Even as we’re in the midst of fighting the spread of COVID-19, we’re worried about what the future holds for us. Economic researchers are just beginning to measure the far-reaching impact of the novel coronavirus. Here are 10 financial facts that reveal the impact of COVID-19 on the U.S. economy.
Abandoning social distancing measures to preserve the economy could end up costing the U.S. more. Returning to normal life too early could cause a spike in COVID-19 cases, which would exponentially increase the strain on the economy. Abandoning social distancing measures by Easter would have resulted in a projected 7 million additional hospitalizations. For those cases, it would cost up to $161 billion for hospitalization alone.
The passage of the Coronavirus Aid, Relief and Economic Security (CARES) Act on Wednesday, March 25, 2020, marked a historic occasion in the U.S. economy. The $2 trillion CARES Act is the largest stimulus bill passed in our country’s history. But there could be more to come, suggested House Speaker Nancy Pelosi, as the country deals with a crisis unprecedented in our lifetimes.
An early look at the first few weeks of partial shutdown in the U.S. is projecting a GDP decline of 10% and an estimated total financial loss of $2.14 trillion. The research from the Mercatus Center predicts the impact of the shutdown on different industries based on their degree of digitization, and the results showed a decline of 5% per month during the partial shutdown.
The $260 billion cash infusion is designed to both aid individuals already collecting unemployment insurance and also open the benefits up to others affected by the coronavirus pandemic. Under the CARES Act, the expanded unemployment insurance program also covers self-employed individuals, independent contractors, part-time employees and individuals who had to quit work for reasons related to COVID-19.
Between sick leave and short-term disability claims, employers are expected to pay $23 billion towards coronavirus-related employee leave. For large companies that are not protected by the Families First Coronavirus Response Act (FFCRA), this could take a huge toll. Now is the time for large companies to evaluate the benefits they have in place to support employees so they can return to work.
Although official numbers have yet to be released, the unemployment rate today is likely at 13%, the highest it’s been since the Great Depression, research suggests. The number of individuals filing for unemployment continues to rise. It is estimated that there are 16 million people currently without work in the U.S.
In response to the stay-at-home orders, households rushed to stockpile necessary home goods and groceries, leading to a dramatic increase in household spending. Between Feb. 26 and March 11, household spending increased by approximately 50%.
The coronavirus pandemic spurred dramatic drops in the stock market in March 2020. Circuit-breaker safeguards designed to slow-down panic trading were triggered 4 times between March 9 and 18, two of which are among the largest single-day drops in the Dow Jones Industrial Average.
Goods-producing industries only account for 20% of the U.S. GDP. To spur economic growth during and after the coronavirus pandemic, the U.S. economy will have to pivot in favor of the other 80%, which is composed of services trades. These include the exchange of information, knowledge and other digitally-delivered services which can carry on remotely during a shutdown.
Economic recovery for the U.S. and other global powers heavily depends upon the success of current social distancing measures. Research shows that a resurgence of the virus due to premature relaxation could put off the U.S economic recovery until 2023, but successful measures now could have the economy back up and running by the end of 2020.