By now, you probably know every detail about the COVID-19 coronavirus outbreak in the entire world and how it has engulfed 198 countries. The news channels are filled with stories about people practicing social distancing and living in isolation through this grim situation. The US is one of the worst-hit areas, with 68,000 people reportedly affected, with over 1,000 people dead. Under such a grave scenario, it’s only obvious that it’s economic conditions of the US will experience a negative influence.
Countless lives lost and the stock market’s downward spiral gives reasons to be concerned about the economic repercussions.
Advanced economies like the US are barely immune to these effects. On the contrary, a widespread outbreak of the disease could be even worse for their economies than in China.
The US economy at a glance amidst the coronavirus scare
According to news published on NPR, while the course of the COVID-19 pandemic is still mostly unpredictable, economists are making educated guesses about just how bad the damage will be. And, the predictions are far from favorable. Here are some statistics that experts have predicted:
- Oxford Economics anticipates the US economy to shrink at a rate of 12% between April and June.
- JPMorgan Chase witnesses a second-quarter contraction of 14%.
- Goldman Sachs warns of a jaw-dropping 24%.
Businesses suffering from supply chain disruptions
“To analyze the impact of the coronavirus on the US economy, it’s vital to pay attention to the ways that businesses, consumers, and governments may react to it’, believes Ian Milligan, an expert on economics assignment help from All Essay Writer. COVID-19 has highlighted economic losses through supply chains, and financial markets, affecting household consumption, business investment, and international trade. Moreover, the sense of uncertainty around this pandemic has also adversely affected the US economy.
Now, the question is, how has the coronavirus outbreak escalated the sense of uncertainty around the economy? Businesses have already had to withdraw from making investments because of the obvious uncertainty around supply chains.
Uncertainty leads to less expenditure among consumers
In fact, businesses aren’t the only ones that are pulling back amidst uncertainty. Households, concerned about contracting the virus, have cut down their expenses on some aspects like traveling and going out.
Moreover, this health risk will have a far-reaching impact on the US economy. Many households have insufficient health insurance, which would leave them with large doctors’ bills when they fall sick. Also, most Americans don’t have paid sick leave. This means that if they fall sick from the virus and need to stay home, they won’t get paid.
Considering the risks, people will find it as a good precaution to avoid activities exposing them to others. On an economic scale, though, this means less spending and thus less growth.
Interest rates and stock price plummet as economic uncertainty grips the US
American Progress reports the interest rates in the US have recently taken a nosedive amidst the pandemic situation. The decline continued in February. As a result, the yield rate dipped below 1% for the first time in 150 years. This abnormal economic situation has prompted Wall Street to demand immediate action from the White House and Congress.
Financial markets are anticipating the risk of a recession. Financial markets also worry that the Federal Reserve’s action on interest rates may not be enough. Hence, the future of the stock market and interest rates in the US are going to be murkier.
The measures that the US government should consider in response to the coronavirus outbreak
Economic policymakers need to minimize the risks of the virus in a constructive manner. It is imperative for economic policymakers to take steps. This is to ensure that disruptions don’t affect the workers and individual businesses throughout different sectors.
Contain the risks households and vulnerable populations
It’s important for the US government to focus on maintaining the financial stability of households. This is expressed particularly to those who are already vulnerable to the disease, including the immune-compromised. Many workers don’t have the privilege of health insurance, and roughly 27% of private-sector employees didn’t have access to paid sick days in 2019.
The United States government must devise a paid sick leave policy as soon as possible. The government should support employers with proper financial aid to support their employees in case of a health crisis. This ensures that employees receive proper care and for an ailing family member without losing their job or pay.
Stabilizing the financial markets
COVID-19 has struck the financial markets hard, but it’s unclear how the epidemic further affects the broader financial system. As financial statement analysis markets become more volatile, it will be essential to act swiftly in order to avoid any disruptions in the chain of payments.
The Fed cut its interest rate by 0.5% March 3 in a move identified as a reaction to the outbreak. Other central banks have also lowered interest rates or have contemplated taking such steps. The Federal Reserve should further adopt an accommodative monetary policy, employing all resources at its disposal. These resources include emergency lending authorities.
Amidst a large-scale crisis, the US government should act swiftly to minimize economic damage caused by the pandemic. The economic policies need to be focused on reviving the financial markets and extending the flexibility towards household requirements.
Nionica Starc is a high-school teacher who has a Master’s degree in English literature. She also offers help for case study through MyAssignmentHelp.com for students seeking expert academic assistance.