The Impact of COVID-19 on the American Economy

Introduction

In 2020, the world experienced a serious health crisis that affected people’s health and way of living. Americans were not exceptional as COVID-19 spread faster across the country, leading to a lockdown that saw to closing of many businesses. The economy is significantly affected and continues to suffer as the pandemic continues to affect various jobs. A large number of Americans especially those of lower-class experience major financial problems. Considerably, the American government through various projects such as stimulus checks stabilized their financial burdens to a positive level. Considering the seriousness of the health condition in the world, it is necessary to learn its effects on the American economy. The restriction of movement caution caused the closing of many businesses thus increasing unemployment. The industrial sector performance has been equally reduced and the flow of finances in the country has gone down. Therefore, COVID-19 has impacted the American economy by increasing the level of unemployment, reducing industrial performance, and declining the financial flow in the nation.

Increased Level of Unemployment

Americans through individual income contribute to the growth of the economy through paying taxes. This means that increase in incomes increases taxes paid thus boosting the economy. Closure of various businesses during the pandemic period involves loss of jobs or reduced salaries. According to a report by the Journal of Risk and Financial Management, the rate of unemployment rose from 3.6% to 10.1% between January and July in 2020¹. During this period, many unemployed Americans could not apply for jobs while some of the employed lost their jobs or experienced salary cuts. Consequently, individual income taxes are reduced while decreasing taxes collected by the federal government. As the economy worsens, the low-income earners experience the tougher effect of COVID-19.

Minimizing congestion and human contact in workplaces forced many businesses to operate remotely. Unfortunately, not all jobs or workers could manage to work from home. Economically disadvantaged workers especially those with a minimum level of education can no longer keep their jobs². As most businesses have integrated technology in their systems, businesses have to only keep the technology literate employees and replace the illiterate ones. People with a low level of skills especially those doing manual jobs have to stay at home with no income. However, highly skilled workers in businesses that can work remotely had low effects of the diseases, especially in terms of the labor force.

Restricted Level of Performance in the Industrial Sector

COVID-19 restrictions control the production of consumer goods in the industrial sector. Due to narrowed movements and reduced number of workers per shift in the industries, production of various goods is reduced. Thorbecke (2020) states that industrial production of goods reduced by 9% in 2020³. The fall in production means a shortage in the supply of goods to entrepreneurs. The financial stability of the entrepreneurs is also affected due to reduced sales and general income. The industry incurs losses from declines in production which involves fewer sales and revenue.

The poor rate of production in the industrial sector results in reduced taxes and a deteriorating economy. Industrial income through taxes contributes to the growth of the American economy. Thus, reduction of production significantly affects the amount of taxes collected from the sector⁴. Furthermore, the shortage of supply experienced by the entrepreneurs also reduced their amount of income and taxes. In other words, when producing companies cannot produce enough trading goods, the probability of increased profits declines and so is the economic growth. The production situation has however improved from 2020 because as people learn how to survive with the spread of COVID-19, many industrial companies are resuming their normal production levels.

Unstable Financial Flow

The spread of COVID-19 develops financial instabilities by affecting stock markets due to sudden recess that creates uncertainty. The stock market is another major contributor to the national economy through taxes. A recent financial analysis shows that stock market value dropped by 43% between February 19 and March 23 in 2020⁵. The stock market is a major source of wealth for most high-income earners in the United States. Consequently, a lowered value for stock markets causes losses to their invested stocks hence earning decreased income. To a noticeable level stock market prices have increased with the declining spread of COVID-19.

Although the federal government tried to keep the financial flow steady, it was not enough for the spending curve to yield a return on investment. The federal government through stimulus checks and other financial aid means paid Americans a sizeable amount of income to alter the pandemic effects⁶. The government aimed at increasing or improving the flow of financial income in the nation and boosts the economy. However, the level of spending of this money did not match the expected return on investment. Consequently, financial flow continues to strain the economy despite the efforts for restoration. Continued support alongside the positive environment created by stock marketers after lockdown will lead to an improved flow of finances in the nation.

Counter Claim

The pandemic forces stabilize the economy for the wealthy, under deserved, and less affluent. A section of Americans believes that the health crisis affects all people thus balancing the economic standards for the wealthy, poor, and less skilled people. A study shows that losses incurred in the production industry caused financial strains for the wealthy⁷. Henceforth, the economic burden is not only felt by the unemployed or those that lost jobs but also the employers. Business owners suffered losses by experiencing income shortages, especially during the lockdown. Thus, like employees, the economic hardship was the same for the employers or business owners. The basic argument is that COVID-19 equalizes the economy for all people no matter their statuses.

Another section of optimists holds that the federal subsidiaries offered to the low-income earners might improve their economic status and uplift those who depend on them. When the most affected Americans were given the stimulus checks, they did not spend it all. Some people invested the money in various businesses while others in real estate. These investments are expected to increase their spending and improve their economic statuses⁸. Consequently, the economic spending and status of those who depend on them, especially the families will increase the economy.

Refutation

Although the recent economic growth is promising despite the effects of Coronavirus, the economically disadvantaged still suffers severe impacts. The American economy is reviving from the 2020 recession caused by the ongoing health crisis. However, the low-income earners and least skilled still face tough economic strains⁹. When the reality of COVID-19 hit the Americans, many businesses have adopted future sustainable means of operations. One of the operations includes remote working which only favors highly skilled labor. Thus, even as businesses resume normal operations, the least educated still suffer from unemployment.

On the positive side, COVID-19 has increased the number of entrepreneurs in the country. America has always supported the spirit of entrepreneurship but the ongoing health crisis might have pushed it. When many Americans lost jobs due to labor and salary cuts, they decided to become self-employed¹⁰. A sizeable number of people especially the skilled opted to begin online businesses while others started their physically located businesses. These entrepreneurs have discovered the power of the self-employed and are equally contributing to economic growth. This positive effect of Coronavirus has taught Americans to embrace a future sustainable means of living should there be another pandemic. Existing businesses are also changing their operating settings by trading online and offline in readiness for the future.

Conclusion

COVID-19 has adversely affected the American economy through labor force, industrial production, and flow of finance. However, as much as all people are affected by the deteriorating economy, minorities are highly affected. The nation experienced severe effects of the disease in 2020 where all the major factors of this discussion were aggregated. Going forward, the country is slowly recovering from the effects by adapting to the presence of the pandemic. The positive impact is further expected to the economy as many businesses resume normal functioning and relearn the ways of operation. The newly learned ways of working especially remote working may be a disadvantage for the least skilled. Thus, as the economy moves towards recovery, the minorities continue to suffer from severe impacts of COVID-19. All in all, the negative impacts of Coronavirus are expected to fade as time goes by.

Bibliography

Altig, Dave, Baker Scott, Jose M. Barrero, Nicholas Bloom, Philip Bunn, Scarlet Chen, Steven J. Davis, Julia Leather, Brent Meyer, Emil Mihaylov. “Economic Uncertainty Before and During the COVID-19 Pandemic.” Journal of Public Economics 191, no. 104274 (2020): 1-13. Web.

Clark, Eva, Karla Fredricks, Laila Woc-Colburn, Maria Elena Bottazzi, and Jill Weatherhead. “Disproportionate Impact of the COVID-19 Pandemic on Immigrant Communities in the United States.” PLoS Neglected Tropical Diseases 14, no. 7 (2020): 1-9. Web.

Kantamneni, Neeta. “The Impact of the COVID-19 Pandemic on Marginalized Populations in the United States: A Research Agenda.” Journal of Vocational Behavior 119, no. 103439 (2020): 1-4. Web.

Thorbecke, Willem. “The Impact of the COVID-19 Pandemic on the U.S. Economy: Evidence from the Stock Market.” Journal of Risk and Financial Management 13, no. 10 (2020): 1-32. Web.

Footnotes

1. Thorbecke. “The Impact of the COVID-19 ,” 8.
2. Kantamneni. “The Impact of the COVID-19 Pandemic,” 3.
3. Thorbecke, “The Impact of the COVID-19,” 13.
4. Altig et al., “Economic Uncertainty,” 5.
5. Thorbecke. “The Impact of the COVID-19,” 12.
6. Clark et al., “Disproportionate Impact of the COVID-19,” 8.
7. Altig et al., “Economic Uncertainty,” 4.
8. Altig et al., “Economic Uncertainty,” 6.
9. Kantamneni. “The Impact of the COVID-19 Pandemic ,” 2.
10. Clark et al., “Disproportionate Impact of the COVID-19,” 6.