Written by Mariam Safirta
Coronavirus disease (COVID-19) is an infectious disease that causes mild to major respiratory issues. It quickly spread and became a worldwide pandemic influencing the lives of all human beings (“Health topic: Coronavirus disease (COVID-19)”, 2024). The pandemic has reshaped economic landscapes, revealing vulnerabilities, and prompting shifts in financial strategies and policies.
The global lockdowns due to COVID-19 triggered immediate disruptions in production and supply chains. Consumer demand turned away from in-person services, which caused supply shocks and inflationary pressure as suppliers were unable to meet the increased demands (“Issue Brief: Supply Chain Resilience | CEA”, 2023). One way to assess the extent of global supply chain disruptions is the Global Supply Chain Pressure Index (GSCPI). According to studies done by the Federal Reserve Bank of New York, there was the rapid growth of the GSCPI in the first year of the pandemic, peaking in April 2020 and again in December 2021(“Issue Brief: Supply Chain Resilience | CEA”, 2023). These peaks highlight the intense strain on supply chains, which normally maintain a GSCPI below zero. Stock market volatility, measured by the degree of price fluctuation over time, is also heightened, which indicates increased risk and sensitivity to market conditions. The stock market showed negative or diminishing returns during COVID-19, contrasting with pre-COVID-19 statistics from January 1, 2013, to December 31, 2019 (Basouny et al., 2021). Negative and diminishing returns signify investment losses, where returns fall short of the initial investment amounts.
As a significant amount of jobs transitioned to remote work, and the stock market experienced substantial declines, many people faced financial hardship and required aid (“Economic Impact Payments”, 2024). The United States government released the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which aimed to provide direct financial support to mitigate economic strain. Under the CARES Act, eligible adults received up to $1,200, with an additional $500 provided per qualifying child. For instance, a family of four could receive approximately $3,400 in direct financial relief. Additionally, people with an adjusted gross income (AGI) of up to $75,000 were eligible for full payments, with benefits phasing out for higher-income earners (“Economic Impact Payments”, 2024). The CARES Act also introduced additional relief programs specifically designed to support lower-income households, addressing the disproportionately severe impact of the pandemic on economically vulnerable people (“Economic Impact Payments”, 2024).
The COVID-19 pandemic precipitated significant shifts in employment and labor markets across various sectors (Chandler et al., n.d.. According to the National Institute of Health, labor supply fell by about 6% in the United States. In comparison, the unemployment rate surged to 3.611% in March 2020 (“The impact of COVID-19 pandemic on the world’s major economies: based on a multi-country and multi-sector CGE model”, 2024). Increased unemployment has many implications for individuals and families, but also in smaller communities and larger economies. For example, in regions with elevated unemployment rates, economic output tends to decline, reducing aggregate consumer spending. This contraction in demand limits the production of goods and services, which can lead to further job losses, perpetuating a cycle of economic decline. Due to the decrease of Gross Domestic Profit (GDP), unemployment rises, causing hardships for many people (Tardi, 2024).
The economic shifts induced by COVID-19 lockdowns exacerbated wealth gaps and the disproportionate impact on vulnerable populations. Research from the National Institutes of Health indicates that individuals earning less than $25,000 per year, particularly those between the ages of 18 and 64, faced heightened adverse effects from these economic disruptions. (Impact of COVID-19 and Socioeconomic Status on Delayed Care and Unemployment, n.d.). Due to these disparities, governments implemented various relief measures, such as stimulus checks, aimed at stabilizing the financial security of affected populations (Alfano et al., 2022). Additionally, strategies like investment diversification emerged as essential tools to promote economic resilience. Diversification, spreading investments across multiple sectors, mitigates risk by ensuring that if one sector underperforms, others can help offset potential losses, thus fostering more balanced economic stability. For example, if all life depending on one sector, and that industry faced issues, everyone would be greatly impacted. However, spreading production across various industries, potential losses can be avoided, and people are less impacted in their daily lives (Gupta, 2023, 362-367).
In 2021, an Executive Order was signed to mandate a comprehensive review of federal agencies, focusing on the origins of their supplies and evaluating the associated supply chains and processes (Issue Brief: Supply Chain Resilience | CEA, 2023. In order to decrease unemployment, the U.S. government sought to limit reliance on outsourcing and re-shore jobs to stimulate domestic employment. A key finding from this review revealed that 88% of semiconductors and 60% of batteries were sourced internationally, reflecting a “decline in US manufacturing capacity over time” (Issue Brief: Supply Chain Resilience | CEA, 2023). Repatriating these production capacities could create substantial job opportunities and reduce unemployment domestically.
On a global scale, governments collaborated to form strategic international partnerships aimed at revitalizing the global economy. For example, the United States launched the Indo-Pacific Economic Framework for Prosperity (IPEF), designed to establish emergency communication channels, secure jobs, and decrease supply chain disruptions. The framework aimed to include multiple countries in creating more efficient, sustainable, and cohesive communications across industries used for production and for development of countries across the world (Indo-Pacific Economic Framework for Prosperity (IPEF) | United States Trade Representative, n.d.).
The COVID-19 Pandemic has had enduring repercussions on healthcare systems and daily economic stability. Inflationary pressures on essential goods, rising unemployment, and negative stock market returns underscored the pandemic’s extensive economic toll, leaving the global economy in a protracted recovery phase (Casselman, 2024). However, the United States and the global community are advancing toward economic stabilization through targeted government intervention and various initiatives.
References
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