Debt Consolidation

Economic Recovery Amid Coronavirus Pandemic Varied Across U.S.

Since February, the economy has slumped into a recession, likely impacted by the COVID-19 pandemic. As a result, Americans of all stripes have suffered. Those without work have had to deal with unemployment rates that reached as high as 14.7% in April, while small businesses have had to map out futures among uncertain times.

For a variety of reasons, certain states are faring better than others. Economies built around tourism (like Nevada, which finished last in our rankings), for example, have suffered as crowds have stayed away.

LendingTree researchers analyzed the data to find the states that are closest to seeing pre-pandemic economic conditions. Here’s what we discovered.

Key findings

  • Idaho’s economy has gotten the closest to reaching January levels. Small business revenue in August was just 5% below January levels, while the August unemployment rate in the state was only 1.4 percentage points above what it was in January.
  • Consumer spending in Kentucky — second on our list — was just 2.7% below January, while job postings were just 6.8% below January levels.
  • Similarly, consumer spending in Kansas has nearly recovered to pre-pandemic levels, putting it third on our list, though the unemployment rate in the state was 3.8 percentage points higher than it was in January.
  • Nevada has made up the least ground in getting its economy back to pre-pandemic levels. The state’s unemployment rate was 9.6 percentage points higher than in January. Many of those workers will struggle to find work, as job postings were 30.3% below January levels.
  • In Delaware, the state with the second-worst economic recovery, consumer spending was sitting 16.4% below January levels. The lack of spending may be affecting small businesses, as 22.1% fewer businesses are open relative to January.
  • The New York economy is still struggling to recover, despite COVID-19 cases remaining low in August. Job postings were down 28.4% and the unemployment rate was 8.7 percentage points higher than it was in January.
  • Overall, no state has returned to pre-pandemic levels in any of the categories outside of a few states that saw consumer spending levels return.

How consumers impact economic recovery

Consumer confidence dipped in August for the second month in a row, signaling further pessimism. In fact, 25.2% — according to The Conference Board Consumer Confidence Index — said jobs are “hard to get,” up from 20.1% the prior month. Despite that pessimism, nonfarming payroll enrollment has been on the rise the past several months, according to data from the U.S. Bureau of Labor Statistics (BLS), showing that economic activity is again picking up.

A key to the national recovery is whether consumers are boosting spending. Without that vital component, businesses — especially small businesses — lose revenue, which leads to fewer jobs. That cycle of spending and job creation is essential to enabling a recovery.

At this stage, it’s about getting closer to the “normal” spending patterns that we saw pre-recession and pre-pandemic. Arizona, Georgia, Massachusetts and Wyoming recording August consumer spending rises (above January levels) is encouraging. But the question remains: Is it sustainable? Again, it’ll depend on consumers continuing to invest in the economy.

How consumers can boost economic recovery

For consumers who have the means, supporting small, local businesses can be one of the best ways to boost the economy, both from a national and state perspective.

“So many small businesses are really struggling, and they could really use the help,” said Matt Schulz, LendingTree’s chief credit analyst. One way Schulz’s family has done this is by starting a biweekly tradition of getting takeout from area restaurants. This way, they can plan for the expenses.

“It’s really all about perspective,” Schulz said. “That $25 lunch may not be a big deal to you, but it can make a huge difference to that restaurant in your community. If you have the financial means, it’s really important to support those businesses, especially if you have a friend who runs one or something like that. But you shouldn’t put yourself in difficult financial straits.”

For those looking to make their dollars go further for businesses, Schulz suggests going for local, family-owned businesses, including:

  • Bookstores
  • Clothing stores
  • Restaurants

4 things consumers can do to get out of debt

Helping speed along the economic recovery can feel difficult when you’re in debt, especially during times like these when it feels like so much is up in the air. But it’s possible to get out of debt and start making a contribution. Consider these four things:

No. 1: Make a budget

“It sounds super basic but — really — a budget is the key to the whole thing,” Schulz said. “Once you know how much money is coming in and going out of your household each month, then you can start to make a plan for what to do with your money and begin prioritizing where you want that money to go.”

No. 2: Look into money-making options

While it can feel like getting a part-time job to supplement your income is a large investment that may be easier said than done, there are other options to explore. For example, picking up a quick side hustle or freelancing using your existing skill set and contacts can be less of a time commitment but still provide you with cash to put toward debt.

No. 3: Consider a less conventional money plan

“I’m a big believer in building up your emergency fund while you’re paying off your debt because that’s how you break the cycle of debt,” Schulz said. “If you feel comfortable with the emergency fund that you have, then maybe take a little bit of that money you’d be using to pay down that debt and use it on spending on local businesses.”

It’s important to stay aware of your boundaries if you go this route, though, and keep a close eye on your expenses.

No. 4: Take stock of your belongings

There may be items you own taking up space in your home that you no longer need, and those are valuable opportunities to find cash to use for paying off debt. And items that cost money, either through energy, storage fees or regular maintenance, offer an even better opportunity for those who are in debt. Just make sure you won’t need those items in the near future.

There are many paths to getting out of debt — including debt consolidation loans — but the most important thing, Schulz said, is to take some sort of action. “People tend to feel really overwhelmed when things are out of their control, and taking some sort of step to tackle that debt can really make a difference,” he said.

Methodology

LendingTree researchers analyzed five economic metrics from August to compare the figures relative to January to find out how state economies have recovered since the beginning of the year. Those five metrics measured the percentage change in:

  • Consumer spending
  • The number of open small businesses
  • Small business revenue
  • Job postings
  • Unemployment rate

The states were ranked from highest to lowest based on an indexed number comparing January to August. Index ties were broken by the states with the smallest percentage change in consumer spending relative to January.

Unemployment rates come from the U.S. Bureau of Labor Statistics (BLS), while data for all other metrics comes from the Opportunity Insights Economic Tracker.

 

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