The United States, regarded as the globe’s largest economy has long recorded unprecedented growth, but thanks to the COVID-19 outbreak and crisis, it has collapsed to a large extent. According to experts, the US Economy may be witnessing its biggest recession ever, owing to the several measures that its government has taken in relation to the coronavirus. For instance, the US economy shrank by nearly 5% in its 1st quarter of 2020. This was the country’s biggest slide when compared to the financial crisis of 2008. This drop in the economic growth has caused millions of United States citizens to lose their jobs while consumer spending too has witnessed its biggest drop in forty years. Thus, while many companies in the US are declaring bankruptcy, the government has rolled out over $2 trillion package to support the economy.
Given the above scenario, what remains to be seen is how will the US economy bounce back and whether the worst is over or not.
Will the US Economy Return to its Normal State?
While US President Donald Trump is of the opinion that the economy will return to its usual state after the virus has been contained, economists believe that there will be long-term effects of the coronavirus both in the U.S. and across the globe.
Since the mid of March, over 26 million individuals in the United States have come forward to file for unemployment. In addition to this, the country has witnessed a historic drop in business activities as well as consumer confidence. According to the economic forecasters, growth may decline by more than 30% in 3 months.
In comparison, where people were under restrictions for almost the entire quarter, the economic growth slumped by 6.8 percent. On the other hand, Germany stated that its economy may shrink by more than 6.3% in 2020.
Before the COVID-19 outbreak knocked the world economy, experts expected the United States economy to grow by 2 percent in 2020. But, by the mid of April, over 95% of the nation was under lockdown. While some states have begun to unlock themselves, many others are yet to open for business. These include the major economic giants like California and New York. As a result, a number of companies in the U.S have stated that they have been severely hit by the pandemic and their quarterly results aren’t impressive.
For instance, GE’s (General Electric) revenue fell by 8 percent in the 1st quarter, whereas Boeing, which was already witnessing a crisis post the crashing of the 737 Max plan, recorded a 48% revenue drop. The company now plans to reduce its output and cut down jobs.
Apart from this, industries such as hotels, trading, airlines, restaurants, sports and theaters have also been severely hit and now they will have to adopt the new norms of social distancing as well as increasing spaces between curbing sales, customers, employment and profits levels.
Consumer Spending Hit
On the other hand, consumer spending that contributes around 2/3rd of the United States economy declined by 7.6% right in the initial 3 months of 2020. Spending on accommodation and food services dropped by over 70%, whereas footwear and clothing purchases dropped by over 40%. Spending on health too dropped despite the coronavirus, even as concerns regarding the infected made doctors to delay their routine treatments as well as medical care.
While the Fed has pumped $2.2 trillion relief package for businesses and households. But, all that fund won’t suffice apart from keeping businesses afloat and assisting unemployed Americans to earn their pay checks.
To sum up, even in the best of scenarios, most of the forecasters are stating that unemployment will continue to increase for a couple of years. Also, the rate of joblessness won’t return to its pre-corona crisis lowest figure of 3.5%, dragging the recovery out further.