

Employees Working, 2020

Percent change (relative to January base)

Source: Homebase.

Note: All the rates compare that day vs. the median for the day of the week for the period January 4, 2020, to January 

31, 2020. 

7/13/20

Holiday activity
CEA • Evaluating the Effects of the Economic Response to COVID-19 41

Small business job openings. Opportunity Insights, a nonpartisan and not-for-profit research 

organization based at Harvard University, has also developed a data set to track the impact of 

COVID-19 on small businesses since January 2020. They pull together data from different 

sources of “credit card processors, payroll firms, and financial services firms” to construct time 

series to track the impact of COVID-19 (Chetty et al. 2020). Figure 24 shows that by mid-April, 

the number of small businesses open had fallen over 30 percent compared with January. Since 

then, as States have begun reopening, the number has increased; it is currently about 13

percent below that of January 2020. The small business closures, combined with the lack of a 

spike in bankruptcies, underline the goals of PPP: to allow small businesses to remain solvent 

while closed, and to allow the employer-employee relationship to remain intact even while 

many businesses were closed.

-40

-30

-20

-10

0

10

02/01/20 02/22/20 03/14/20 04/04/20 04/25/20 05/16/20 06/06/20 06/27/20

Figure 24. Change in the Number of Small Businesses Open, SevenDay Average, 2020

Percent change (relative to January base)

Source: Opportunity Insights.

Note: All the rates compare that day vs. the median for the day of the week for the period January 4, 2020, to January 

31, 2020. 

7/8/20

CARES Act signed
CEA • Evaluating the Effects of the Economic Response to COVID-19 42

The Opportunity Insights data also capture how the impact of COVID on small businesses varies 

by State. April 10 is when almost all shelter-in-place orders had been announced and is the 

lowest point of the number of small businesses open time series at the nationwide level. Figure 

25 shows the States with the highest percentage of small businesses recovered since April 10, 

as of July 8. States in the east and southeast are the ones that have seen the largest gains from 

the nationwide trough. 
CEA • Evaluating the Effects of the Economic Response to COVID-19 43

Small business revenues. Opportunity Insights also tracks how much total small business 

revenue has fallen (figure 26). At its lowest point, which occurred in late March, small business 

revenue fell by about 40 percent. It has since begun to recover, until plateauing at about 15 

percent below January levels. These data illustrate a quicker rebound in revenues compared 

with the data on the number of employees working and businesses being opened. The recent 

surge of cases in various states is the main driver for revenues plateauing as States reconsider 

restrictions. 

-50

-40

-30

-20

-10

0

10

20

02/01/20 02/22/20 03/14/20 04/04/20 04/25/20 05/16/20 06/06/20 06/27/20

Figure 26. Change in Small Business Revenue, Seven-Day Average, 

2020

Percent change since January 2020

Source: Opportunity Insights.

7/8/20

Cares Act signed
CEA • Evaluating the Effects of the Economic Response to COVID-19 44

Figure 27 shows the states with the highest percent recovered of small business revenue since 

April 10, as of July 8. States in the east and southeast again are the ones that have seen the 

largest gains from the nationwide trough, but western and southwestern States are also 

rebounding. It is noteworthy that States like California, Kansas, and Arizona have seen recovery 

in small business revenue, yet the number of small businesses open have not recovered to the 

same extent, as seen in figure 25, but many small businesses are being adaptive and are finding 

new ways to maintain revenues.

The Impact of the Coronavirus Food Assistance Program on Farm Incomes

The CARES Act authorized provisions to support farmers who were harmed by the 

consequences of the COVID-19 epidemic. These provisions took the form of the USDA’s 

Coronavirus Food Assistance Program (CFAP). The COVID-19 epidemic and the associated 

economic response disrupted food and agricultural markets, resulting in a dramatic drop in 

farm income for a wide array of agricultural products. CFAP makes available $16 billion in

financial assistance for producers of affected commodities, including $9.5 billion to 

compensate for losses due to commodity price reductions between mid-January and mid-April 

2020 and another $6.5 billion for ongoing market disruptions. In early February 2020, before 

the extent of the impact on agricultural markets was understood, U.S. net farm incomefor 2020 

was forecast to be $99 billion, which would have been a 4 percent increase over 2019 and the 

highest net farm income since 2014. By June, as the magnitude of the pandemic became 

apparent, analysts had revised the forecast of 2020 net farm income down by more than $24

billion (25 percent) when CFAP payments are excluded. Including the $16 billion in emergency 

farm payments raises forecasts for net farm income to $91 billion (figure 28).

Sources: Opportunity Insights; CEA calculations.

Note: Percent recovered is the percent below pre-COVID 

levels on July 8 divided by percent below pre-COVID levels on 

April 10.

-7.1% to 38.6%

38.6% to 52.8%

52.8% to 69.5%

69.5% to 107.4%

Figure 27. Percent Recovered of

Small Businesses Revenue, 

April 10 to July 8
CEA • Evaluating the Effects of the Economic Response to COVID-19 45

The Impact of CARES Forbearance Measures

The latest consumer debt and credit indicators for April, May, and June have not shown the 

deterioration that would be expected given the unprecedented size of the negative income 

shock experienced by households. In contrast to the Great Recession, when consumer debt 

delinquencies spiked and lenders curtailed supply of credit to households amid an 

environment of worsening credit risk, reported delinquency rates across major consumer debt 

categories have fallen to date while credit limits extended to existing credit card holders have 

remained largely stable. The CARES Act may have contributed to this in two ways. First, the 

cash transfers provided under the CARES Act—in combination with households sharply 

reducing spending during the COVID-19 pandemic due to social distancing measures—may 

have freed up resources for households to make debt payments. Second, delinquencies are 

also down because of the forbearance provisions under the CARES Act.

31 Some consumers who 

have not been able to meet debt payments have received accommodation from their lenders

per these provisions, so that the lender does not report the account as delinquent. Equifax, 

however, reports an increase in loans that have received a “Possible Accommodation” from 

lenders.32 Accommodations are most noticeable in mortgages and student loans. Media outlets 

 

31 Several States have also introduced forbearance provisions, complementing those included in the CARES Act. 

See, for example, https://www.mcguirewoods.com/client-resources/Alerts/2020/4/cares-act-states-consumercredit-protection.

32 Equifax defines a loan accommodation as “any form of relief that lenders offer to a borrower in times of hardship 

(job loss, natural disaster, illness, military deployment, etc.)” In a recent analysis, Equifax categorized loans as 

“Possible Accommodations” based on a variety of indicators. For example, if a credit card account has a balance, 

but no payment due, that is a “Possible Accommodation.” 

60

70

80

90

100

2016 2017 2018 2019 2020F

2020 forecast pre-COVID 2020 forecast with COVID impact

2020 forecast with COVID impact and CFAP Actual net farm income

Figure 28. U.S. Net Farm Income, 2016–20

Billions of dollars

Sources: U.S. Department of Agriculture; Food and Agricultural Policy Research Institute; CEA calculations.

Note: "F" denotes a forecast; CFAP = Coronavirus Food Assistance Program.
CEA • Evaluating the Effects of the Economic Response to COVID-19 46

have reported rising delinquency, especially in mortgages; however, they do not take into 

account loan accommodation.33 This subsection reviews the latest consumer credit indicators 

across various debt categories. 

Mortgages. Mortgages make up the largest category of consumer debt, accounting for 68 

percent of outstanding consumer debt. Since the Great Recession, mortgage debt has 

gradually risen to reach new highs, with households with prime credit (those with Vantage 

credit scores above 619) holding a larger share when compared with the pre-2008 period. As of 

March 2020, prime households held close to 80 percent of total household debt, whereas in 

2008 they held less than 70 percent according to internal analysis at the Treasury Department.

Despite the record highs in outstanding mortgage balances, the severe delinquency rate 

(defined as the percentage of balances that are either 90 days or more past due in bankruptcy 

or foreclosure) has fallen to a new low. According to Equifax data, the severe delinquency rate 

for first mortgages has fallen from a high of more than 8 percent in the Great Recession to 0.6 

percent as of June 30, 2020 (figure 29). In contrast to the Great Recession, when the mortgage 

loan severe delinquency rate spiked, the rate has fallen by 0.2 percentage point since February 

2020, our pre-COVID benchmark date. Figure 30 shows that the delinquency rate was relatively 

stable in the immediate months leading up to the COVID-19 outbreak in the United States and 

only began to decline upon the passage of the CARES Act in late March. 

The most likely explanation for this trend is the introduction of the mortgage loan forbearance 

option made available by the CARES Act. In the Equifax data, first mortgage loans reported with 

possible accommodations increased from 2.7 percent, when the CARES Act was passed, to 8.7

percent as of June 30 (figure 34). The Mortgage Bankers Association (MBA) reported that the 

share of loans under forbearance rose from 0.3 percent of all loans in early March to 8.6 percent 

as of June 7. Much of this increase occurred after the passage of the CARES Act, rising by 5.7 

percentage points from April 1 to May 3. The MBA now estimates that 4.3 million homeowners 

are in forbearance plans. 

Evidence from the Great Recession suggests there are strong dividends from relief measures 

such as forbearance that provide liquidity to borrowers in the housing market. Specifically, 

liquidity relief is more effective at alleviating defaults and boosting consumption than principal 

reductions that affect household net worth but have less impact on budget constraints

(Ganong and Noel 2019). Beyond the impact on individuals, this fact has broader salience for 

the housing market as a whole, given evidence that foreclosure activity amplifies house price 

declines (Guren and McQuade 2020).

 

33 If forbearance measures are not taken into account, a mortgage loan in forbearance would first be deemed late, 

then deemed 30 day delinquent, then 60 day delinquent the next month, and so on. For an example of a media 

outlet report that does not account for forbearance, see 

https://www.washingtonpost.com/business/2020/07/14/new-mortgage-delinquencies-hit-record-high/.
CEA • Evaluating the Effects of the Economic Response to COVID-19 47

The major categories of nonmortgage consumer debt include student loans (more than $1.6

trillion), auto loans ($1.4 trillion), credit card debt ($797.0 billion), and consumer finance 

loans ($118.4 billion). Since February 2020, severe delinquency rates in each of these 

consumer debt categories have either remained stable or decreased. The delinquency rate 

is also significantly well below that observed during the Great Recession. 

0

1

2

3

4

5

6

7

8

9

2006 2008 2010 2012 2014 2016 2018 2020

Figure 29. Mortgage Severe Delinquency Rate, 2006–20

Deliquency rate (percent)

Sources: Equifax; CEA calculations.

Jun-20

0.56

0.60

0.64

0.68

0.72

0.76

0.80

0.84

10/31/19 01/31/20 03/10/20 03/31/20 04/21/20 05/12/20 06/02/20 06/23/20

Figure 30. 90+ Day Mortgage Severe Delinquency Rate, 2019–20

Delinquency rate (percent)

Sources: Equifax; CEA calculations.

Note: Since these are weekly data, and the CARES Act was signed March 27, it is presented the week of March 31, 2020.

CARES Act signed

6/30/20
CEA • Evaluating the Effects of the Economic Response to COVID-19 48

Forbearance provisions have helped students. It is clear that the forbearance on Federal

loans under the CARES Act has played a key role in forestalling an increase in student loans 

delinquencies. The severe delinquency rate for nondeferred student loans plummeted from 

a pre-COVID rate of 6.3 percent to only 0.4 percent as of June 30 (figure 31). When looking at 

student loans with possible accommodations, these loans have increased by 43.0

percentage points, from 48.5 percent on March 17 to 91.5 percent on June 30 (figure 32).

Almost all federal student loans are seeing accommodation, including deferrals. Educationheld student loan accounts can still be severely delinquent; but due to forbearance, they are 

not reported as delinquent. Instead, borrowers are reported as not owing payments on their 

balances.

Auto loans 

and leases

Credit cards

Others

Nondeferred 

student loans

0

1

2

3

4

5

6

7

10/1/19 02/1/20 03/24/20 04/21/20 05/19/20 06/16/20

Figure 31. Severe Delinquency Rate by Nonmortgage Products, 

2019–20

Percent

Sources: Equifax; CEA calculations.

Note: Since these are weekly data, and the CARES Act was signed March 27, it is presented the week of March 

31, 2020.

6/30/20

CARES Act 

signed
CEA • Evaluating the Effects of the Economic Response to COVID-19 49

Delinquencies Are Down. Less dramatic but still noteworthy, the delinquency rates for auto 

balances and credit card balances have also remained stable or even fallen slightly, and remain 

significantly below that observed during the Great Recession (figure 33). 

Nondeferred 

student loans

40

50

60

70

80

90

100

10/01/19 12/01/19 02/01/20 04/01/20 06/01/20

Figure 32. Percentage of Student Loans Reported with Possible 

Accommodation, 2019–20

Percent 

Source: Equifax.

6/30/20 CARES Act signed 

Auto loans 

and leases

Credit cards

Others

Nondeferred 

student loans

0

2

4

6

8

10

12

14

2006 2008 2010 2012 2014 2016 2018 2020

Figure 33. Severe Delinquency Rate by Nonmortgage Products, 

2006–20 

Delinquency rate (percent)

Sources: Equifax; CEA calculations.

Jun-20
CEA • Evaluating the Effects of the Economic Response to COVID-19 50

Severe delinquency for auto balances decreased from 1.2 percent pre-COVID (1.5 percent peak 

in 2009) to 0.9 percent currently; severe delinquency for consumer credit card balances edged 

down from 2.5 percent pre-COVID (above 5 percent in 2009) to 2.1 percent currently. At the 

same time, auto loans and leases haveseen a large increase in possible accommodations, from 

just under 1 percent of balances before the CARES Act to 7.8 percent on June 30 (figure 34).

However, credit card balances have seen an increase in possible accommodations of only 

about 1.2 percentage points since the beginning of March. Forbearance for auto loans may be 

masking a significant increase in distressed accounts; but for credit cards, this appears less 

likely. 

Credit is available to households. One important liquidity lifeline for households is the 

availability of credit through credit cards. When lenders reduce the borrowing limit of credit 

cards, the amount of credit available to households decreases. From 2009 to 2011, lenders 

reduced credit limits on credit cards by 30 percent due to concerns about the creditworthiness

of households, causing consumer credit utilization rates (the percentage of one’s credit limit 

used) to surge as households were not reducing spending accordingly. In contrast, current data 

suggest that lenders have kept borrowing limits stable on credit cards; that, in combination 

with the drop in credit card spending due to social-distancing measures, this led to an overall 

decrease in consumer credit card utilization rates. Currently, credit card utilization rates stand 

at about 19.3 percent, compared with 21.6 percent in February 2020 and just over 25 percent 

at the peak of the Great Recession (figure 35). It is possible that the relief measures under the 

CARES Act may have indirectly contributed to this trend by providing enough financial cushion 

to households to avert delinquencies, which could have caused lenders to be less averse about 

lending. One caveat to this finding is that high-frequency data have shown a sharp drop in new 

Auto

Credit card

Consumer finance

First mortgage

Home equity

0

1

2

3

4

5

6

7

8

9

10

10/01/19 12/01/19 02/01/20 04/01/20 06/01/20

Figure 34. Percentage of Loans Reported with Possible 

Accommodation, by Type of Loan, 2019–20

Percent 

Source: Equifax.

6/30/20 CARES Act signed 
CEA • Evaluating the Effects of the Economic Response to COVID-19 51

consumer credit (i.e., new credit card applications and accounts). It is unclear the extent to 

which the decrease is due to supply or demand factors.

The delinquency rates across consumer debt categories were either stable or declined in April, 

May, and June, a contrast to what was observed during the Great Recession. Certainly, various 

factors other than the provisions of the CARES Act may have contributed to this, such as 

reduced spending of consumers due to social-distancing measures and the improved 

household balance sheets due to the deleveraging of nonprime households before the COVID19 crisis. But the impact of relief measures is also clear. An important open question, however,

is the extent to which the underlying financial stress is being delayed both by lender 

forbearance and by the COVID-19 shutdown itself, and whether the current favorable trend in 

consumer debt delinquency will continue as the economy reopens.34

The Impact on the Financial Sector

As the threat of the COVID-19 pandemic increased, the financial system came under stress in 

February and March. Stock prices plummeted and market volatility rose. A recent analysis by 

Baker and others (2020) shows that COVID-19 has had an unprecedented impact on the stock 

market, especially in comparison with other infectious disease outbreaks, including the 1918–

20 Spanish Influenza. Businesses, which already held a historically high level of debt at the 

beginning of 2020, were suddenly at higher risk of default, leading to a decline in the availability 

 

34 A recent analysis by the Office of Financial Research in the Treasury Department points to financial 

vulnerabilities among highly leveraged households, small business owners with personal debt, and households 

with student loans. 

Credit limit

(left axis)

Credit utilization 

(right axis)

18

19

20

21

22

23

24

25

26

2.2

2.4

2.6

2.8

3.0

3.2

3.4

3.6

3.8

2006 2008 2010 2012 2014 2016 2018 2020

Figure 35. Bank Card Total Monthly Limit and Credit Utilization, 

2006–20

Percent

Sources: Equifax; CEA calculations.

Note: "Credit utilization" refers to the total bank card balance as a share of total bank card credit limit.

Trillions of dollars

Jun-20
CEA • Evaluating the Effects of the Economic Response to COVID-19 52

of credit, and households’ ability to repay their debts in the face of job and income loss became

uncertain. With potential defaults around the corner, lenders could have been in trouble. For 

example, life insurance companies and hedge funds are highly leveraged, meaning they would 

need to cut back lending, sell assets, or shut down if they experience even moderate losses. 

Under these market conditions, monetary or fiscal problems abroad—especially in Europe, 

China, or emerging market economies—could have spilled over to the United States, 

compounding the stress on the financial system.

While vulnerabilities remain, the CARES Act, together with emergency powers under section 

13(3) of the Federal Reserve Act, authorized the Federal Reserve and Treasury Department to 

take action to stabilize the system and prevent a financial crisis like that seen during the Great 

Recession. In accord with the Federal Reserve’s Financial Stability Report, the Federal Reserve 

took three types of actions: monetary policy actions, actions to stabilize short-term funding 

markets, and direct support for credit. In addition, Chairman Jerome Powell testified that the 

Federal Reserve “took measures to allow and encourage banks to use their substantial capital 

and liquidity levels built up over the past decade to support the economy during this difficult 

time.” Below we summarize some of the findings from the Financial Stability Report (Federal 

Reserve 2020).

Monetary policy actions. The Federal Reserve lowered its policy rate close to zero to make 

borrowing less expensive. The Federal Open Market Committee began buying Treasury 

securities and agency mortgage-backed securities after investors moved toward cash and 

short-term government securities due to volatility and uncertainty, which had the effect of 

smoothing and improving market conditions. 

Stabilizing short-term funding markets. Investors’ cash dash also strained businesses’ ability to 

fund operations through commercial paper as they stopped accepting commercial paper and 

pulled out of money market mutual funds that hold it with other short-term debt instruments. 

According to the Financial Stability Report (Federal Reserve 2020), the Federal Reserve 

responded by setting up several Federal Reserve facilities. Eight of these facilities are 

supported by a CARES Act appropriation to the U.S. Treasury to ensure that the Federal Reserve 

will not have to absorb losses. This collaboration with the Treasury enhances business liquidity 

through the establishment of 11 financial facilities (in the case of the PPP, the collaboration 

also includes the Small Business Administration). In these facilities, various Federal Reserve 

Banks lend to private firms or to State and local governments. In general, the facilities can be 

divided into two groups: those that are aimed at the supply of credit to the macroeconomy 

(which rely on CARES Act capital funding), and those aimed at funding markets (which are 

backed by the Treasury’s exchange stabilization fund or are collateralized). The Treasury offers 

capital under the authority of Title IV of the CARES Act to support the 8 macroeconomic 

facilities established by the Federal Reserve under section 13(3) of the Federal Reserve Act. 
CEA • Evaluating the Effects of the Economic Response to COVID-19 53

Direct Support for Credit. As it became apparent that the COVID-19 pandemic and containment 

measures would have long-lasting economic consequences, the Financial Stability Report

(2020) points out that borrowing became more expensive for municipalities, corporations, and 

issuers of asset-backed securities (bundles of loans to households and businesses for 

automobiles, equipment, credit card purchases, etc.). Small and medium-sized businesses 

needed to borrow more as well to cover costs while revenues fell, even as borrowing became 

more expensive. The facilities aimed at the supply of credit to the macro-economy are:

 the Primary and Secondary Market Corporate Credit Facilities to provide liquidity for 

corporate bonds,

 the Term Asset-Backed Securities Loan Facility that will support the issuance of assetbacked securities (ABS) backed by student loans, auto loans, credit card loans, and 

loans guaranteed by the Small Business Administration,

 the Municipal Liquidity Facility to help State and local governments manage cash flow 

pressures after the municipal bond market showed signs of stress, and

 the Main Street Lending Program and the Paycheck Protection Program Liquidity 

Facility to support lending to small- and medium-sized businesses. 

The Facilities aimed at funding markets are: 

 the Money Market Mutual Fund Liquidity Facility,

 the Commercial Paper Funding Facility (both backed by capital from the Treasury’s 

Exchange Stabilization Fund), 

 and the Primary Dealer Credit Facility (which is collateralized) to support the flow of 

credit to short-term funding markets,. 

These facilities resulted in a drop in the issuance of overnight commercial paper and 

redemptions from money market funds, easing market strains.

Commercial and industrial loans at the Nation’s commercial banks grew $726 billion during 

the nine weeks from March 4 through May 6, far in excess of the growth during any similar 

interval since records were first collected in 1973. Li, Strahan, and Zhang (2020) argue that 

banks were able to accommodate this demand because of Federal Reserve bank liquidity 

programs, strong pre-shock bank capital, and coincident inflows from depositors.

A variety of indicators of financial distress spiked early in the COVID-19 epidemic period but 

have receded since then. Although many other shocks have hit the economy, including news 

about the epidemic itself, one can argue that public policy has mitigated the contagion of the 

epidemic into financial markets.

The VIX, an index of expected stock market volatility derived from options prices, spiked from 

27 in late February to a peak of 83 on March 16 (figure 36). It has generally fallen since then, but 

remains somewhat elevated (as of June 12, the VIX was 36).
CEA • Evaluating the Effects of the Economic Response to COVID-19 54

Similarly, corporate bond spreads, such as the spread between BBB bonds relative to 

Treasury notes, show a similar pattern peaking around March 23 and then receding (figure 

37).

 

 

0

10

20

30

40

50

60

70

80

90

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Figure 36. Market Volatility Index (VIX), 2007–20 

Index

Source: Wall Street Journal.

6/12/20

0

1

2

3

4

5

6

7

2006 2008 2010 2012 2014 2016 2018 2020

Figure 37. BBB Corporate Bond and 10-Year Treasury Note Spread, 

2006–20

Basis points

Source: Bloomberg.

06/12/20
CEA • Evaluating the Effects of the Economic Response to COVID-19 55

Finally, the stock market itself, as measured by the S&P 500 index, fell from its February 19 

peak of 3,386 to a March 20 low of 2,237 (-33.9 percent or 1,149 points), but by June 24 had 

recovered to 3,050 (a rebound of 813 points, or a recovery of 71 percent of its earlier loss).

The trends in these indicators, and others, suggest that these programs have played an 

important role in easing market strain and ensuring access to liquidity for businesses, 

households, and communities.

CHAPTER 5

Comparison with the Great Recession

In this chapter, we provide a comparison of the current COVID-19 crisis with the Great 

Recession of 2007–9. We assess the precrisis macroeconomy vis-à-vis a series of indicators and 

then reflect on the policy measures adopted to deal with the situation. As we show, the U.S. 

economy entered the COVID-19 crisis in a stronger position than it did before the 2007–9 Great 

Recession, when highly leveraged household and bank balance sheets created major 

macroeconomic vulnerabilities. In contrast, a potential source of risk in today’s economy is the 

growth of nonfinancial business debt in recent years.

Crisis-Driving Forces

The financial crisis of 2008–9 and the resulting Great Recession started with an overheated 

housing market. In 2006, housing market weakness began to emerge, first in the form of longer 

selling delays—indicating a deterioration in housing liquidity—followed by deceleration and 

reversal in house price growth. As discussed by Garriga and Hedlund (2019), the fundamental 

causes of this reversal continue to be debated, with some scholars focusing on the role of 

subprime lending, others looking at the riskiness of the mortgage products themselves (high 

loan-to-value or payment-to-income loans, adjustable rates, balloon payments, etc.), and 

others assigning primary blame to housing investors who, as non-owner-occupiers, exhibited 

higher propensities to default. Regardless, what is clear is that the weakness in housing spilled 

over into the rest of the economy because of the damage it wreaked on household and bank 

balance sheets alike. 

By March 2007, there were reports that the housing slump had hit some hedge funds hard. In 

April of that year, New Century Financial, the largest independent U.S. provider of subprime 

mortgages, filed for bankruptcy. In their book First Responders, Bernanke, Geithner, and 

Paulson state that “if we had to pick the date that the crisis began, it would be August 9, 2007, 

when the French bank BNP Paribas froze withdrawals from three funds that held securities 

backed by U.S. subprime mortgages” (p. 12). By late summer of 2007, the investment bank Bear 

Stearns was liquidating two hedge funds that were heavily invested in subprime mortgages. 
CEA • Evaluating the Effects of the Economic Response to COVID-19 56

Over the next year, the contagion spread to every corner of financial markets and turned into 

a full-blown crisis. Facing deteriorating balance sheets and frozen markets, lenders cut the 

supply of credit to the economy, which caused households and businesses to curtail spending. 

As the economy hemorrhaged jobs, higher unemployment accelerated the collapse in the 

housing market, which further fueled the cascading spiral of economic misery.

The economic harm wrought by the financial crisis of 2008 and the subsequent Great Recession 

was severe and historic. The Federal Reserve Bank of San Francisco found that “the downturn 

profoundly damaged the labor market. Nonfarm payroll employment declined by about 8.5 

million jobs from peak to trough. The unemployment rate increased from 4.7 percent in 

November 2007 to a peak of 10.1 percent in October 2009.” Moreover, unemployment 

remained above 9 percent for two years after the technical end of the recession (i.e. when GDP 

stopped contracting), and the average duration of unemployment for jobless workers stayed 

near historic highs. Households saw their housing wealth evaporate as prices fell by nearly 30 

percent on average—with larger declines on the coasts and in the sand States—at the same 

time that their retirement portfolios suffered a 50 percent drop in the Dow Jones from peak to 

trough on March 9, 2009. In addition, 3.8 million homes were foreclosed between 2007 and 2010 

(Dharmasankar and Mazumder 2016). Even with all the major interventions that were 

considered unprecedented at the time, it took years for the U.S. economy to fully recover as 

scars from the crisis persisted.

The origins of the COVID-19 recession were quite different. The U.S. economy began 2020 in a 

state of historic strength, with record-low unemployment and broad-based GDP growth. The 

earliest warning signs came from China, where the virus originated, and where Chinese efforts 

to contain the virus had the effect of impairing U.S. supply chains. On January 31, the United 

States banned travel from China and later imposed more travel restrictions in late February 

after community spread began in the United States. On March 13, President Trump announced 

a national emergency, and on March 16 the U.S. government released “15 days to slow the 

spread” COVID-19 guidance. Over the next two weeks, most States began instituting lockdown 

measures, such as restaurant closures, shelter-in-place orders, and other mandatory social 

distancing measures. However, research from Opportunity Insights shows that Americans were 

already privately adjusting their behavior in response to perceived risks from the virus, even 

before State restrictions were announced or went into effect.

This narrative timeline describes a situation where global supply chain shocks morphed into a 

dangerous mix of mutually reinforcing shocks to both the supply and demand sides of the 

economy. Social distancing caused people to refrain from going to work—thereby limiting the 

economy’s ability to produce goods and services—while simultaneously lowering demand as 

people avoided group-based consumption. Although the economic contagion was first most 

severe in industries such as travel and hospitality, it quickly spread elsewhere through the 

complex interlinkages between sectors in the U.S. economy.
CEA • Evaluating the Effects of the Economic Response to COVID-19 57

The Strength of the Economy Before the Crisis

Households. From 2000 to 2008, household liabilities as a share of personal disposable income 

rose from 96 percent to 136 percent before falling back to below 100 percent before COVID-19,

according to the Federal Reserve’s Flow of Funds data. However, examining only aggregates 

can obscure the true level of risk that is captured more accurately by the tails of the 

distribution. Even along this dimension, however, the U.S. economy appears to be in a stronger 

position than back in 2006 before the start of the financial crisis. The share of mortgages with 

debt-to-income ratios above 50 percent has fallen from 11.0 percent in 2006 to only 6.9 percent 

in 2018. While the loan-to-value ratio for new mortgages is similar to what it was in 2006, credit 

has shifted toward borrowers with high credit scores. Whereas 14.1 percent of borrowers 

taking out a mortgage had below a 620 credit score in 2006, that share was only 3.3 percent in 

2018. Borrowers are also taking out safer loans. The share of mortgages with less than full 

amortization fell from 29.2 percent in 2006 to 0.6 percent in 2018, and mortgages where 

borrowers were only required to provide minimal documentation at origination saw their share 

drop from 34.5 percent in 2006 to 1.8 percent in 2018 (Davis et al. 2019). Looking beyond 

mortgages, the share of credit card volume going to subprime borrowers was under 2.5 percent 

in 2019, compared with 3.4 percent before the financial crisis, according to the Consumer 

Financial Protection Bureau (CFPB). The CFPB also shows that, for auto loans, the share going 

to subprime borrowers was under 15 percent in 2019 before COVID-19, versus nearly 20 percent 

in 2006.

Before COVID-19, researchers ran stress tests on households to examine how negative shocks 

to the economy would translate into defaults on household debt. One study simulates a fall in 

house prices similar to what occurred in the Great Recession and generates a much smaller 

peak in foreclosures; the average shocked stressed default rate—which represents for a 

particular loan its expected default rate if it were hit shortly after origination with a replay of 

the financial crisis—was 9.7 percent in 2018 compared with 34.8 percent in 2006 (Davis et al. 

2019). Another study simulates a large house price decline and unemployment spike meant to 

mimic the financial crisis. When faced with the same shocks from 2007 to 2009, the economy 

in 2020 generates fewer defaults because of healthier household balance sheets (Bhutta et al. 

2019).

Nonfinancial businesses. While households were in good shape before the COVID-19 pandemic, 

the nonfinancial business sector had become more leveraged. By early 2020, the aggregate 

debt-to-GDP ratio for nonfinancial businesses had reached levels not seen since the financial 

crisis (figure 38). This ratio has continued to increase in recent months.
CEA • Evaluating the Effects of the Economic Response to COVID-19 58

One reason nonfinancial business debt has risen, however, is that interest rates are at historic 

lows. This reduces the burden of servicing debt. A basic measure of debt burden is the ratio of 

company earnings to their interest payments, or the interest coverage ratio. In recent years, 

the interest coverage ratio for the median firm has remained high (Federal Reserve 2020). The 

sales-weighted shares of nonfinancial public corporations that use more than 30 percent, 40 

percent, or 50 percent of their earnings to make interest payments have all been declining, and 

as of 2020, these shares were all lower than at the start of the Great Recession (Crouzet and 

Gourio 2020).

Despite historically low costs of borrowing, the Federal Reserve and the International Monetary 

Fund have expressed concern about the quality of corporate debt. In early 2020, about 50 

percent of investment-grade debt was rated BBB, an amount that was near a historical high. 

BBB is the lowest rating category for investment-grade debt, and so carries more risk of default 

than higher-grade debt. Another concern is that since 2015, loans to large corporations have 

increasingly focused on highly leveraged firms. Figure 39 shows the default rate for leveraged 

loans over time. In February 2020, the rate was higher than at the start of the Great Recession;

and in the last few months, it has been increasing. (Federal Reserve 2020; IMF 2019, 2020). 

Overall, the second quarter of 2020 has had the highest quarterly volume of defaults in 

leveraged loans since the first quarter of 2009 (LCD News 2020).

0.5

0.6

0.7

0.8

0.9

1.0

2006:Q4 2009:Q2 2011:Q4 2014:Q2 2016:Q4 2019:Q2

Figure 38. Household Sector and Nonfinancial Business Debt to 

GDP, 2006:Q4–2020:Q1

Debt to GDP (ratio)

Sources: Bureau of Economic Analysis; Federal Reserve Board; CEA calculations.

Note: Household sector debt includes debt owned by nonprofit organizations. Debt is defined as oustanding loans 

and debt securities. Shading denotes a recession. 

2020:Q1

Nonfinancial business debt

Household sector debt
CEA • Evaluating the Effects of the Economic Response to COVID-19 59

Financial institutions. According to data compiled by the Federal Deposit Insurance 

Corporation (FDIC), as of 2019:Q4 the commercial banking and savings and loan sector stood 

at a record, or near-record, in various measures of industry solvency and liquidity. This status 

was largely attributable to the continuous growth in the economy since the end of the Great 

Recession and the passage and continuing implementation of the Dodd-Frank Act of 2010, 

which dramatically raised regulatory oversight and capital standards for the industry.

The number of banks on the FDIC’s “Problem Bank List” leading up to COVID-19 was 

exceptionally low. The number of problem banks fell from 76 in 2007:Q4 to 51 by 2019:Q4, the 

lowest number of problem banks since 2006:Q4. Total assets of problem banks increased from 

$22 billion in 2007 to $46 billion in 2019. The commercial bank sector also entered the crisis 

with stable indicators of asset quality. 

Monetary and fiscal policy capacity. The U.S. economy entered the 2007–9 financial crisis with 

the Federal Funds rate at 5.25 percent and a debt-to-GDP ratio of about 62 percent. At that

time, it was thought that the Federal Reserve had significant ammunition to stabilize the 

economy through its usual toolkit of rate reductions, and the Federal government had 

considerable fiscal capacity to act through changes to taxes and spending. However, the 

consequences of cutting interest rates to the zero lower bound for several years and increases 

in deficit spending meant that the U.S. economy entered COVID-19 with the Federal Funds rate 

at only 1.6 percent and the debt-to-GDP ratio at 107 percent. In other words, the economy 

entered COVID-19 with reduced fiscal and monetary capacity. 

0

2

4

6

8

10

12

2006 2008 2010 2012 2014 2016 2018 2020

Figure 39. Leveraged Loan Annual Default Rate, 2006–20

Percent

Sources: S&P LCD; Goldman Sachs.

Note: Shading denotes a recession

Jun-20
CEA • Evaluating the Effects of the Economic Response to COVID-19 60

The Policy Response

The Federal government’s policies to address the financial crisis of 2007–9 evolved over a 

number of years, and they ranged from the fiscal stimulus of increased government 

expenditures for infrastructure, health, education, energy independence, tax rebates targeting 

low- and middle-income families and tax incentives for business investment to assistance on 

refinancing or modifying mortgages to monetary open market operations and liquidityenhancing programs to bailouts and subsidies of various entities and, finally, to regulatory 

reform. It was a bipartisan effort that began in 2007 as policymakers observed a decline in 

housing markets and foresaw a recession and possible financial turbulence. This section 

summarizes some of these policy approaches.

Throughout that period, the Federal Reserve employed open market operations and later a 

program of large-scale asset purchases (commonly referred to as quantitative easing) after the 

Federal Funds rate hit the zero lower bound. The Federal Reserve also took a variety of 

approaches to help provide liquidity to various markets and market participants. For example, 

beginning in December 2007, the Federal Reserve initiated the Term Auction Facility (TAF), 

which provided term discount window loans to depository institutions in sound financial 

condition. In March 2008 the Federal Reserve introduced the Term Securities Lending Facility

under Section 13(3) of the Federal Reserve Act to address funding pressures faced by primary 

dealers, who serve as the trading counterparties for the Federal Reserve’s open market

operations. Also in March 2008, the Federal Reserve introduced the Primary Dealer Credit 

Facility, which constituted an overnight loan facility for primary dealers. In November 2008, the 

Term Asset-Backed Securities Loan Facility, a joint program of the Federal Reserve and the 

Treasury, was introduced to generate demand for certain asset-backed securities—including 

those backed by car, student, and small business loans, as well as credit card debt—by 

accepting those securities as collateral for loans. The Federal Reserve also introduced a $1.25 

trillion Agency MBS [mortgage-backed security] Purchase Program in January 2009 in order to 

support the housing and mortgage lending markets.

Besides these and other Federal Reserve interventions, Congress passed significant stimulus 

bills over the course of the crisis. In February 2008, in an effort to ameliorate the growing crisis, 

the Economic Stimulus Act of 2008 was passed, offering tax recovery rebates to individuals and 

their dependents, and targeting low- and middle-income taxpayers. The Act also created 

incentives for business investment by permitting the accelerated depreciation or immediate 

expensing for certain items. In October 2008, the Emergency Economic Stabilization Act of 2008 

was passed, allocating $700 billion to address the financial crisis by purchasing or insuring 

troubled assets and attempting to avert the failure of key systemic financial institutions. This 

established the Troubled Asset Relief Program (TARP). In 2009, the American Recovery and 

Reinvestment Act (ARRA) was passed, which included tax cuts and government expenditures 

totaling over $800 billion, for national infrastructure, energy independence, education, health 

care, and tax relief. The Federal Government also stepped in to bail out the auto industry. In 
CEA • Evaluating the Effects of the Economic Response to COVID-19 61

2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted, entailing 

an array of regulatory reforms. 

Additionally, the Federal government took several actions to directly aid the housing market. 

It instituted the First-Time Homebuyer Tax Credit between 2008 and 2010, with the goal of 

stimulating home buying and house prices. The government also created the Home Affordable 

Modification Program (HAMP) and Home Affordable Refinance Program (HARP) to prevent 

distressed or underwater borrowers from going into foreclosure. The main distinction between

the two was that HAMP modified a borrower’s existing mortgage contract—often by extending 

the term or lowering the rate to reduce payments—whereas HARP loosened underwriting 

requirements to allow underwater borrowers with negative home equity to take advantage of 

lower interest rates through refinancing.

Relative to the Great Recession, the Federal government has responded with even greater 

speed and coordination to COVID-19, and with an even more expansive suite of policies (see 

figure 40). The Federal Reserve rapidly cut the Federal Funds rate target range to 0 percent at 

the effective lower bound (0.00 to 0.25 percent) and began to reactivate liquidity facilities that 

it had set up during the 2007–9 financial crisis. In a matter of just a couple of months, the 

Federal Reserve balance sheet has jumped by over $3 trillion compared with the five years it 

took to swell by that amount during the Great Recession. The Federal Reserve has also created 

Main Street Lending Facilities to direct relief to a larger swath of small and mid-sized firms.

The fiscal response to COVID-19 has also been swifter and larger (figure 40). During the Great 

Recession, fiscal stimulus rolled out in phases over the course of a year: the Economic Stimulus 

Act in February 2008, the Emergency Economic Stabilization Act in October 2008, and the 

American Reinvestment and Recovery Act (ARRA) in February 2009. By contrast, the Federal 

government during COVID-19 passed the Families First COVID-19 Response Act and the CARES 

Act both within March 2020. Moreover, the CARES Act is slated to deliver $2.2 trillion in stimulus 

compared with a bit over $800 billion by the ARRA. In terms of composition, both stimulus bills 

delivered direct aid to households in the form of rebates and unemployment insurance. The 

ARRA also contained a payroll tax cut and direct aid to States to address revenue shortfalls. 

Unlike in the Great Recession, however, the CARES Act during COVID-19 established the PPP,

which has authorized up to $659 billion in loans to small businesses to help them maintain 

payrolls and avoid insolvency.
CEA • Evaluating the Effects of the Economic Response to COVID-19 62

 
CEA • Evaluating the Effects of the Economic Response to COVID-19 63

The CARES Act’s Focus on Low-Income Households

A primary focus of the CARES Act and other relief bills has been the provision of cash and 

economic support to economically vulnerable households. In this section, we compare these 

measures with those adopted during the Great Recession. 

The Economic Stimulus Act of 2008, passed during the Bush Administration, included an 

individual income tax “recovery rebate.” The typical tax filer received a credit of up to $600 or 

up to $1,200 for joint filers. Eligible individuals received an additional $300 per dependent 

child. Individuals without a net tax liability were still eligible for the rebate, but only if they had 

earnings of at least $3,000 annually. The rebate phased out at a rate of 5 percent for incomes 

over $75,000, and $150,000 for those filing jointly (the same as the CARES Act).

Under the CARES Act, Economic Impact Payments are larger and more widespread than both 

the Economic Stimulus Act and ARRA, which was passed in 2009 under the Obama 

Administration. In response to the COVID-19-induced crisis, the U.S. government swiftly passed 

a provision that offers Economic Impact Payments to individuals. While the phaseout rate and 

income thresholds are the same as they were under ARRA, the CARES Act offers up to $1,200 to 

individuals and $2,400 to joint filers (El-Sibai et al. 2020). The CARES Act stimulus payment is 

more generous than ARRA was for eligible individuals with children; parents can receive an 

extra $500 per dependent child under the age of 17. Unlike the 2008 recovery rebate, the CARES 

Act does not require a minimum tax liability to receive the full rebate (Marr et al. 2020).

Of the $787 billion ARRA stimulus package, about $12 billion helped finance various public 

workforce programs to accommodate expanded participation (table 8). State unemployment 

insurance agencies received $500 million in administrative support funding and $7 billion in 

modernization funds in order to address increased demand (BLS 2014). By comparison, the 

Families First COVID-19 Response Act authorized $1 billion in additional funding to support UI 

administration to assist States with processing increased caseloads and expanded programs 

(Emsellem and Evermore 2020; Goger, Loh, and George 2020).
CEA • Evaluating the Effects of the Economic Response to COVID-19 64

Table 8. Funding of Major Workforce Program Initiatives of ARRA, 2009 

ARRA funding category

Funding amount 

(billions of dollars)

UI Administration 0.5

UI Modernization 7.0

Wagner–Peyser Act grants to States 0.15

Wagner–Peyser Act reemployment services 0.25

Workforce Innovation Act Adult 0.5

Workforce Innovation Act Dislocated Worker 1.25

Workforce Innovation Act Dislocated Worker National Reserve 0.2

High Growth and Emerging Industry grants 0.75

Workforce Innovation Youth 1.2

Job Corps 0.25

YouthBuild 0.05

Senior Community Service Employment Program 0.12

Sources: Bureau of Labor Statistics; Bradley and Lordeman (2009).

In addition to these funds listed in table 8, Congress funded additional enhancements and 

extensions to the UI program. In response to the rise in the number of workers unemployed for 

more than 26 weeks, Congress enacted a temporary extension to UI. This Emergency 

Unemployment Compensation included additional tiers of benefit weeks to supplement 

regular State UI and expanded Extended Benefits programs. In combination, between 

November 2009 and September 2012 these programs extended the maximum number of 

weeks UI recipients could receive benefits for up to 99 weeks. 

The Recovery Act not only expanded UI duration, but also included a Federal Additional 

Compensation benefit that funded an additional $25 per eligible worker in weekly UI benefits 

through the temporary Emergency Unemployment Compensation. This increased benefit cost 

the Federal government $20.1 billion during 2009–11. The permanent Extended Benefits 

program became completely federally funded through January 1, 2010, and State eligibility 

rules were relaxed to make more unemployed workers eligible. These Extended Benefits cost 

the Federal government $24 billion during 2009–11. ARRA also temporarily suspended the 

taxation of the first $2,400 of UI benefits. 

Under the CARES Act, UI benefits are expanded for up to an additional 13 weeks and States are 

allowed to eliminate the mandatory one-week waiting period before benefits can be released 

to recipients. It also offers a significant increase in additional UI income—24 times greater than 

the additional benefit that was offered during the Great Recession. Workers claiming UI now 

receive a $600 weekly supplement. Furthermore, unlike the Recovery Act, the CARES Act added 

a new program to expand eligibility for UI benefits to include the self-employed, gig workers, 

and other types of workers who would not otherwise qualify for regular UI benefits.
CEA • Evaluating the Effects of the Economic Response to COVID-19 65

Under ARRA, individuals eligible for UI werereferred to the Employment Service for job referral 

and reemployment services. ARRA allocated an additional $250 million in Reemployment 

Services Grants to local employment offices to better serve UI recipients. The Bureau of Labor 

Statistics notes that, despite increased funding, the local offices still faced major constraints, 

which resulted in increased enrollment in low-cost services (e.g., orientations, assessments), 

but smaller increases in expensive and labor-intensive services (e.g. counseling, education, 

training). Other employment services, such as the Workforce Innovation Dislocated Worker 

program and the Workforce Innovation Adult program, also received increased funding (see 

table 8).

The CARES Act does not increase funding for Reemployment Services Grants or Workforce 

Innovation and Opportunity Act formula programs. As outlined in a previous CEA report (2019) 

many government training programs lack rigorousevidence based results demonstrating their 

effectiveness at training or retraining workers and getting them employed. The CARES Act

does, however, provide $345 million for Dislocated Worker Grants to prevent, prepare for, and 

respond to the coronavirus. Additionally, the CARES Act does offer incentives to States to adopt 

or make better-use of Short-Time Compensation programs, which would allow employers to 

avoid laying off their employees by reducing their hours. Under this program, workers would 

still be eligible for UI benefits to make up for their reduced working hours.

Tax Provisions. The ARRA stimulus package included about $14 billion for the Economic 

Recovery Payment, a one-time payment of $250 to seniors, persons with disabilities, and 

veterans. The Recovery Act also authorized the Making Work Pay personal tax credit for 2009 

and 2010. The provision provided a refundable tax credit of up to $400 for single working 

individuals and up to $800 per couple. The credit phased out for incomes over $75,000 (or 

$150,000 for joint filers) at a rate of 2 percent.

ARRA lowered the refundability threshold of the Child Tax Credit (CTC) and increased the 

Earned Income Tax Credit (EITC), thereby allowing more low-income people to claim the credit.

The Recovery Act expanded the threshold for couples claiming the EITC, and raised the 

minimum credit claimed by workers with three or more children. 

The Recovery Act also subsidized the purchase of cars and first-time homeowners through an 

automobile sales tax credit ($1.7 billion total) and a homeownership tax credit ($6.6 billion). 

Homebuyers who purchased their property by the end of April 2010 and settled by the end of 

September 2010 were eligible for a credit up to $8,000.

The CARES Act does not make any changes to the existing tax credits. However, the CTC was 

recently expanded under the Tax Cuts and Jobs Act, providing enhanced tax relief to families 

with children.
CEA • Evaluating the Effects of the Economic Response to COVID-19 66

Healthcare. Before the Great Recession, Consolidated Omnibus Budget Reconciliation Act 

(COBRA) required many employers to provide continued healthcare coverage to workers (and 

their dependents) who lost their job, but it did not require employers to continue subsidizing 

the premium payments. ARRA provided a 65 percent subsidy for employers to help cover 

premium payments of most COBRA-eligible workers who lost their job between September 

2008 and May 2010. This subsidy covered workers and their dependents for up to 9 months 

(later extended to 15 months).

Unlike ARRA, the CARES Act is responding directly to the effects of a health-related crisis. As 

such, it established the Provider Relief Fund meant to support families, workers, and 

healthcare providers in the midst of a pandemic. The CARES Act, through the Department of 

Health and Human Services, allotted $100 billion to hospitals and other healthcare providers. 

The Paycheck Protection Program and Health Care Enhancement Act (PPP/HCE) provided an 

additional $75 billion for the Provider Relief Fund to healthcare providers to reimburse 

heightened costs and lost revenues that are attributable to COVID-19. In addition, PPP/HCE 

provided $25 billion to help increase COVID-19 testing. This includes $1 billion to reimburse the 

cost of testing uninsured individuals, in addition to the $1 billion previously appropriate for 

this purpose by the Families First Coronavirus Relief Act (FFCRA). The FFCRA also, as amended 

by the CARES Act, requires Medicare Part B, State Medicaid and Children’s Health Insurance 

Programs, and group health plans and health insurance issuers to cover COVID-19 diagnostic 

testing without cost-sharing for patients. Uninsured individuals may also obtain COVID-19 

diagnostic testing free of charge under the State Medicaid programs, if the State offers this 

option. The Centers for Medicare and Medicaid Services has made an accessible and easy-touse toolkit for states to amend their Medicaid programs in order to offer this service.

COVID-19 also poses a substantial financial cost to hospitals and other healthcare providers. 

The American Hospital Association (AHA) estimates that the pandemic has imposed over $200 

billion in losses to the American healthcare system in the four-month period between March 1

and June 30. Over 80 percent of this estimated cost is due to revenue losses from canceled 

surgeries and other services. This includes both elective and nonelective procedures, 

outpatient treatments, and emergency department services. The remaining 20 percent of 

estimated losses are based on the direct costs of COVID-19 to hospitals: losses from COVID-19 

hospitalizations, additional purchases of PPE, and additional support that hospitals provide to 

their front-line workers. This may underestimate the total financial losses to the healthcare 

system as it does not include potential losses from drug shortage costs, increased salaries and 

wages paid to front-line workers, non-PPE medical supplies such as ventilators, and capital 

costs such as setting up additional space for COVID-19 testing tents and additional ICU beds.

With funding allocated by the CARES Act and the Paycheck Protection Program and Health Care 

Enhancement Act, the Department of Health and Human Services is set to allocate $175 billion 

of aid to hospitals and other healthcare providers to offset these costs. This includes specific 

programs to provide relief to safety net hospitals that serve the most vulnerable segment of 
CEA • Evaluating the Effects of the Economic Response to COVID-19 67

the population as well as rural hospitals and those in small metropolitan areas. While this is 

likely to help ease the financial burden on healthcare providers, hospitals are only expected to 

receive about 50 percent of the healthcare funds in the CARES Act, with the remainder going to 

suppliers and other organizations. This mean that the relief is likely to offset less than half of 

the financial losses experienced by hospitals between March and June. Additionally, the 

distribution of relief funds provided by the Federal government has not been targeted to those 

experiencing the greatest economic harm from the pandemic, as initial rounds of payments 

did not account for whether a potential recipient had experienced revenue losses due to 

canceling elective procedures or undertaken significant costs to treat COVID-19 patients.

Education. The Recovery Act included the American Opportunity Tax Credit, which modified an

existing education credit (the HOPE credit) by making it available to more parents and students 

by raising the income eligibility limits. It also expanded the qualifying expenses and allowed 

the credit to be claimed not only by two-year institutions but also by four-year higher 

education institutions. The maximum annual credit of $2,500 per student was made available 

to individuals with a modified adjusted gross income of up to $80,000, or up to $160,000 for 

joint filers. 

A major difference between the Great Recession and the current crisis is the large amount of 

school closures across the country in response to the pandemic. Between the first and third 

weeks of March, close to 100 percent of kindergarten, primary, and secondary schools were 

shut down. These closures have had a substantial negative effect both on the U.S. economy

and on children themselves. Academic literature finds that children are likely to experience a 

persistent 2.3–3.7 percent decline in future earnings as a result of lower human capital 

accumulation from the shortened school year. 

Meanwhile, parents who miss work entirely because of childcare duties induced by school 

closures are likely to experience a persistent 1 percent drop in lifetime earnings because of lost 

job experience. The CEA estimates that 18 percent of the workforce may fall into this category. 

Overall, the data indicate that only about 30 percent of workers are likely to be able to 

telecommute. 

Assuming that school closures reduce work experience for even just four months, affected 

workers—as a lower bound, 70 percent of the one-quarter of the workforce with young children 

at home—will lose 1 percent of lifetime earnings. Furthermore, mothers—and single mothers 

especially—are less able to telecommute. Whereas 45 percent of married men with children 

can telecommute, the number falls to 42 percent for married women and dramatically to 21 

percent for single women. The effects are likely to be particularly severe for early-career single 

mothers, who will experience not just lower earnings but also less secure job prospects.

Reopening schools would help boost the economy. The most recent literature suggests that 

school-age children are less susceptible to contract COVID-19, less likely to be severely ill, and 
CEA • Evaluating the Effects of the Economic Response to COVID-19 68

less likely to transmit the disease to others. In particular, those under the age of 20 are half as 

likely to contract COVID-19 as those over the age of 20. States and localities should therefore 

focus efforts on preventing teacher-to-teacher transmission of COVID-19.

Supplemental Nutrition Assistance Program. ARRA included a number of provisions related to 

SNAP, including an increase of $40 billion in additional SNAP benefits for all participants. 

Additionally, the minimum benefit for one- and two-person households rose by $2 to $16. As a 

result of these changes, in 2009, the average monthly SNAP benefit increased by $21. In 

addition to increasing the monthly benefit, ARRA suspended work requirements for 

nondisabled, childless adults between April 2009 and September 2010.

The Families First COVID-19 Response Act (FFCRA), which passed in March 2020, provided 

authority for work requirement waivers and benefit increases up to the maximum allotment 

for households not already receiving the maximum. The CARES Act provided over $15 billion in 

additional contingency funding for the increased costs associated with the FFCRA provisions, 

as well as anticipated increased participation in SNAP. As provided by the FFCRA and the CARES 

Act, the Department of Agriculture also provided waivers of certain requirements so that 

nutrition programs could reach families and children during the social-distancing restrictions.

The FFCRA also suspended work requirements for nondisabled, childless adults through the 

month after the end of the COVID-19 public health emergency.

Housing assistance programs. ARRA provided $13.6 billion for programs administered by the 

Department of Housing and Urban Development, including $1.5 billion for the Homelessness 

Prevention and Rapid Re-Housing Program. 

The CARES Act is even more aggressively assisting these vulnerable populations. Congress has 

provided $4 billion for homelessness alone. These funds will support Emergency Solutions 

Grants targeted to homeless populations or populations at-risk of becoming homeless. About 

$3 billion of these funds are being used to operate emergency shelters (covering food, rent, 

security, etc.), make even more emergency shelters available, provide essential services to 

homeless populations (including childcare, employment assistance, and mental health 

services), and prevent individuals from becoming homeless through rapid rehousing.
CEA • Evaluating the Effects of the Economic Response to COVID-19 69

Conclusion

President Trump has often referred to this coronavirus as the “invisible enemy,” which all 

Americans face. As such, Americans have faced the virus with bravery, optimism, and sacrifice,

while this Administration, working in a bipartisan way, has equipped them with the resources 

needed to maintain their livelihoods. Unprecedented legislation and Federal action, enacted 

swiftly, has mitigated the effects of this historic adverse shock. 

During the pandemic’s peak, over 6 million Americans filed for unemployment insurance in a 

single week and 10 million Americans filed in just two weeks, leading to an unemployment rate 

in April of 14.7 percent. Immediate action taken by the Administration and Congress, coupled 

with a historically strong economy before COVID-19, has allowed millions of Americans to 

maintain ties to their workplace through expanded unemployment insurance benefits, PPP 

loans for small businesses, and several Federal Reserve facilities that have eased liquidity 

constraints on businesses.

Moreover, surges of liquidity and income replacement targeted to the most vulnerable income 

groups through economic impact payments have greatly mitigated what was on pace to 

become the largest macroeconomic contraction since the Great Depression, increasing 

disposable income by 10.7 percent since February. As a further consequence, the consumer 

debt and credit indicators for April and May have not shown the deterioration expected as 

severe delinquencies on mortgages have fallen to new lows. While we continue to monitor 

small business bankruptcies with weekly data, another potential area of concern, the levels for 

April and May are still lower than what were observed earlier this year, suggesting that relief 

measures may have played an important role in staving off business failures. 

This CEA report has documented the successes and effects of thesefiscal and monetary actions 

thus far, accounting for what may have occurred in the absence of such a response, and finds

that millions of Americans have been provided the liquidity to maintain their livelihoods and 

bolster economic recovery. It is important to note, however, that the crisis is far from over. As 

the Nation continues its slow path to recovery, the Administration remains committed to 

taking the necessary steps needed to make the process as smooth and painless as possible for 

all Americans.
CEA • Evaluating the Effects of the Economic Response to COVID-19 70

Appendix 

Figure 15

Household income is imputed in February 2020 as follows: Each household in February 2020 is 

ranked based on the reported family income category of the household head over the past 12 

months—rankings within the same income category are assigned randomly. Specific income 

values are then assigned to each household in February 2020 according to its rank and the 

distribution of household income during calendar year 2018 based on the CPS-ASEC. 

The same procedure is used to assign March, April, and May household income values, which 

are then modified to incorporate the loss of earnings from job loss, the receipt of 

unemployment insurance, and Economic Impact Payments. 

Individuals who are unemployed in these three months are assumed to have been employed 

in February (this slightly overstates the number of individuals assumed to have lost their job 

since February since some were already unemployed in February, but we may also understate 

the number of individuals losing their job since some job losers may be out of the labor force 

due to temporary layoffs). We then impute the lost earnings for these individuals by regressing 

the natural logarithm of weekly wages for workers in all months of the 2019 monthly CPS on 

worker characteristics including State of residence, family income, age, sex, race, Hispanic 

ethnicity, and educational attainment. We then use these regression results to predict typical 

weekly earnings for unemployed workers in March, April, and May of 2020. Monthly estimates 

of lost earnings for unemployed workers are formed by multiplying these weekly earnings 

estimates by four.

We impute unemployment insurance benefits without the CARES Act by applying State-specific 

rules on earnings replacement rates and caps for different family types to the earnings imputed 

above. Unemployed self-employed workers are assigned zero unemployment insurance. For 

unemployment insurance benefits with the CARES Act, we add $600 weekly to unemployment 

insurance benefits, and we assign State and Federal supplement benefits to unemployed selfemployed workers, in both April and May.

Economic Impact Payments are imputed to households on the basis of the reported family 

income of the household head, the number of adults and their marital status, and the number 

of children. Phase-outs of Economic Impact Payments begin at $75,000 for single adult 

households, $112,500 for unmarried, multiple adult households, and $150,000 for married, 

multiple adult households. Economic Impact Payments then phase out at $0.05 per $1 of 

income above these thresholds. Economic Impact Payments are applied to households in April 

2020.
CEA • Evaluating the Effects of the Economic Response to COVID-19 71

Figure 16

The low-wage household has $2,000 in monthly income (all of which comes from earnings). 

The high-wage household has $6,000 in monthly income (all of which comes from earnings). 

Each household has two married adults and two children. The working adult loses his or her 

job beginning in April. Unemployment insurance replaces 50 percent of earnings up to $475 per 

week, the mean State cap weighted by workers in the 2019 monthly CPS surveys. Under the 

CARES Act, unemployment insurance pays an additional $600 per week. A stimulus payment of 

$3,400 is applied in April to both households. 
CEA • Evaluating the Effects of the Economic Response to COVID-19 72

References

Chapter 1

Baqaee, D., and E. Farhi. 2020. “Nonlinear Production Networks with an Application to the COVID-19 

Crisis.” CEPR Discussion Paper DP14742. 

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3603974.

Burns, A., D. van der Mensbrugghe, and H. Timmer. 2006. “Evaluating the Economic Consequences of 

Avian Influenza.” World Bank. 

https://web.worldbank.org/archive/website01003/WEB/IMAGES/EVALUATI.PDF. 

CEA (Council of Economic Advisers). 2019. “Mitigating the Impact of Pandemic Influenza through 

Vaccine Innovation.” https://www.whitehouse.gov/wp-content/uploads/2019/09/Mitigatingthe-Impact-of-Pandemic-Influenza-through-Vaccine-Innovation.pdf. 

Dixon, P., J. Giesecke, M. Rimmer, and A. Rose. 2011. “The Economic Costs to the U.S. of Closing Its 

Borders: A Computable General Equilibrium Analysis.” Published Archives and Papers 194. 

https://create.usc.edu/sites/default/files/publications/theeconomiccoststotheu.s.ofclosingits

borders-acomputab_0.pdf. 

Gordon, P., J. Moore, J. Park, and H. Richardson. 2009. “The Economic Impacts of International Border 

Closure: A State-by-State Analysis.” 

https://create.usc.edu/sites/default/files/publications/theeconomicimpactsofinternationalbo

rderclosure-astatebystateanalysis.pdf. 

JHU (Johns Hopkins University). 2020. “COVID-19 United States Cases by County.” 

https://coronavirus.jhu.edu/us-map. 

Jonas, O. 2013. “Pandemic Risk.” Background paper, World Bank. 

https://www.worldbank.org/content/dam/Worldbank/document/HDN/Health/WDR14_bp_Pa

ndemic_Risk_Jonas.pdf. 

Kilbourne, E. 2006. “Influenza Pandemics of the 20th Century.” Emerging Infectious Diseases 12, no. 1: 

9–14.

Knobler, S., A Mahmoud, S. Lemon, A. Mack, L. Sivitz, and K. Oberholtzer. 2006. Learning from SARS: 

Preparing for the Next Disease Outbreak—Workshop Summary. Washington: National 

Academies Press. https://doi.org/10.17226/10915. 

Lee, J., and W. McKibbin. 2004. “Globalization and Disease: The Case of SARS.” Asian Economic Papers

3, no. 1: 113–31.

Markel, H., H. Lipman, J. Navarro, A. Sloan, J. Michalsen, A. Stern, and M. Cetron. 2007. 

“Nonpharmaceutical Interventions Implemented by U.S. Cities during the 1918–1919 Influenza 

Pandemic.” JAMA 298, no. 6: 644–54.
CEA • Evaluating the Effects of the Economic Response to COVID-19 73

McKibbin, W. 2009. “The Swine Flu Outbreak and Its Global Economic Impact.” 

https://www.brookings.edu/on-the-record/the-swine-flu-outbreak-and-its-global-economicimpact/#:~:text=Fearing%20this%20outbreak%20may%20lead,a%20lack%20of%20public%2

0confidence. 

McKibbin, W., and A. Sidorenko. 2006. “Global Macroeconomic Consequences of Pandemic Influenza.” 

Lowy Institute for International Policy. 

https://www.lowyinstitute.org/sites/default/files/pubfiles/McKibbin_Sidorenko%2C_Global_

macroeconomic_1.pdf. 

Patel, A., and D. Jernigan. 2020. “Initial Public Health Response and Interim Clinical Guidance for the 

2019 Novel Coronavirus Outbreak—United States, December 31, 2019–February 4, 2020.” 

MMWR Morb Mortal Wkly Rep 69: 140–46.

https://www.cdc.gov/mmwr/volumes/69/wr/mm6905e1.htm#suggestedcitation.

Rose, A., G. Beeler Asay, D. Wei, and B. Lung. 2009. “Macroeconomic Impacts of Shutting Down the U.S.

Borders in Response to a Security or Health Threat.” Global Business and the Terrorist Threat.

U.S. Census Bureau. 2020. “Small Business Pulse Survey Data.” 

https://portal.census.gov/pulse/data/#downloads. 

Verikios, G., M. Sullivan, P. Stojanovski, J. Giesecke, and G. Woo. 2011. “The Global Economic Effects of 

Pandemic Influenza.” https://static.rms.com/email/documents/liferisks/papers/the-globaleconomic-effects-of-pandemic-influenza.pdf. 

Chapter 2

Alvarez, F., D. Argente, and F. Lippi. 2020. A Simple Planning Problem for COVID-19 Lockdown. BFI 

Working Paper. Chicago: Becker Friedman Institute. 

Autor, D., D. Cho, L. Crane, M. Goldar, B. Lutz, J. Montes, W. Peterman, D. Ratner, D. Villar, and A. 

Yildirmaz. 2020. An Evaluation of the Paycheck Protection Program Using Administrative Payroll 

Microdata. MIT Working Paper. 

Baker, S., N. Bloom, S. Davis, and S. Terry. 2020. Covid-Induced Economic Uncertainty. NBER Working 

Paper 26983. Cambridge, MA: National Bureau of Economic Research.

Eichenbaum, M., S. Rebelo, and M. Trabandt. 2020. The Macroeconomics of Epidemics. NBER Working 

Paper 26882. Cambridge, MA: National Bureau of Economic Research.

Han, J., B. Meyer, and J. Sullivan. 2020. “Income and Poverty in the COVID-19 Pandemic.” Brookings 

Institution Preliminary Paper.

Parolin, Z., M. Curran, and C. Wimer. 2020. “The CARES Act and Poverty in the COVID-19 Crisis.” Poverty 

and Social Policy Brief 4, no. 8.
CEA • Evaluating the Effects of the Economic Response to COVID-19 74

Chapter 3

Autor, D., D. Cho, L. Crane, M. Goldar, B. Lutz, J. Montes, W. Peterman, D. Ratner, D. Villar, and A. 

Yildirmaz. 2020. An Evaluation of the Paycheck Protection Program Using Administrative Payroll 

Microdata. MIT Working Paper. 

Baker, S., R. Farrokhnia, S. Meyer, M. Pagel, and C. Yannelis. 2020. Income Liquidity, and the 

Consumption Response to the 2020 Economic Stimulus Payments. NBER Working Paper 29097. 

Cambridge, MA: National Bureau of Economic Research.

Barrero, J., N. Bloom, and S. Davis. 2020. COVID-19 Is Also a Reallocation Shock. NBER Working Paper 

27137. Cambridge, MA: National Bureau of Economic Research. 

Chetty, R., J. Friedman, N. Hendren, and M. Stepner. 2020. How Did COVID-19 and Stabilization Policies 

Affect Spending and Employment? A New Real-Time Economic Tracker Based on Private Sector 

Data. Working Paper 2020-05. Cambridge, MA: Opportunity Insights.

Coibion, O., Y. Gorodnichenko, and M. Weber. 2020. The Cost of the COVID-19 Crisis: Lockdowns, 

Macroeconomic Expectations, and Consumer Spending. NBER Working Paper 27141. 

Cambridge, MA: National Bureau of Economic Research. 

Fairlie, R., K. Couch, and H. Xu. 2020. The Impacts of COVID-19 on Minority Unemployment: First Evidence 

from April 2020 CPS Microdata. NBER Working Paper 27246. Cambridge, MA: National Bureau of 

Economic Research.

Fuster, A., G. Kaplan, and B. Zafar. 2020. What Would You Do with $500? Spending Responses to Gains, 

Losses, News, and Loans. Working Paper. 

https://static1.squarespace.com/static/5d69437d65a29d0001ae6520/t/5e4defdf21989a778bb

aca4f/1582165986078/fuster_kaplan_zafar_wp_feb2020.pdf. 

Ganong, P., and P. Noel. 2019. “Consumer Spending During Unemployment: Positive and Normative 

Implications.” American Economic Review 109, no. 7: 2383–424.

Ganong, P., P. Noel, and J. Vavra. 2020. U.S. Unemployment Insurance Replacement Rates During the 

Pandemic. NBER Working Paper 27216. Cambridge, MA: National Bureau of Economic 

Research.

Granja, J., C. Markridis, C. Yannelis, and E. Zwick. 2020. “Did the Paycheck Protection Program Hit the 

Target?” Becker Friedman Institute. Working Paper 2020-52. https://bfi.uchicago.edu/wpcontent/uploads/BFI_WP_202052-1.pdf.

Kaplan, G., and G. Violante. 2014. “A Tale of Two Stimulus Payments: 2001 vs. 2008.” American 

Economic Review Papers and Proceedings 104, no. 5: 116–21. 

Parker, J., N. Souleles, D. Johnson, and R. McClelland. 2013. “Consumer Spending and the Economic 

Stimulus Payments of 2008.” American Economic Review 103, no. 6: 2530–53.
CEA • Evaluating the Effects of the Economic Response to COVID-19 75

Chapter 4

ABI (American Bankruptcy Institute). 2020. “Total April Bankruptcy Filings Fall 46 Percent over Last Year, 

Commercial Chapter 11s Increase 26 Percent.” https://www.abi.org/newsroom/pressreleases/total-april-bankruptcy-filings-fall-46-percent-over-last-year-commercial.

Baker, S., N. Bloom, S. Davis, K. Kost, M. Sammon, and T. Viratyosin. 2020. The Unprecedented Stock 

Market Reaction to COVID-19. White Paper. Chicago: Becker Friedman Institute. 

Bartik, A., M. Bertrand, Z. Cullen, E. Glaeser, M. Luca, and C. Stanton. 2020. How Are Small Businesses 

Adjusting to COVID-19? Early Evidence from a Survey. NBER Working Paper 26989. Cambridge, 

MA: National Bureau of Economic Research.

Elenev, V., T. Landvoigt, and S. Van Nieuwerburgh. 2020. Can the Covid Bailouts Save the Economy?

NBER Working Paper 27207. Cambridge, MA: National Bureau of Economic Research.

Ganong, P., and P. Noel. 2019. “Consumer Spending During Unemployment: Positive and Normative 

Implications.” American Economic Review 109, no. 7: 2383–424.

Guren, A., and T. McQuade. 2020. “How Do Foreclosures Exacerbate Housing Downturns?” Review of 

Economic Studies 87, no. 3: 1331–64.

Keshner, A. 2020. “Coronavirus Has Rocked America’s Economy—and It’s Had a Surprising Effect on 

Bankruptcy Filings.” MarketWatch, May 6. https://www.marketwatch.com/story/thecoronavirus-has-rocked-americas-economy-but-its-had-a-surprising-effect-on-bankruptcyfilings-2020-05-05. 

Li, L., P. Strahan, and S. Zhang. 2020. Banks as Lenders of First Resort: Evidence from the COVID-19 

Crisis. NBER Working Paper 27256. Cambridge, MA: National Bureau of Economic Research.

Parlin, B. 2020. “Debtors in Bankruptcy Seek Access to CARES Act Paycheck Protection Program 

Loans.” Holland & Knight. https://www.hklaw.com/en/insights/publications/2020/05/debtorsin-bankruptcy-seek-access-to-cares-act-paycheck.

Tett, G. 2020. ”Swamped Bankruptcy Courts Threaten U.S. Recovery.” Financial Times, May 14. 

https://www.ft.com/content/14b07c0e-95e3-11ea-af4b-499244625ac4. 

Chapter 5

Bernanke, B., T. Geithner, and H. Paulson, and J. Liang. 2020. First Responders: Inside the U.S. Strategy 

for Fighting the 2007–2009 Global Financial Crisis. New Haven, CT: Yale University Press.

Bhutta, N., J. Bricker, L. Dettling, J. Kelliher, and S. Laufer. 2019. "Stress Testing Household Debt." 

Finance and Economics Discussion Series 2019-008. Washington: Board of Governors of the 

Federal Reserve System. https://doi.org/10.17016/FEDS.2019.008.
CEA • Evaluating the Effects of the Economic Response to COVID-19 76

BLS (Bureau of Labor Statistics). 2014. “Public Workforce Programs during the Great Recession.” 

https://www.bls.gov/opub/mlr/2014/article/public-workforce-programs-during-the-greatrecession.htm. 

Bradley, D., and A. Lordeman. 2009. “Funding for Workforce Development in the American Recovery 

and Reinvestment Act (ARRA) of 2009.” Congressional Research Service. https://digital.library.

unt.edu/ark:/67531/metadc743444/.

CEA (Council of Economic Advisers). 2019. “Government Employment and Training Programs: 

Assessing the Evidence on Their Performance.” https://www.whitehouse.gov/wp-content/ 

uploads/2019/06/Government-Employment-and-Training-Programs.pdf. 

CFR (Council on Foreign Relations). 2020. “The U.S. Financial Crisis.” https://www.cfr.org/timeline/usfinancial-crisis.

Chetty, R., J. N. Friedman, N. Hendren, M. Stepner, and the Opportunity Insights Team. 2020. “How Did 

COVID-19 and Stabilization Policies Affect Spending and Employment? A New Real-Time 

Economic Tracker Based on Private Sector Data.” https://opportunityinsights.org/wpcontent/uploads/2020/05/tracker_paper.pdf.

Crouzet, N., and F. Gourio. 2020. “Financial Positions of U.S. Public Corporations: Part 1, Before the 

Pandemic.” Federal Reserve Bank of Chicago. 

https://www.chicagofed.org/publications/blogs/chicago-fed-insights/2020/financialpositions-part1. 

Davis, M., W. Larson, S. Oliner, and B. Smith. 2019. “A Quarter Century of Mortgage Risk.” FHFA 

Working Paper 19-02. 

https://www.fhfa.gov/PolicyProgramsResearch/Research/PaperDocuments/wp1902.pdf. 

Dharmasankar, S., and B. Mazumder. 2016. “Have Borrowers Recovered from Foreclosures during the 

Great Recession?” Chicago Fed Letter 370: 1.

El-Sibaie, A., E. York, G. Watson, and T. LaJoie. 2020. “FAQ on Federal Coronavirus Relief Law (CARES 

Act).” Tax Foundation. https://taxfoundation.org/federal-coronavirus-relief-bill-caresact/#:~:text=Individuals%20with%20a%20Social%20Security,)%2C%20or%20%24112%2C500

%20(heads%20of. 

Emsellem, M., and M. Evermore. 2020. “Understanding the Unemployment Provisions of the Families 

First Coronavirus Response Act.” New York: National Employment Law Project. 

https://www.nelp.org/publication/understanding-the-unemployment-provisions-of-thefamilies-first-coronavirus-response-act/. 

Federal Reserve. 2011. “Gauging the Impact of the Great Recession.” https://www.frbsf.org/economicresearch/publications/economic-letter/2011/july/impact-great-recession/

———. 2020. Financial Stability Report, May 2020. https://www.federalreserve.gov/publications/2020-

may-financial-stability-report-purpose.htm. 
CEA • Evaluating the Effects of the Economic Response to COVID-19 77

Garriga, C., and A. Hedlund. 2019. Crises in the Housing Market: Causes, Consequences, and Policy 

Lessons. Working Paper 2019-33. Saint Louis: Federal Reserve Bank of Saint Louis. 

Goger A., T. Loh, and C. George. 2020. “Unemployment Insurance Is Failing Workers during COVID-19. 

Here’s How to Strengthen it.” Washington: Brookings Institution. 

https://www.brookings.edu/research/unemployment-insurance-is-failing-workers-duringCOVID-19-heres-how-to-strengthen-it/. 

IMF (International Monetary Fund). 2019. Global Financial Stability Report. 

https://www.imf.org/en/Publications/GFSR/Issues/2019/03/27/Global-Financial-StabilityReport-April-2019. 

———. 2020. Global Financial Stability Report. 

https://www.imf.org/en/Publications/GFSR/Issues/2020/04/14/Global-Financial-StabilityReport-April-2020-49020. 

LCD News. 2020. “U.S. Leveraged Loan Defaults Total $23B in Q2, the Most Since 2009.” July 6. S&P

Global. https://www.spglobal.com/marketintelligence/en/news-insights/latest-newsheadlines/us-leveraged-loan-defaults-total-23b-in-q2-the-most-since-2009-59301227

Marr, C., S. Jacoby, C. Huang, S. Hingtgen, A. Sherman, and J. Beltrán. 2020. “Future Stimulus Should 

Include Immigrants and Dependents Previously Left Out, Mandate Automatic Payments.” 

Washington: Center on Budget and Policy Priorities. 

https://www.cbpp.org/research/economy/future-stimulus-should-include-immigrants-anddependents-previously-leftout#:~:text=The%20CARES%20Act%20includes%20%E2%80%9Crecovery,child%20aged%2016%

20or%20younger.

Taylor, D. 2020. “How the Coronavirus Pandemic Unfolded: a Timeline.” New York Times, June 9. 

https://www.nytimes.com/article/coronavirus-timeline.html.
ABOUT THE COUNCIL OF ECONOMIC ADVISERS 

The Council of Economic Advisers, an agency within the Executive Office of the President, is 

charged with offering the President objective economic advice on the formulation of both 

domestic and international economic policy. The Council bases its recommendations and 

analysis on economic research and empirical evidence, using the best data available to 

support the President in setting our nation's economic policy. 

www.whitehouse.gov/cea 

August 2020