Social distancing in response to COVID-19 has not only forced the economy into a downturn but also has sparked a global recession and increased unemployment. United States will most likely experience a U-shape recovery with economic contracts and bumps if the recession prolonged June.
As stocks and oil prices are going down, the other most vulnerable parts are airlines, hotels, shipping, technology, industrial convention and transportation. The control most likely relies on health officials and policy makers as lower consumer and business confidence has cut down spending. Economic historian Albrecht Ritschl said during Deutsche Welle (DW) News interview, “We are only at the beginning of the crisis. It can get as bad as the Great Depression of the early 1930s. A decline in gross domestic product of around 20% is also not entirely out of question. The outlook is bleak and depends on how long the quarantine measures last”.
When asked about Germany’s “economic armory” he asserted that Germany is in good position because of the “controversial black zero policy” of balanced budget. The Federal Employment Agency in Germany is responsible for giving short-time work money to employees, which also provides unemployment benefits. Ritschl further said that America’s economy is more dependent on other countries as it is more “internationally interlinked” than other major economies of the world.
The U.S economy depends on China, as it is the biggest producer of manufactured components. Due to the shutdown of imported goods the aircraft and automobile industries would get a severe hit. “If China can quickly get the outbreak under control, and the world’s factory rumbles back to life in the second quarter, then the impact on the rest of the global economy could be contained”, said Tom Orlik in Bloomberg News. Economists say that China will have a U-shape recovery while U.S will experience a V-shape quick economic recovery if the virus is contained in May or June, but if it prolonged then it may have a U-shaped or a disastrous L-shaped recovery.
On the other hand, one of the huge effects of coronavirus is joblessness which has forced nearly 10 million Americans to apply for unemployment. “The U.S government has not released an official unemployment rate, but economists say it has likely jumped to 10 percent, a massive and sudden spike from February, when the nation’s unemployment rate was 3.5 percent”, said Heather Long in The Washington Post. The figure of the U.S unemployment is five times greater than the increase in global financial crisis every week, according to Harvard Business Review.
During the Great economic depression the unemployment rate was 25% and in World War II it was 10.8%, but now in this Recession it has crossed the limits to 30%. John T. Harvey wrote in Forbes that to rescue the economy from coronavirus effects, the government needs to stop equating the economy with the market, let the federal government take the lead and prioritize Main Street over Wall Street. As in New York the death has exceeded from 2300, Gov. Andrew M. Cuomo pleaded with the Federal Government to provide medical supplies. “Really, the only hope for state at this point is the Federal Government’s capacity to deliver” Cuomo said in The New York Times.
Despite of the persistent increase in coronavirus cases in U.S, Trump promised to start the economy right after Easter. “This is the making of a major public health disaster. I am not sure where he is getting his information from, but it is extremely flawed,” said Dr. Tina Tan of the Infectious Diseases Society of America in an interview with CNBC.
In The New York Times, Anna Scherbina, an Economist at Brandeis University and the American Enterprise Institute disclosed that they already proposed a study and warned the government of the pandemic and its destruction. “Ms. Scherbina based her estimates on the models she built when she was a senior economist at the Council of Economic Advisers and an author of the September paper, ‘Mitigating the Impact of Pandemic Influenza Through Vaccine Innovation,’ which warned of potentially catastrophic death tolls and economic damage from a pandemic flu in the United States.”, wrote Jim Tankersly in The New York Times.
Although being aware of the accelerated increase in COVID-19 cases, people didn’t take it seriously in the start and continued to ignore social distancing. Trump’s decision to heal the ravaged economy will put the lives of the people at stake. The government and policy makers need to adapt severe precautionary measures in order to force people to self quarantine and focus on health care and containment of virus more than the economy.