The fallout of the COVID-19 pandemic could cause a major economic slowdown, with the effects expected to ripple throughout the second quarter of 2020. However, just how bad things can get—and how long it will take the economy to snap back—will depend on critical measures from our leaders in the coming weeks and months.
Millions of Americans have already lost their jobs, at a pace that economic experts believe has quickly surpassed the losses during the worst weeks of the Great Recession that lasted from 2007-2009. Some experts believe the U.S. could lose 37 million jobs. Pandemics, due to their very nature, tend to have negative impacts on the economy. And unfortunately, the coronavirus is not your typical pandemic.
Negative economic impacts of the COVID-19 pandemic
As Forbes points out, the U.S. stock market is not the economy but generally a reflection of the economy. As anyone who has checked their 401(k) balance since coronavirus began to spread globally can probably attest, the economy is not exactly doing great right now.
There are four basic ways in which the economy can take a hit from a pandemic. First, there will be disruptions in the supply chain, which we initially saw with the panic hoarding of basic supplies such as toilet paper and hand sanitizer. Next comes the loss of a viable workforce, due to those who are sick or symptomatic.
The third way a pandemic hurts the economy—and it’s been the biggest impact we’ve seen so far—is the indirect effect of quarantines and social distancing. This includes travel restrictions, the closures of restaurants and retail businesses, schools, workplaces, and so on. Finally, as a result, the economy becomes crippled from the combination of individual income loss and small businesses struggling to keep their heads above water.
The stagnating economy might not end soon
The U.S. is falling behind other countries in terms of pandemic response, local and state government officials fear.
John Deskins, director of the West Virginia University Bureau of Business and Economic Research, believes that there is too much uncertainty to make a judgment call just yet, though he said, “This has the potential to be one of the deepest recessions that we had in decades.”
The overall length of a government shutdown will determine how devastating it will be on the economy, and some like Deskins believe that if the virus is contained quickly and people can get back to work quickly, the stock market could recover within a year. But the longer this pandemic continues, the longer the U.S. stock market will take to recover and the more likely it is that we’ll experience a global recession.
In other words, how quickly the United States can contain the virus, combined with the government response to those impacted, will ultimately define the economic trajectory.