When millions throughout the U.S and the rest of the world went into lockdown in March of 2020, it was apparent that this would have a rippling effect across the economy. Even though these actions were required from a medical point of view to bring the coronavirus effects of the pandemic under control. However, there was a negative side effect, i.e., Significant portions of the economy came to a complete standstill. In addition, because this epidemic has spread over the whole world, its effects have been felt worldwide.
How significant was the negative impact that COVID-19 had on the economy? According to the St. Louis Federal Reserve Bank (Fed), the economic downturn in the first few months of the effect of the pandemic was comparable to the initial dips that occurred during the Great Depression.
After the implementation of exceptional stimulus measures, the economy of the United States eventually began to show signs of improvement later in the year 2020. The fast availability of vaccines and the efforts of the United States government to urge everyone to obtain these treatments and vaccinate themselves provided another much-needed boost to the economy. This boost came at a time when the economy desperately needed it.
Despite this, the special economic impact of pandemics is far from done, particularly given the ongoing emergence of new strains of the virus that are incredibly infectious.
Economy That Is Interconnected
Definite industries, including those related to travel and hospitality, were among those that were hit the hardest by the pandemic. Many stores and restaurants either ceased operations entirely or reopened with reduced seating capacities and fewer customers desiring to dine in. Travel that was not necessary vanished, which resulted in a significant loss of revenue not only for airline companies and luxury cruise operators but also for smaller businesses that depend on the money brought in by tourists.
Those employed in industries that appeared to have no connection to one another also experienced the secondary influence of social distancing. For instance, manufacturers, mainly those not involved in the medical industry, saw a decrease in the number of orders they received as consumers slowed down their shopping and demand decreased for non-essential goods such as new clothing. The government-mandated forbearance rules resulted in the banks taking on the loss of loan repayments. As a result of the steep drop in people's propensity to travel for day-to-day activities, oil companies witnessed a steep fall in prices.
These adverse pandemic impacts on the economy were only made worse by people's fear of the unknown. Even people and families who appeared to have secure employment cut back on their spending just in case the economic aftershock couldn't be contained.
Assessing the Potential Impact of a Pandemic
Because every pandemic is different, estimating the effects of this kind of disaster is an endeavor that is particularly difficult to undertake. In addition, not many instances may be used to compare to the estimations of the worst-case scenario about the consequences of COVID-19. For instance, the H1N1 virus that occurred in 2009 traveled widely but did not kill as many people. According to estimates provided by the CDC of the United States, there have been 61 million cases of H1N1 in the country, which resulted in less than 13,000 fatalities.
The generally known Spanish Flu pandemic, which was caused by another H1N1 virus but a different strain from the one that caused the 2009 pandemic, in the event in recent history that most closely resembles the current COVID-19 epidemic. This pandemic occurred over the world from 1918 to 1919. The Centers for Illness Control and Prevention (CDC) estimates that around 500 million individuals were infected with the illness, which eventually resulted in approximately 50 million deaths across the globe.
There is a lack of economic figures from the early 20th century. Nevertheless, according to a study conducted by the Federal Reserve Bank of St. Louis, many companies, notably those in the service and entertainment industries, "suffered double-digit losses in revenue."
In those days, the damage to the economy was only temporary because the underlying health problem ended around 1919. How does the recent epidemic stack up against others? The economic toll of COVID-19 has already been substantial, although the death rate associated with it has been much less than with the Spanish Flu.
The effect that COVID-19 Will Have on the Economy
During the early stages of the COVID-19 epidemic, a significant number of employees and prospective customers retreated indoors. This had a profound effect not only on the US economy but also on the economy of the rest of the world. For instance, retail sales in the United States had a precipitous drop in April 2020 until beginning to rebound by July 2020. 15 In addition, figures from the Fed indicated the manufacturing industry saw its most significant decline since the 1940s, while it has recovered.
Importance of Intervention by the Government
In a best-case scenario, legislative bodies and central banks would utilize their financial authority to assist in mitigating the effects of an economic crisis. In order to stimulate the economy, many rounds of resuscitation legislation were passed in the United States. Lawmakers approved the first of these in the United States in March 2020. It was a stimulus bill for $2 trillion called the Coronavirus Support, Relieving, and Economic Protection Act. Its purpose was to mitigate the adverse effects of the worldwide coronavirus pandemic on the economy. On March 27, 2020, approved into Law by the president a bill into law that contained several provisions intended to assist the American population. These provisions were considered in the bill.
Those aren't the only tools that are in the tool kits that administrations have available to them. They can put into motion short-term funding methods that enable firms to weather the storm and keep their employees on staff. In addition, they have the ability to improve unemployment insurance and create other safety nets that prevent the most vulnerable citizens from fleeing for their lives or going hungry. The economic stimulus programs enacted in the United States contained steps to address these concerns.
