2. What is Economic Growth?
An increase in the aggregate production of goods & services in an economy,
resulting in an increase in real GDP.
Aggregate production → Marginal productivity -> Income → Quality of
life
Typically modeled as a function of growth in physical capital, human capital,
labor force, and technological advancements.
Measured in the value of the goods & services produced, not only quantity.
Defining ‘Growth’ is subjective.
4. What is a Recession?
“In economics, a recession is a business cycle contraction when there is a general
decline in economic activity. Recessions generally occur when there is a widespread
drop in spending (an adverse demand shock.)”
During a recession, businesses lose money because of lower demand, causing them to
lay off workers which contributes to the unemployment rate rising.
An example of a recession is the 2007-2009 ‘Great Recession’ that was caused by
deregulation of the financial industry, and 8.7 million jobs were lost over a period of 2
years.
5. How Covid-19AffectsEconomies
In the effort to mitigate the spread of Covid-19, many governments around
the world made the decision to “close down” the economy. While these efforts
are necessary in protecting the welfare of people, they have significant
implications on the global economy.
By putting sanctions on business and trade, economies can expect…
- Decrease in marginal productivity.
- Increase in the rate of unemployment.
- Increase in closures of small businesses.
- Increase in delinquency and default rates.
- Decrease in interest rates → Inflation
6. Scale of Global Economic Downturn(Eurostat,2020)
Takeaways
- OECD countries are
not faring much
better economically
compared to
“developing
countries”.
- Generally, countries
with higher
standards in public
health are doing
better economically.
7. Economic Decline vs.Rates of DeathDue to Covid-19
(Eurostat,2020)
Takeaways
- Moderately strong
correlation between
GDP loss and number
of deaths associated
with Covid-19.
- No trade-off between
protecting peoples’
health and protecting
the economy. (Hasell,
2020)
8. Impact in the UnitedStates
The United States (negative):
With the spread of the COVID-19, the global economy is in turmoil, and many economic
indicators in the United States are developing in an unwelcome way. The chart below
shows a snapshot of the overall state of the U.S. economy so far.
1. GDP of the United States decreased by 9.5% in the second quarter on a year-on-year
basis. Since records began in 1947, quarterly GDP has never fallen more than 3%.
2. Employment: more than 50 million people are currently unemployed due to the
permanent closure of businesses, and restrictions continue in many parts of the United
States.
3. Consumer spending: consumer spending, which accounts for more than two-thirds of
the U.S. economy, fell 12.6% in April.
10. The United States (positive):
With the slow reopening of production facilities, the output of manufacturing
industry tends to be stable.
Impact in the UnitedStates Cont.
11. Impact in China
China (negative):
1. The economic growth rate announced by the Statistics Bureau in the first quarter was - 6.8%, indicating that
the economy has been hit hard. This data is unprecedented, and consumption fell by 20% in January and
February.
2. Production can't be sustained, as in February, this is the most serious. Now production has begun to
recover, but demand has not recovered, and domestic demand has not recovered. At the same time, overseas
demand is more worrying.
3. Even if the epidemic situation is under control in the second half of the year or next year, the industrial
chain will shift, and the epidemic may accelerate this pace.
4. With the impact of the epidemic, enterprises are heavily in debt, without effective cash flow support,
making enterprises insolvent. In the first quarter of 2020, the unemployment rate is as high as 5.8%.
12. National survey of unemployment rate from 2018 to March 2020(Wei Chen,
2020)
13. China(positive):
The epidemic situation has
increased domestic
consumption demand, and
the government has more
support for local
enterprises and the rise of
domestic products.
Impact in China Cont.
15. NewJersey : Economic Effects of COVID-19
Along with New York, Connecticut, and other states in the New England area, New Jersey
had/has a strict interpretation of lockdown. This strict interpretation includes that of
curfews, restricted amounts of home necessities available in stores, shorter store hours,
limits on the amount of people in public spaces, etc. The slow reopening of the state has
had negative effects on the economy:
● Small Businesses: approx. 28% of NJ’s Income → economic downturn
● Out of 9 million residents, over 1.5 million claimed unemployment
● Between April and August, employment grew by 12% (The U.S. was 8%)
● Between April and June: economic loss at an annualized rate of 34.6%
● As of October, about 49% of jobs have been regained (The U.S. is 47.9%)
● Rather than an “U” or “L” shape, recovery is a “Nike Swoosh”
● Predicted 5-year regrowth period
16. Georgia: Economic Effects of COVID-19
Opposing that of more Northern States, Georgia had/has a loose interpretation of
lockdown. During the first two months of the Pandemic, like most states, Georgia was in
a strict lockdown. Many Georgia natives, however, did not take this serious. By May,
clubs/bars were open in Atlanta, there was no curfew, no limit on public spaces, etc. This
fast reopening of the state may be due to:
● Inability for the economy to flourish
● Increasing rates of unemployment ( 12.6% as of April 2020)
The fast reopening of the state has had positive effects on the economy:
● Unemployment rate is at 6.4% (U.S. is 7%)
● 65% of jobs have been regained
● Predicted 2 year-regrowth period: less small businesses
18. Federal
- During the covid-19 pandemic, the unemployment rate was at the highest it has been at any
point since World War 2, with the highest being at 14.7%
- Experts believe that the shift to virtual work will change the labor market forever, changing the
way companies are hiring workers which will also impact the unemployment rate.
- “The record-long United States economic expansion came to an end as a result of the COVID-19
pandemic, with forecasts of a deep recession in 2020. The outlook remains highly uncertain, as it
is difficult to gauge the social and economic impact of the pandemic, which will depend on the
success of containing the outbreak and the measures to restart economic activity.”
- “Three stimulus packages were approved by the United States Congress in March to address the
impact on households and businesses. New legislation was also approved in April and June to
improve the effectiveness of the programmes included in the previous three fiscal packages. The
United States Federal Reserve cut interest rates to the zero lower bound, offered unlimited
quantitative easing and deployed old and new policy tools aimed at keeping financial markets
functioning.”
19. Solution: International
- Follow WHO public health guidelines.
- Implement expansionary policy; i.e increasing the money supplied and
reducing interest rates.
- Increase long-term tax revenue by incentivizing the normalization of the
economy; offering stipends and service vouchers.
With increased tax revenue…
- Provide stimulus checks to unemployed and for loathed members of the
workforce.
- Subsidise research and development of a vaccine.
20. Solution: United States (Federallevel)
- Follow CDC/WHO Public Health Guidelines
- Federal Approach to COVID
- Focus on Market Trends
- Increase Human Capital → gov. Training programs, state workforces, etc.
- Focus on Long-Term relief :
- Supplement federal relief efforts
- Lower interest rates on loans
- Making job industry accessible
- Prepare for “online economies”
- Post-Pandemic Economy Prep
- Reskilling programs
- Invest Internationally
- Digitalize workplace
21. Solution: United States (State& local level)
- Follow CDC Public Health Guidelines
- Implement Expansionary Policy
- Support local economies: small business relief, relax regulations to
stimulate local demand, campaign to support community businesses
- State workforce programs
- Keep State Budget Balanced
- Tax Relief
- Infrastructure Investment
22. Takeaways
- Economic volatility is the result of changes in an economy’s ability to
produce and consume goods & services.
- Covid-19, and pandemics in general, slow down productivity- which
causes periods of economic recession.
While Covid-19 has had negative implications…
- We can learn from existing trends and better address pre existing issues.
- Improve health care coverage and infrastructure.
- Prepare for Post-Pandemic Economy/Interactions
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https://www.visualcapitalist.com/economic-impact-of-covid-h1-2020/.
Wei Chen. “Statistics of new urban employment, migrant workers and unemployment rate in the first quarter of 2020”,
17 Apr. 2020, https://m.huaon.com/detail/603497.html.
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24. continued…
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25. continued…
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26. continued...
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