COVID — 19 Economic Recession
By Roshni Danda
COVID-19, as most of us know, has made a tremendous impact on our lives. It has trapped us in our homes, eliminating the opportunity to socialize with people, our friends, and even our family. It has affected the world in many aspects but the economy took the biggest hit of all. The Frontiers in Public Health said, “…due to reduced productivity, loss of life, business closures, trade disruption, and decimation of the tourism industry,” were all causes of the economic recession. There is no one factor that caused this domino effect because everything happened at once. This economic recession is an entire cycle, like a ripple effect, one thing causes another.
Productivity
Let’s start with low productivity. Companies that depend on people or workers whose work cannot be done remotely have a significant impact. If these companies solely depend on workers, then there will be a decline in the number of sales they will have. Fewer sales lead to less revenue which leads to less profit. Due to low revenue, the company cannot employ all their workers, so some workers will get laid off, increasing the unemployment rate. Sometimes, the company isn’t receiving enough revenue to even continue the business, so the company will shut down. CNBC says that 60% of small businesses closed due to COVID-19. Not only does this affect companies, but the family of the unemployed workers. Many families had to migrate back to their native country because they lost their jobs therefore losing the privilege to live in the United States. This being the case, many companies closed, a lot of people were left unemployed, and ultimately causing a bigger burden upon the government.
Unemployment
Continuing with where we left off, the severe decline of the unemployment rate. Pew Research states that during the first four months of the coronavirus the number of unemployed in the U.S. rose from 14 million to 20.5 million. The number of unemployed rose faster than it did during the Great Recession. Adding on, people without jobs are less inclined to buy products from companies that also cycles back to businesses closing. Not only that, but this also impacts the stock market. When people don’t have jobs, they are unlikely to buy new products from companies. This means that these companies don’t make the predicted amount of sales causing people to sell their shares and ultimately dropping the share price. When people lose their jobs, the government gives them unemployment compensation. However, since the unemployment rate increased rapidly, the government focused all of its funds on the people who lost their jobs but not on the community, such as fixing the streets, etc.
Travel Industry
Although many industries took a fall, the travel industry took a bigger hit out of all of them. Due to the Coronavirus, everyone has to social distance, meaning traveling via plane, ship, or bus, was not a good choice. This also led to many tourist places being deserted. Of course, there were some people brave enough to visit, but places such as Disneyland, Universal Studios, didn’t get as much revenue. UNCTAD writes that “The world’s tourism sector could lose at least $1.2 trillion…” which is clearly a huge loss for the tourism industry.
There are many other factors that contributed to the falling of the economy, but the ones listed above are one of the most critical. At the beginning of Covid-19, the economy saw one of it’s darkest moments, it suffered immensely. As of now, the economy is recovering, but it is at the brink where if the littlest thing happens, the whole thing will repeat. Hopefully, when the vaccination of the Coronavirus comes out, the economy will see colors once again. However, if there is another wave, we don’t know where that will take the economy.
References
Frontiers in Public Health. (29 May 2020). Economic Consequences of the COVID-19 Outbreak: the Need for Epidemic Preparedness. Retrieved October 17 2020, from https://www.frontiersin.org/articles/10.3389/fpubh.2020.00241/full
US Travel Association. (15 October 2020). COVID-19 Travel Industry Research. Retrieved October 17 2020, from
https://www.ustravel.org/toolkit/covid-19-travel-industry-research
PNAS. (28 July 2020). The impact of COVID-19 on small business outcomes and expectations. Retrieved October 17 2020, form
https://www.pnas.org/content/117/30/17656
CNBC. (16 September 2020). Yelp data shows 60% of business closures due to the coronavirus pandemic are now permanent. Retrieved October 17 2020, from
Pew Research. (11 June 2020). Unemployment rose higher in three months of COVID-19 than it did in two years of the Great Recession. Retrieved October 17 2020, from