With the dreading coronavirus affecting almost 197 countries worldwide, U.S. has become the next epicentre. The number of corona positive cases in the country crossed 123,000 and the number of deaths reached 2200 as of March 28, 2020. There couldn’t have been a worse news for the country and the countrymen. As per the reports of leading editorials and magazines of the U.S, the country has failed to make a positive implementation to control the pandemic. Though the chances of quick control is not possible, it is important the U.S. government at least implement smart and helpful measures.
Impact of Coronavirus on U.S. Economy
The impact of coronavirus on U.S. Economy is nothing but a tradegy of decades in the country. Amidst all this chaos, the entire country and the governement needs to come together to battle this horrific pandemic. Here’s everything you must know about what is the impact of coronavirus on U.S. economy and the efforts government has made to deal with the tragic situation.
However before moving on, we would like to give you a glimpse how Donald Trump, the President of the United States reacted over the situation.
Response of the U.S. President
While the governments of different countries across the world are making every effort possible to fight this deadly virus, Donald Trump, the President of the United States is living in a different world altogether. Not considering the seriousness of the situation, President Trump has suggested that the citizen should return to work by Easter.
While medical officials expect hospitals overwhelming with patients within days, the Governers facing infections and deaths are begging for help, particularly in New York. The Mississippi Governer shows sheer carelessness by overturning social restrictions by the local officials. If this wasn’t enough, the Texas’s liutenant governer reportedly suggests “our grandparents ought to die to restart the economy.” It is much clear how America is failing to mount a decisive and coordinated response to save its countrymen.
How U.S Economy is suffering from the pandemic
As the spread of coronavirus increases, the stock prices have started falling. Since its last peak in February, the S&P 500 has gone down by 17%. The oil prices have also been affected bad. Undoubtedly, the financial markets are not necessarily the exact indicator of the overall performance of real economy and health. But, the current damage the U.S. market is going through is not something we can ignore. It is definitely going to have a hand to spill over a long-lasting economic damage.
Two potential scenarios the US economy may face
The extent of damage of the US economy depends directly on the extent of coronavirus escalation, which is no where to stop soon. So, here are the two potential scenarios the country’s economy may face, given the situations of the pandemic.
If the coronavirus fades away
The first scenario is about the pandemic fading away in the upcoming weeks and mainly impacts the economy in March and April. The spendings on entertainment, travel and tourism activities totals for almost 7% of the GDP. It includes amusement parks, casinos, movie theaters and live performances.
Can you imagine the impact when these industries face damage? For instance, there is a drop of 10% over the coming 3-month period in the spendings on these sectors, the overall US GDP will see a fall by 0.7%. For an economy like the Unites States, which grows by 0.5% every quarter, this is a big drop.
Note: The 10% estimate is temporary. The real markers are yet to be recorded.
Not just travel, tourism and entertainment, but restaurants will also suffer. There will be disruptions of the supply chains and thus, the production will be moderately slow along with slower business investment.
Various other big sectors contributing to the country’s economy, such as, consumer goods, will also suffer but quite less as they are the major part of everyday essentials and their purchase doesn’t involve high risk of the infection.
Assuming that the fear of the virus subsides by May or June, the U.S. economy could possibly bounce back well. It is because the consumers resume their regular spending behavior and the businesses fix back their supply chains and start production at their normal capacity.
To explain in brief, if coronavirus fades away in the upcoming month, it will only cause a temporary disruption to the US economy, which the country could easily cover up in a few months time.
However, the current situations suggest otherwise. Read on.
If the coronavirus spreads and persists
The second scenario focuses on the bigger picture – if the pandemic keeps spreading. In this case, the US economy will see a deep fall with long-lasting economic disruption, which will potentially continue beyond April. Economists call it a full-fledged recession.
Now, there’s this question – Will US reach the second scenario? The answer to this depends on various factors, some of which are under control directly. However, in case of some you can just keep your fingers crossed.
The situations that can be under government’s control includes the actions of health officials and the policymakers. Mainly, the potential steps taken to stop the virus from spreading further, like making the COVID-19 tests available to the larger mass and controlling the number of sick people who are still attending to their jobs.
If this deadly outbreak persists till April and beyond that, the number of infected people will be drastically high. This would directly affect the supply chains and consumers, which will be hard to recover quick. Not only the period of lower spendings will be longer (as we discussed in the first scenario), the economists calling it ‘second-round effects’ (which seems to have started already) would worsen the impact of coronavirus on the US economy.
For instance, the ever long disruption would lead to lower business confidence and consumer and decreased spending across a wide range of sectors. Businesses that have been holding on to their workers hoping the pandemic to fade away soon would lay them off eventually. As such, the households will have less or no income to spend.
If this situation occurs, avoiding a full-fledged recession in the country would be next to impossible. Another frightening fact is the long-term interest rates reaching to zero, which strictly restricts the Federal Reserve’s ability to help the US economy bounce back. Some kind of fiscal policy, such as, payroll tax cut could come to help. However, the bigger concern about limiting consumption now is not the lack of money but lack of willingness to invest/spend.
So, whether the estimations and assumptions of the US economists hit the right spot is yet to be known, once the extent of the pandemic is recorded. The policy makers need to be active and moving with ideas to balance and bring the economy damage under control in the quickest way possible.
The policy recommendations to control the adverse impact of the virus on US economy
Coronavirus is not limited to disrupting a specific category of business, but is affecting almost all the sectors. The government officials in Washington are being pushed continuously to take some reasonable steps to render assistance and relief to workers and businesses alike.
Some of the recommendations include:
Stopping the payroll taxes
This will grant businesses some relief as they have more cash to continue paying their employees.
Lending sums from the U.S. Small Businesses Administration
It will help in allowing small businesses to endure through this time of crisis.
Starting a bridge loan facility
This will allow businesses to keep paying their employees and offer essential operations for a period of time.
Thankfully, the government has already started making amends to stop the payroll taxes.
Advice people should follow as citizens of the United States
It is very vital to keep up to date with the recent developments on the virus from the local health departments and CDC. Citizens must follow the necessary directives from the relevant local and state authorities on protocols and precautions in their respective areas.
In this rapidly spreading pandemic situation, the CDC recommends US citizens to follow these preventive measures:
- Avoid close contact with sick people. It is better you stay away from everyone. Maintain a distance of 6ft.
- Avoid touching your nose, eyes and mouth
- Stay home when you are sick
- Cover your mouth and nose while sneezing and cough. Dispose the tissue right away.
- Disinfect and clean the objects and surfaces you touch frequently. You can use a regular household cleaning wipe or spray.
- In case of any kind of Covid-19 symptoms such as high fever, dry cough, chest pain or difficulty breathing. Consult your healthcare provider for immediate medical assistance.
Note: The CDC doesn’t recommend the people who are well to wear face masks. It should be saved for the caregivers and the people who are sick. Only if you are around a sick person, you should wear a face mask.
US needs to act smarter to control the pandemic
Coronavirus is a pandemic that has not just affected lives in the United States but also different business sectors that directly or indirectly affect the country’s economy. The government and economists need to come together to control the impact of coronavirus on US economy.