The Covid-19 pandemic has had a devastating impact on so many things. First, there were worries about its effects on health as millions became infected. Then there were job losses and shelter-at-home orders — dealing hammer blows to the economy. As the coronavirus crisis drags on, you may be worried about how the global health pandemic and the response to it will continue to affect the economy.
No one knows when the coronavirus pandemic will end. Many people hope that a vaccine will soon be available, and life can get back to normal. But until then, the best ways of curbing the spread of Covid-19 is social distancing, wearing face masks, and washing hands frequently.
This article contains a snapshot of the Covid-19 economy in August. This ‘snapshot in time’ gives insights into what we can expect in the weeks and months ahead.
The Effect of COVID-19 on the Economy
There is no doubt that the coronavirus crisis whipped through the economy, leaving a trail of destruction in its path. The terrible effects on the economy have been worse than the health impact. The whole country was put into lockdown, affecting travel, jobs, shopping, leisure, education, and entertainment.
What has happened to the economy since March, when lockdown restrictions came into force? Here’s a brief overview of the effect of Covid-19 crisis on the economy up until August:
- Substantial job losses meant that over 32 million people lost their job, and unemployment peaked at 14.7% in April.
- Industries such as retail, hospitality, leisure, and education took the brunt of the job losses.
- Sales of new cars fell by nearly half, and mortgage applications dropped by 30%.
- The pandemic resulted in a recession — the largest since the Great Depression of the 1930s.
Millions started claiming unemployment benefits for the first time. Those lucky enough to have a job started working from home. Then parents took on the role of teacher and breadwinner when schools shut down. And we all go through the daily rituals of hand sanitizing and putting on face masks when out in public.
Covid-19 Economy Snapshot in August
Now that we’re a few months down the road since the Covid-19 outbreak, where’s the economy at now? Are there any glimmers of hope at the end of the dark tunnel? Please read on to find out.
Here is a brief look at the effect of Covid-19 on the U.S. economy at the end of August 2020:
- Nearly 6 million have been infected with Covid-19, and cases continue to rise by more than 1,000 daily.
- Fewer people infected with Covid-19 require hospital treatment.
- Since the start of the pandemic, more than 1 million people every week claim unemployment for the first time.
- Unemployment figures continue to fall each month as more businesses reopen.
- Gross Domestic Product (GDP) in the 2nd quarter of 2020 fell by 31.7%.
- Research shows that people are growing more pessimistic about how leaders handled the virus. Pew Research found that nearly 70% of people think that state governments lifted restrictions too quickly.
- Disposable income fell by 1.4% in June.
What is happening in the U.S. is similar to economic crises in other countries. The Covid-19 pandemic has plunged most counties into recession. Unfortunately, there is no end to the health crisis in sight. So, no one can say for sure the overall effect it will have on local and global economies.
The Covid-19 Economy in August: Reasons for Hope
There could be some reason for hope. Many analysts say that the cause of the current recession — a health crisis —is different from previous recessions. Structural problems in the economy caused the Great Depression of the 1930s and 2008 Recession. So, we can safely hope that any damage to the economy should be temporary and short-lasting.
- Consumer spending is back to pre-Covid-19 levels
- House sales started to rise in June. However, there is still uncertainty in the housing market due to worries about future outbreaks.
- The overall unemployment rate has dropped every month since April.
- Manufacturing output continues to increase.
- The number of people claiming unemployment continues to decline.
- Mortgage rates are at an all-time low, meaning it’s never been cheaper to buy a house.
Of course, it’s too early to say when we can expect an upturn in the economy. Much has to do with how quickly businesses can reopen again, when global travel returns to normal, and if there’s a second surge in Covid-19 infections.
Covid-19 Stimulus Payments to Boost the Economy
Stimulus payments helped many folks get through the first few months of the Covid-19 pandemic. Here’s a brief snapshot of how economic impact payments have helped keep the economy afloat:
- Under the CARES Act, most folks in the U.S. got a Covid-19 stimulus check for $1,200.
- The government put a moratorium on evictions for people who can’t pay rent.
- Anyone claiming unemployment received an extra $600 a week in benefits.
- Free Covid-19 testing was made available to everyone.
- The self-employed and “gig” workers could apply for unemployment for the first time.
- There was a temporary suspension of student loans.
Since the start of August, many of the provisions in the CARES Act have expired. Most politicians realize that more help is needed to help bolster the economy in August and beyond. So, for the past few months, there have been murmurings of a second round of Covid-19 stimulus payments.
What do we know about a second stimulus check?
- The House of Representatives approved the HEROES Act in May — however, it didn’t go any further.
- Congress held frantic talks in August to get approval for the HEALS Act — but, once again, neither party could agree on the final proposal.
- The President signed executive orders in August to provide extra stimulus to the economy and help the unemployed.
It seems that politicians have the appetite to pump more cash into the economy. Only time will tell how much any new stimulus package will be worth and how it helps the economy recover from Covid-19.
The Covid-19 Economy: A Takeaway
The good news is that economies have always recovered from great recessions. And politicians have learned lessons from the past on how to boost failing economies. With the current Covid-19 downturn, there is hope that the economy recovers fast as businesses start to reopen.
Are you grappling with the day-to-day pressures of making ends meet? Please check out some resources on financial aid you can find near you. Or, you could find out how to start working from home during the pandemic.