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Economic Impact of COVID-19 in The Midwest, By Meghana Anireddy

Updated: Feb 25, 2021

The COVID-19 pandemic has impacted every aspect of our daily lives, from health and mental well-being to income and livelihood. The initial craze of robbing stores of toilet paper and hand sanitizer may have died down, but the pandemic still maintains its relevance more than ever. Surpassing the first anniversary of the USA’s first covid case and approaching our individual 1 year quarantine anniversaries, it’s important to look back on, and understand, the impact covid has had on our livelihoods beyond the general facts that we have become used to.

As of February 15th, 2021, The United States has had 501,663 deaths out of 2,480,465 deaths worldwide, with over 95,000 deaths in January alone. To put this into perspective, with the influx of lives lost in January, the USA officially exceeded the number of American lives lost during WWI, making the USA’s total death toll equal to 20.22% of the global mortality due to Covid-19. These stats were all accomplished in the USA within a one-year time frame. In one year, with three waves of the virus sweeping the nation, COVID-19 showed clear trends. Starting in densely populated coastal areas before moving onto the more rural areas, the virus spread throughout the nation. To better understand a virus that has permanently changed our future, it’s important to focus on a designated area and compare and contrast. For our better understanding of how COVID-19 had a direct impact on our livelihood, I will be focusing on the economic impact in the Midwest and what that means for our future.

Layoffs and Shutdowns

Various mid-western states had different ways of approaching the initial stages of the pandemic. Due to a lack of guidance from our administration, every state governor went their path and saw the rise in cases accordingly. Figure A shows such changes by comparing the unemployment rate and new covid cases before and after individual stay-at-home orders. States who did not have a stay-at-home order were measured by the initial date of a week after COVID-19 was declared a National emergency (March 20th), until the first wave of cases was approximated to end (May 7th).

Figure A

*Rates for unemployment were taken from the bureau of labor statistics. Covid cases from specific dates were taken from the New York Times. The population of each state was taken from the nationsonline organization, recorded in December of 2019.

Stay at home orders proved to be somewhat effective, even more so if enacted in earlier stages, but the biggest hit was to the rate of unemployment. Numerous firms in the labor market had no choice but to reduce their operations as an increase in layoffs and firm shutdowns during this time forced employee hours to be cut. The total number of hours decreased by over 50% nationwide in March, causing the demand curve to decrease. However, there was a substantial increase after the reopening of small businesses in April. In fact, by mid-August of 2020, there were 56% more new business applicants than in mid-August of 2019.

Regardless, even with the opportunity of new jobs, many former workers cannot go back to work. This group of people includes people over the age of 16 who are eligible to work and have stated they want work, but did not actively look for a job in April. They cited reasons ranging from child-care responsibilities, transportation issues, or even illnesses. The biggest disruption in the labor force would have to be the absence of working parents. The labor market will not be able to recover if such a large portion of their workforce is missing, impacting the economy for years to come.


As I had mentioned earlier, there are different waves of the virus. While the first and 2nd wave was focused on more densely populated areas on the east and west coast, covid cases began to increase in rural areas as well. November of 2020 is when the third wave began in the Midwest. The Midwest is home to 12 states, in order to look at the impact of the 3rd wave, I’m going to focus on 6 metro areas. The Mid-Sized metro areas include Cedar Rapids, Iowa, Peoria, Ill., and Fort Wayne Ind. The large metro areas include Minneapolis-St. Paul, MN, Grand Rapids Mich, and Milwaukee, Ill. Although these metro areas make up 18% of midwestern metro areas, they solely accounted for 33% of the new COVID-19 cases in November.

Work-place visits and workplace travel severely decreased, resulting in smaller businesses taking a step back as well. The improvements seen in Mid-August took a major hit with the sudden spike in cases. The colder months only proved to be more difficult as businesses had to stay afloat and midwesterners had to deal with other illnesses as well.

The introduction of the Vaccine in late December couldn’t have arrived at a better time, providing those in the public sector a certain level of immunity from their day-to-day job. Slowly our economy should be getting back on its feet and allowing businesses to have a constant flow of income, instead of the instability we have seen recently. According to current predictions, with herd immunity will also come a new golden age. Similar to what is known as the renaissance period, which will not only help firms stay afloat but gain even more profits. The economic impact on the Midwest has been drastic, especially recently, but with the introduction of the vaccine, we will be entering a new, vibrant, era.