The coronavirus pandemic has devastated the U.S economy like never before. The economy is now heading for a recession like the rest of the world that reeling under the effects of the pandemic. This pandemic is unparalleled to the likes of which we have seen in a hundred years. The COVID-19 pandemic is causing much harm as it spreads like wild fire across the nations with the number of infected people rising exponentially. To stall the spread of this particular virus, the US and most countries of the world responded by ordering extensive lockdown of the cities and towns and advised people to stay within their homes to ensure their safety and protect communities. The economic fallout due to the lockdown has been disastrous as the U.S recorded a 5% drop in production in the first quarter of 2020 as well as the loss of nearly 39 million jobs.
Joseph F Lopresti agrees with the experts who are foreseeing the worst economic recession of our lifetime. The term recession is scary as it signifies that bad times are about to ensue. Those who are not yet affected may not fully comprehend the terms economic depression and recession, which may hinder their overall understanding of how it is likely to affect them as well as the economy. It is essential to understand the meaning of these words in proper context to truly define the economic crisis that is currently brewingas well as assist in determining how to best respond to it.
The current situation as viewed by Joseph F Lopresti
In technical terms, recession sets in when we experience continuous negative economic growth in two quarters. We have so far recorded one while awaiting the other to happen in just a few days, which means we are now going through an economic downturn, but a recession is inevitable. Ups and downs are a natural occurrence as it pertains to any healthy economy. Therefore, an economic downturn can be viewed as a necessity as it assists in the alternating growth and contraction in economic cycles that help maintain steady economic growth.
The downturn that we are experiencing is different due to the fact that it was triggered by our response to COVID-19 rather than the result of the natural economic cycle. The closure of non-essential businesses coupled with the lockdown orders and staggering unemployment rates have led to the lowering of spending by consumers in every category except essential items. It will take time to level off the pandemic. The economic recovery is largely contingent on discovering a vaccine or finding an effective cure. As the lockdown eases and businesses start reopening, some experts are optimistic about the swift reversal of the current downward trend.
Recession is different from depression
Recession– A recession is the economic phase resulting from economic contraction for six consecutive months measured in terms of GDP or gross national product. It is the gross production of goods and services by a country that includes basically anything and everything. The recession is over when the GDP comes back to levels recorded before the recession.
Depression – While a recession is normal in any economy as it is part of the economic cycle, depression is a far less and uncommon phenomenon that lasts longer. Barring the Great Depression of the 1920s and 30s, there has not been an event much like this one in the past 166 years. Whereas during this time, it has been recorded of 33 instances of recession. Recessions maylast for months. However,economic depressions can last for as long as years. Going by the signs of the current times, it appears to be more of a global depression,which is much harsher than typical recessions, and is more likely to have long-lasting impacts on society and the economy.
What the US government is doing to bolster the economy?
The US government’s $2 trillion stimulus package released in March was the first attempt at countering a recession, but the results will take time to show up. The economy relief law includes a loan program for businesses to help them in paying their employees. Additionally, a stimulus payment of $1,200 for most taxpayers was initiated in attempts to support individuals and families affected by the pandemic. In addition to the government working on a second stimulus package, the Federal Reserve has mentioned lowering interest rates to close to zero for the foreseeable future. By doing so, it could lead to more people borrowing, thus, more spending, which could, in turn, improve the economy.
On the scientific front, scientists and doctors are racing towards developing a cure or vaccine for COVID-19. Despite several companies like Moderna, Pfizer, Novavax, and the duo of Oxford University and AstraZeneca working against time to get the vaccine, it could still take a year or more before acquiring something effective and substantial that is readily available for all.
Individuals who desire to understand their place and role in improving the economy should first and foremost eliminate any existing fear of uncertainty. It is recommended that people should begin to spend their money, making certain that they don’t spend beyond their means. In doing so, the money will begin to circulate in our economic system, which can help fuel the much needed economic growth as well as assist the nation in turning the corner. Taking baby steps is the way to encourage others to start spending, which is the only way to stimulate the flagging economy that has reached unprecedented depths that no one has ever thought of.