The coronavirus pandemic has people around the world fearful for their health and financial wellbeing. While economists and epidemiologists look to past pandemics, economic depressions, and recessions to try to project the coronavirus’ impact on the economy, we find ourselves in a situation of unprecedented financial uncertainty.
In this article, we’ll give you an overview of a few of the ways to understand the coronavirus’s impact on the economy.
Unemployment rates
After most countries around the world began implementing quarantine, social distancing rules, and other measures to attempt to “flatten the curve” of the infection rate, unemployment began to skyrocket.
As of May 2020, the US’s unemployment rate jumped to nearly 15%, which is the highest level since the Great Depression. Spain’s unemployment rate is also over 14%, and countries throughout Latin America and the rest of the globe have also faced a steep uptick in unemployment.
Even if the healthcare community is able to make advances in treating and preventing the spread of the disease, it’s unclear how long it will take for the “post-pandemic” economy to recover. It’s uncertain how a gradual, partial opening of national and local economies will affect businesses and individuals.
The unemployment rate could remain high for years to come as businesses collapse, schools remain closed, and childcare options remain scarce. Some economists project uneven recovery of the employment rate as some businesses are unable to survive the crisis and certain communities are more harshly affected by the pandemic.
This dramatic increase in unemployment is not only disastrous for individuals’ personal finances but also for national economies. With the rate of unemployment claims at a record high, countries like the US may see an end to the trend of economic expansión that they have enjoyed for decades.
Risk of recession
Numerous advanced economies, as well as less industrialized countries, are likely facing economic recession — or worse.
Globally, we are undoubtedly already facing an economic slowdown. Local businesses are closed, trade and travel have been halted, and consumer activity has stagnated.
However, many experts remind us that it is still too soon to understand exactly how the impending global recession may affect us. Future waves of infection, governmental responses, and other factors will ultimately determine how the recession affects individual finance and national economic indicators.
The US, the UK, Germany, Italy, Japan, Canada, and others are already dealing with significant decreases in their Gross Domestic Product (GDP). Some estimates predict that, globally, we will face negative economic growth of around 9%. Other projections are more optimistic, estimating that global GDP will contract by around 1%.
How trade and the GVC (the global value chain, or the worldwide supply chain involved in the buying, selling, and producing goods across borders) adapt to the changing pandemic will largely determine the depth of the recession facing local, national, and the international economy. Overall, it’s a bit too early to project the coronavirus’s impact on the economy in terms of recessions.
Stock market after coronavirus’ impact on the economy
If you have access to the internet (or any other form of media), you have probably heard that the stock market has taken a hit as a result of the coronavirus’s impact on the economy. The Dow Jones, the Nikkei, and the FTSE collectively experienced their largest quarterly losses in over 20 years.
Aid bills in the US and other countries have helped stimulate the global economy enough to help the stock market make modest recoveries. However, as of May 2020, major markets are still down about 20% and experts warn that they could continue to be volatile.
In the coming months, a number of factors will determine how the stock market reacts to the coronavirus’s impact on the economy. Consumer confidence, industrial production and supply chains, trade, travel, oil prices, travel governmental policies, and a slew of other factors will shape how the stock market recovers and the timeline over which it does.
A global pandemic is far from just a health crisis — the coronavirus’s impact on the economy has already been severe and it is still too early to determine its ultimate influence. If this economic uncertainty has you feeling on edge, don’t worry, you’re not alone.
Here at Academy we’ve put together some ideas to help you survive the coronavirus’s impact on the economy. Investigate the rest of our financial education library to learn more about how to keep your financial fitness in check during these tough times.
