Unless you were living on a secluded island for the past three months, you’ve undoubtedly heard about the coronavirus (COVID-19). Governments across the globe are instituting mandatory shutdowns and enforcing social distancing. These measures will save lives, which is fantastic, of course. It’s becoming more evident by the day that these measures will cause significant economic pain, once the pandemic subsides and people can return to their regular lives.
While nobody has a crystal ball, most experts think that we will be in a recession once commerce resumes. Here are three ways the economy will likely suffer at the end of this lockdown period.
The Coronavirus Will Cause High Unemployment
With 3.3 million jobless claims filed after the first week of lockdowns, the unemployment rate now sits at 5.5%. This number is likely to rise significantly as more people get laid off and file for claims. There are already anecdotal rumors of overloaded unemployment websites and phone lines that have so many callers that it’s impossible to get through.
If the impacts of the coronavirus were short-lived, then everybody may be able to return to work. However, social distancing measures are officially in place at the Federal level until the end of April. There’s a good chance the government will extend those again. As the shutdown drags on and businesses fold, those temporary layoffs could become permanent.
Expect to see unemployment skyrocket and take some time to come back down to more reasonable levels.
There Will Be Stock Market Swings
Since this situation is so volatile, the stock market is likely to react to each passing day’s numbers differently. For many companies, this shutdown has impacted the tail end of Q1 earnings, so those might be decent. However, if the lockdowns continue into Q2 and beyond, we could see many companies reporting very disappointing earnings.
While the initial rout of the coronavirus-induced stock market appears to be over (for now), expect wild swings as new information emerges. Depending on how volatile these swings are, it could cause problems for our economy.
Many of the relief packages that members of Congress and governors have put together delay payments but do not dismiss them. For example, many cities have enacted laws that make it impossible for landlords to evict renters who do not pay.
However, these protections are temporary, and none of them negate what renters owe. Depending on how long these lockdowns last, it’s not inconceivable that all across the country renters and mortgagees could suddenly find themselves owing the past three months of rent, without having had a job to earn that money.
If this happens, we could see financially-distressed consumers who are already wary after having been cooped up inside. Much of the economy’s discretionary spending will dry up.
Social Distancing In The Coronavirus Age Will Get The Economy Running Faster
A prolonged shutdown will wreak havoc on the economy. The sooner we can contain the virus and then re-open businesses, the better off we will all be. Not only will we save many more lives by doing so, but we’ll minimize the economic damage as much as possible. If you like this kind of quick engaging content check us out at Sovereign Media Distribution for more publications on financial matters!