Economic Impact of the Pandemic- Blog 4
As millions of people in the United States were ordered to stay at home and quarantine in March 2020, the consequences were bound to have global ramifications. While these restraints were necessary from a physical health standpoint, the economic repercussions rivaled the initial declines of the Great Depression. The COVID-19 pandemic has not only claimed many lives but has also wreaked havoc on the country’s economy.
Certain industries, notably tourism and hospitality, were particularly hard hit by the pandemic. Restaurants either closed in-person dining completely or opened with limited seating space. Many businesses were forced to shut down their operations entirely. Non-essential travel ceased, resulting in significant income losses for airlines and cruise ship operators, as well as smaller businesses that rely on tourism. The secondary consequences of social alienation were also felt by those working in seemingly unrelated fields. As purchasing slowed and demand for non-essential goods, such as new clothes, fell, manufacturers, particularly those outside the medical area, experienced fewer orders.
In April 2020, the employment-to-population ratio in the United States fell significantly, suggesting that the pandemic caused far more job losses in the country than expected. According to historical averages, the ratio should have been 61.3 percent, but it was just 51.5 percent. In April 2020, the additional national decline was 9.9 per 100 people (Figure 1), which means fewer individuals were employed than had been projected prior to the outbreak.
Government Intervention
Several waves of stimulus legislation were passed in the United States. To mitigate the economic damage of the global coronavirus epidemic, the U.S. Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020, a $2 trillion stimulus plan. Former President Donald Trump signed the bill into law on March 27, 2020, with a variety of provisions targeted at assisting the American people.
Efforts to free up the US Treasury and distribute money directly to homes were helpful to those who were newly unemployed or had decreased working hours. In March 2020, the Federal Reserve cut interest rates to near-zero to increase liquidity at a time when it was scarce.
Omicron Variant
According to U.S. Treasury Secretary Janet Yellen, the Omicron variant of COVID-19 could hinder global economic development by worsening supply-chain difficulties and decreasing demand.
Travel has already been hampered by the current round of restrictions, which has harmed consumer trust. A severe, vaccine-resistant virus may drive the economy back into a spiral by exacerbating supply chain issues and raising prices, but it also has the potential to cut demand and halt growth, alleviating some of the inflationary pressures. A milder outbreak could relieve demand on healthcare systems and allow the recovery to resume.
Financial markets have been roiled by the spread of Omicron, prompting governments throughout the world to tighten travel and working restrictions.
Every pandemic is different, which makes estimating the consequences of such a calamity particularly difficult and we can only adjust and learn as we face new challenges each day.
