What is the outlook for our economy?
In the wake of economic reverberations, we are witnessing the adverse side effects, or results of the pandemic.
The adverse effects are supply shock. Pre-COVID-19, everybody was good. Evidently, the economy had been functioning as normal. In the U.S. market economy consumers and producers were determining what was sold and produced. Producers owned what they made and decided their own prices. Consumers owned what they bought and decided how much they were willing to pay. (nbcnews.com)
The news had begun discussing the virus. Corona virus then became COVID-19 and intensified under it's new name. Globally, 333,000 people have died (5/22/2020). Hospital systems have been flooded with patients suffering from COVID-19. Some patients have symptoms some have very mild symptoms, but they have been confirmed COVID-19 positive. The pandemic gave the government no other logical choice except to lock down the economy. (https://www.who.int/emergencies/diseases/novel-coronavirus-2019/)
Now, stay at home work orders are in the process of being removed. Governments that previously inhibited, then prohibited people from going to work, are reestablishing rush hour standards.
Supply is the measure of what our economy collectively produces. The virus single handedly caused a sudden contraction of the labor force. Our ability to produce goods and services was slam dunked. Supply shock.
Inside of a supply shock, policies like those used during the Great Recession function properly. Currently, the secondary shock to consumer confidence, the demand shock, is contained. Fiscal and monetary front responses are keen. The key is that the government doesn't add any additional shocks on top. These could detrimentally damage overall ability to work and produce. The government should continue to function as such. It was mentioned that under another pandemic flare up, the government will not lock down.
Labor force depletion is taking up ground. The labor force participation rate, tapping bottom, is the sum of all workers who are employed or actively seeking employment divided by the total noninstitutionalized, civilian working-age population.
Too many citizens are out of work, subsequently being forced to seek positions they're easily over qualified for. Underemployment is veering out of control. It's the underuse of workers where a job does not use their skills, is part-time, or leaves the workers idle.
Widespread underuse of the labor force is the effect caused by the downcast 20% unemployment rate. The unemployment rate is the number in the civilian labor force divided by the number of unemployed. Everyone without a job isn't necessarily unemployed, at least according to the Bureau of Labor Statistics. To be counted in the unemployment rate, you not only have to be without a job, you have to have actively looked for work in the past four weeks. If you were temporarily laid off and are waiting to be called back to that job, you're still counted. If you've given up looking for work, you're not counted in the unemployment rate.
The supply shock is huge. It's the unexpected event, COVID-19, that changed the supply of products or commodities resulting in an unforeseen change in prices. Supply shocks can be negative, resulting in a decreased supply. Supply shocks can be positive, yielding an increased supply; however, they're often negative. Assuming aggregate demand is unchanged, a negative (or adverse) supply shock causes a product's price to spike upward. A positive supply shock decreases the price.
The supply shock ignited from the COVID-19 pandemic lockdowns. All non-essential employees in the area were ordered by government to work from home and to remain indoors as much as possible. The order was an effort to slow the spread of the virus.
COVID-19 was the coronavirus disease of 2019, when it was first identified. Originally called the "2019 novel coronavirus," the highly contagious disease spread across most parts of the globe. It is believed to be spread primarily by respiratory droplets from infected people. Fever, cough and shortness of breath are hallmark symptoms. Currently there is no vaccine or proven treatment for the virus that may cause severe respiratory disease. Severe typically means pneumonia. Pneumonia requires hospital intensive care and can quickly turn lethal. Many people experience few or fairly mild flu-like symptoms within a week or two. It rapidly surged passed an epidemic. Pandemic is an outbreak of a disease that occurs over a wide geographic area and affects an exceptionally high proportion of the population of the world. Thus, our current state. (M. William, Macroeconomics, 2019, isbn: 9781137610669)
This is the outlook for our economy. We will rise out of supply shock, or fall back into it.
