INDIANAPOLIS  — Last week in this space we learned the number of jobs in Indiana declined by 91,100 between March and August 2020. This decline was attributed to the pandemic. Now let’s look at the output and income effects experienced by Hoosiers.

The U.S. Bureau of Economic Analysis has released estimates for the second quarter of 2020, when Covid-19 had its greatest impact. Before that we were hardly in a period of robust growth. There was slow growth nationally and in Indiana from the first quarter of 2019 to the same three months (January through March) in 2020.

Without adjustment for very moderate inflation, the nation’s Gross Domestic Product (GDP) rose by a modest 2.1%, with Indiana just behind at 2.0% (24th among the 50 states). When the pandemic struck in the second quarter of 2020 (April through June), the U.S. suffered a GDP decline of 32.8% at an annual rate, with Indiana again not far off at -34.1% (29th among the states).

How did these catastrophic output measures translate into income? In 2020: Q2, U.S. personal income rose by 34.2% at an annual rate while advancing in Indiana by 28.7% (35th in rank). With GDP dropping like a boulder in a landslide, how could personal income grow so much?

The fall in GDP meant layoffs for workers and reduced incomes for business proprietors. Thus, earnings fell by 26.5% nationally and 28.6% in Indiana. In dollars, the U.S. saw earnings decline by $992 billion and $19 billion in Indiana.

Enter the federal government with necessary stimulus programs that more than offset these declines, stabilizing the economy although not relieving the emptiness of every pocketbook. Transfers, as we call Social Security, Unemployment Compensation, and other income maintenance efforts, rose by $2.4 trillion nationally ($41 billion in Indiana).

Conventional economic reasoning, circa 1930 but still popular in many political and academic backwaters, proclaimed disaster from the increase in the federal deficit and the expected, inevitable inflation. However, policy makers at the Treasury and the Federal Reserve learned in 2008-09 that rapid, stimulating responses to economic shocks are effective in avoiding a nationwide meltdown.

Contrast how consensus and action prevailed in 2020 compared with the years that passed before significant relief was begun in the Great Depression. We learned from the financial sector earthquake of 2008 to be more bold in meeting the challenges of a major crisis.

COVID-19 is unlike any prior economic challenge modern societies have faced. Its economic effects on millions of households and businesses will be with us well into 2021; continued federal aid is imperative.

The many lives lost, and the greater number of lives disrupted, are markers for humility. There remains much for us to learn about preparing for crises of all varieties. Congratulations and celebrations for mere survival are not in order. 
 
Mr. Marcus is temporarily a one-armed economist. Reach him at mortonjmarcus@yahoo.com.