COVID-19 is Taking A Sledgehammer to the US Economy
As the world has been enveloped by the most threatening health crisis of the century, it is also combating another crisis simultaneously which is severe unemployment and recession. COVID-19 has not only endangered the lives of many people but also the livelihood of millions across the globe and when people are deprived of their work, a sense of threat and desperateness looms upon them. All the countries across the globe are trying to bring their economy back on track by directing their Nation’s momentum towards developmental tasks and boosting novel ideas to encourage people to work from home and contribute to the economy simultaneously. However, there is still a vacuum when it comes to restoring the situation of employment and livelihood of crores of people. This might be the migrant workers in India or the women in the USA, there are millions who are deprived of their right to livelihood.
More than 40 million Americans have filed for unemployment over the last 10 weeks and the USA has not witnessed such a huge number since the Great Depression. The wave of layoffs has heightened concerns that more government aid is needed to sustain the economy through the deep recession caused by the viral outbreak.
Republicans in Congress are locked in a standoff with Democrats, who have proposed trillions more in aid, including for struggling states and localities, beyond the nearly $3 trillion already given to individuals and businesses. The tentative reopening of some businesses in many states has done little to reverse the flow of mass layoffs. Jobless workers in some states are still reporting difficulty applying for or receiving benefits. These include free-lance, gig and self-employed workers, who became newly eligible for jobless aid this year.
Although the U.S. unemployment rate fell to 13.3 percent in May, according to the report of the U.S. Bureau of Labor Statistics (BLS), for those who lost their jobs permanently due to the coronavirus pandemic, searching for new jobs presents a challenge.
However, since then the BLS has itself admitted to statistical anomalies. In a blog post, they have clarified the reasons for this error as being attributable to survey responses. A significant portion of respondents cited absence from work based on “other reasons”, instead of “on layoff (temporary or indefinite)”. This was because they were simply unsure of their status. Since a response of “other reasons” does not trigger follow-up questions to determine if someone is unemployed for the purpose of statistics, they were never properly recorded. Correcting for the error, overall unemployment rate would have been about 19.7 percent in April and 16.3 percent in May – 3 percent higher than old figures. However, a monthly comparison shows improvement in the job market. The U.S. Labor Department informed that the economy regained 2.5 million jobs in May after losing more than 22 million jobs in March and April.
The better-than-expected May report suggests thousands of U.S. businesses reopened and brought back workers more quickly than predicted. It could take months, however, before those who lost jobs in March and April return back to work, prompting some economists to predict the jobless rate could remain in double-digits into next year.
Since the US began its shutdown of businesses to combat the virus, the rise in its unemployment rate for that month (relative to January, that represents the pre-virus labor market) is just .8 percentage points (from 3.6 to 4.4%). A standard illustration is that the Dow Jones Industrial Average and S&P 500 rose more than 2%, continuing a recovery in share prices from their March lows. Additionally, Bank of America is temporarily converting more than 3,000 employees from across the bank into positions intended to field an onslaught of calls from consumer and small business customers.
A series of online job opportunities have paved their ways into the economy wherein, more than 100,000 websites show that the employment situation has improved and the postings for seeking jobs has drastically declined. The updated website of EMSI gives a clear picture of the employment situation there. Contrary to the misinterpreted belief of lack of job opportunities, the US economy is seeking for participants in various roles. This includes translators, part-time workers to ameliorate the conditions of COVID patients as well as the poor in these trying times. Many organizations, such as Allianz Global Investors and Cisco, have already set up internal project marketplaces that break down work into tasks and projects that can be matched with people from anywhere in the organization with relevant skills and availability. Many new online platforms have emerged and are offering a wide range of job opportunities streaming from online educators for financial decisions to online therapists. In the recent surge of #BlackLivesMatter movement, social workers and social educators are the need of the hour as they would be instrumental in explaining the situation from its fundamental stages.
Amazon Headquarters in Seattle, WA.
Amazon has prospered like no other company in this situation. The e-commerce giant which until now enjoyed only a very small portion of overall retail business in the US (online and offline), has made significant inroads because of its superior delivery supply chains compared to rivals like Walmart and Home Depot. Amazon has also stepped up hiring in its warehouses. Its cloud computing platform, Amazon Web Services, is also known to benefit from the enhanced strain on networks due to increased demand for streaming and other web-based services.
COVID-19 has triggered a global financial crisis and is forcing states to develop rescue packages on a scale not seen before. The crisis has called into question the US dollar's hegemony and could redefine the global monetary system. Researchers have developed four scenarios that show how political decisions will shape the post-Corona world. In the case of complex and privatized structures such as the offshore dollar-based monetary and financial system, crises are key drivers of change. It is in these moments that political decision-makers lay the groundwork for future developments.
The move by the U.S. Securities and Exchange Commission as operators of equity crowdfunding is a welcome move towards boosting the financial setup in the economy and to encourage this, many platforms working with record amounts of companies are pushing the total funds raised to all-time highs. San Francisco-based Wefunder's platform did $2 million in regulation crowdfunding — as that variety of crowdfunding is known — last week for the first time in its history. Another big platform operator, West Hollywood-based StartEngine Crowdfunding Inc., similarly said it just had its most successful quarter ever, helping startups raise more than $24.4 million. From these cases, it can be noted that crowdfunding is serving as a ray of hope in financing many businesses. In addition to Equity crowdfunding, other forms of the same that include donation-based crowdfunding have gained popularity. Platforms like Kickstarter and Indiegogo have played a key role in providing access to donations from varied sourced across the nation and the globe.
COVID-19 has enveloped the world in a volcano of threat and fear but it is important to note that this situation will not vanish away in the blink of an eye. This is going to remain ingrained in all systems across the globe. It is now up to all the economists to put their thinking caps on and identify novel ideas to encourage growth and development of their nations and the globe as a whole.
Views expressed are solely those of the author.
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About the Author
Ananya Satish is a budding lawyer and is currently pursuing B.A. LLB from National Law University, Odisha. She is a passionate speaker and has participated in many Model United Nations Conferences and debate competitions in the school level and also has many citations in her name. Ananya also enjoys the law school tradition of mooting and has developed a keen interest and passion for the same. She is an avid reader and has a taste for classics and crime fiction. She is a trained bharatanatyam dancer and aspires to pursue legal journalism post law school.