The Essay On Covid-19's Impact On Global Economy, Unemployment, And Inflation.

Overview of Covid-19 Pandemic

In 2020, on March 11, WHO (World health organization) announced covid-19 is a global pandemic. Since then, many things have happened in the past two years, and it is still happening in many countries worldwide. This crisis has affected the lives and livelihood of many individuals, it affected businesses, society, and no one knows what next. As of 2022, (Covid-19) coronavirus is an ongoing global pandemic disease. Its impact has broadly affected the global economy, culture, general society, ecology, politics, etc. It is the second-largest global recession globally, and it decreases business activities due to lockdown. The stock market also faces the largest decline in its history. This pandemic is the biggest factor in the global energy crisis and food crises in 2022. Before the pandemic, global economic conditions slowed down stimulatingly, covid-19 is pandemic ae the main cause of economic disruption globally, and it is considered the worst recession since the great depression. Statistics show that in 2020, global working hours were lost by 8.8 %, equal to 255 million full-time jobs. This pandemic has put employment informal at risk because of a lack of protection against lockdowns and illness. With continued monetary and fiscal policy support, the United States of America and China experienced great growth in 2021. According to the report of the World Bank global economic prospect, next to a strong rebound in 2021, the economy of the global is noticeable ingoing slowdown due to fresh variants of covid-19 variants and a rise in income inequality, debt, and rise in inflation endangering the recovery in developing and emerging economies globally. Preceding the conflict, the world is recovering from the pandemic, and it is predicted to continue in 2022 and 2023. Due to continuous vaccination efforts, supportive macroeconomics policies, and favourable financial conditions, it is becoming possible. This paper will shed light on the unemployment situation from February 2020 through December 2021 and inflation during various business cycle phases. It will further shed light on fiscal and monetary policies during pandemic times.

The global unemployment rate in 2020 is reached 6.5 %, with 1.1 % up from the previous year. 33 million people increase the unemployment range of the world are unemployed, reaching 220 million. According to (CES) current employment statistics and (BLS) bureau of labour statics, nonfarm payroll employment fell by 9.4 million jobs in 2020. It is the largest jobs decline in the current employment statistics series history. All economic activities in 2020 are declined due to the covid-19 pandemic, including pandemic-driven behavioral and social changes and business activities based on government restrictions. Loss of jobs is common during these tough times; it is greatest in industries because many people are involved. The hospitality and leisure industry suffers a large number of job losses. Although 2020 is considered extreme job losses, pandemics affected every industry differently, resulting in significant unpredictability in employment impacts. The numbers boomed rapidly and continuously after the first covid-19 virus was identified in January. (CDC) the U.S. Centres for Disease Control and Prevention, on January 21, announced the first U.S. case. In March 2020, local and state governments will start imposing restrictions on responding to the pandemic. This restriction leads to immediate job losses.

Impact of Covid-19 on Global Economy

1.7 million Jobs were lost in March, and this job loss surpassed the employment decline in 1945 after World War II. In February, it was designated as the month of overall economic activity at its peak, marking the beginning of the economic recession. In April, employment was dropped by 20.7 million jobs, which is the largest decline of jobs in the history of CES, which formed in 1939. After that, job recovery started, with 2.8 million in May and 4.8 million marked as nonfarm employment growing by June. In statistics, May, June, July, and August are the fourth-largest job gains in the history of CES. Again, later that year, covid-19 cases surged back then. Most local and state governments started imposing restrictions, and the year ended in December with employment loss.

In 2020, women's employment was fallen by 5.2 million. In March and April, the nonfarm employment of women dropped by 12.2 million, accounting for 55% of the total employment decline. In 2020, all private sector employees’ average weekly hours will be increased by 0.4 hours to 34.5 hours. After reaching the peak in February 2020 in the Leisure and hospitality sector, 8.2 million jobs were lost in March and April. By the end of that year, 4.4 million jobs are recovered, almost 54%. Government employment jobs declined by 1.3 million in 2020, and employment in the health and education sector fell by 1.2 million in 2020. 2, 18,000 jobs were lost in March and 2.6 million in April during this time. Employment in social assistance has declined by 7, 01,000 in 2 months, child, day-care services sector, has lost 3, 73,00 jobs. Employment in family and individual services has fallen by 2, 51,000 in March and April. Private educational services employment lost 5, 33,000 jobs in just 3 months. Employment in business and professional services jobs are falling by 8, 60,000 in 2020. And these industry jobs are loosened by 2.4 job losses. In the manufacturing sector, jobs are lost by 5%, retail employment is fallen by 3%, and in the month of March and April, employment in the motor vehicle sector has fallen by 19%. The unemployment rate in December 2021 is 3.9%; the general US unemployment rate during a pandemic is low but pre-pandemic. In 2020, the global unemployment rate will reach 6.5%, and the total number of unemployed people is increased by 33 million, reaching 220 million.

The business cycle is the periodic evolution and nation's economic decline, its GDP measures that. The government is trying to manage the business cycle by spending, lowering and raising taxes, and adjusting interest rates. Individuals are affected by the business cycle, from investing to job-hunting.

Figure: 1

Source: https://www.businessinsider.in/finance/news/business-cycles-chart-the-ups-and-downs-of-an-economy-and-understanding-them-can-lead-to-better-financial-decisions/articleshow 

Every business cycle is bookended by the economic growth of a sustainable period, followed by a sustainable economic decline period. The business cycle goes throughout in life cycle through four stages that are; expansion, peak, contraction, and trough.

GDP of U.S is declined 9.5% approximately in the 2^nd quarter thus consumers sheltered in place, and business closed their doors.

• Income of personal increases during the shutdown, but businesses and factories are shut down, and output was intended to fall.
• Federal relief legislation reserved for households could not avoid economic activity from decreasing.

Impact of Covid-19 on Unemployment

Summer of contained demand- Retail sales had recovered by 97% by the end of June at their pre-shutdown level. In recollection, it is observed that increases in the saving rate of households, scaled to 33% in April month, created a surge in consumer demand.

• Partial recovery of the labor market is expected, unemployment remains high, the economy reopening has created new jobs in the market, and one-third of workers were placed off past spring.
• Manufacturing activities are climbed speedily through summer when factories are reopened, approximately regaining 45% of the sector.

Tilted unemployment numbers- (UI) unemployment insurance privileges timely indicator of economic distress and have claimed to be the most reliable historically.

• According to the reports of states total of 49 million new unemployment insurance claims and business and household, surveys estimated that 14.5 million population is closer unemployed.
• Workers who filed UI are enclosed under PPP (paycheck protection program); this allows payrolls during shutdowns.

Pandemic early affected the economy of the U.S. and put in recission in 2020 February. These crises put the economy of the U.S stock market into bear market territory in March. The unemployment rate in the U.S. was 14.7% in April 2020, and it is the highest number since the great recession and up from 3.5 % in February 2022. 3.8% unemployment rate was recorded in March 2022. U.S monetary policy fed's stimulus measures have fallen under three basic categories: loans and assets purchased, regulation changes, and cut-rate of interest. Interest rates are cut twice during 2020 march- 0.50%, then 1.00%, federal funds rate cut its benchmark.  

One of the most modest asset-purchasing plans was the QE program, in which the Federal Reserve buys directly from Mortgage-backed securities (MBS) and U.S. Treasuries. It is the program that started during the great recession, and it was restarted on March 15, 2020. The Federal Reserve started reducing the asset purchase in late 2021, known as tapering. In Dec. 2021, Jerome Powell announced (FOMC) a Federal open market committee definite to quicken tapering of purchasing new bonds in responding to rising inflation and solidification of the economy. $120 billion per month purchases are done. The Federal reserve immensely lengthened repo operations by $ trillion, which added $500 billion later to ensure money market liquidity.

In addition to purchases of direct assets, the Federal Reserve sets new offering programs as part of the Economic Security Act and coronavirus aid relief. (ESF) treasury department's exchange stabilization fund is also one such direct asset.

This program was launched to help small businesses on 2020 April 4, in the show with CARES Act. This program aims to lend money to the bank, and then banks lend money to small businesses through PPP and the program ended on 2021 July 30.

Fed created (PMCCF) to ensure businesses get credit by buying corporate bonds. And (SMCCF) also bought up bonds from corporate and exchange-traded funds bond (ETF) in the secondary market.

Created on March 23, 2020, fed aim was to revive alternative programs for the great recession. They took (ABS) Asset-based securities as collateral and made up an initial $100 billion in loans to organizations. The program stopped making new loans on 2020 December 31.

This program sets up an SPV in purchasing up to $600 billion in medium- and small-sized business loans. Under this policy plan, the Federal Reserve buys 95% stake of every loan amount, with the bank keeping only 5%. After that, fed stretched this program to non-profit corporations that don't have donations larger than $ 3 billion. This program ended on January 8, 2021.

Business Cycle Phases

This program will be launched on 2020 April 9. This program purchased up to $500 billion of notes of short-term issued by:

• District of Columbia and 50 states
• Countries having at least 5,00,000 people
• Cities contain at least 2,50,000 people
• Entities of multistate (compact between two or more states as an entity of fed)
• Up to two revenue bond issuers, like utilities or airports

Under the CARES Act, the treasury department made $35 billion in SPVs in initial equity investment. They stopped purchasing notes on 2020 December 31.

This program was created on March 17, 2020, and it ensures the market stays liquid by purchasing short-term debt known as commercial paper. This program was run during the great recession when the commercial paper market dried up.

In March and April 2020, the U.S. government has launched one supplemental package and three main relief packages.

First relief package was towards the response of supplemental appropriation and Coronavirus preparedness Act, 2020. Funds of $8.3 billion were allocated to do

• Research for vaccine fund
• Giving money to local and state governments in fighting against coronavirus.
• Allocating funds for reducing the spread of the virus overseas

(FFCRA) the Families First Coronavirus Response Act was signed on March 18, 2020. This relief budget includes the following things;

• Cost waivers and funding for making Covid-19 free testing for everyone.
• Provides $1 billion in extra insurance money for unemployment states and gives loans for funding states of unemployment insurance.
• Mandatory for companies to have less than 500 employees, provide paid sick leaves to employees suffering from virus, and provide extra credit facilities to overcome from covid-19.
• Families who depended on school free lunches, proving money to these families due to school closures.

This is the largest relief package signed on March 27, 2020. It is also considered as largest relief package in the history of the United States and it is known as Coronavirus Aid Relief with the amount of 2.3 trillion.

• $600 additional unemployment per week till July 31, 2020.
• Universities and schools get $40 billion
• State and local governments get $150 billion
• Approximately $150 billion for healthcare providers and hospitals
• $500 billion to those companies that are affected by the pandemic
• Direct cash payment of $1,200 per person, plus per child $500.
• Development of unemployment benefits that include gig workers, furloughed people, and freelancers till December 31, 2020. And many more.

It is a supplementary package, and it was signed on 2020 April 24. Its major part is spent on PPP and EIDL and added funding for covid-19 testing. PPP is modified by the pay check protection program flexibility Act 2020.

Its estimated value was 900 billion relief bills, and it is attached to the main omnibus budget bill. Its main objectives include $600 direct payments per person and unemployment benefits expanded to eleven weeks. $325 billion provided for small business loans, emergency rent assistance of $25 billion, and CDC extension moratorium from Jan 2021 to Aug 2021. Along with that $69 billion were provided for public health measures.

American Rescue Plan Act 2021, President Biden signed this law on March 11, 2021. It implements a $1.9 trillion package of relief proposals and Stimulus. Some major points of the plan were raising the workers' minimum wages to $15 an hour. $350 approximately of the total fund is allocated to local and state governments.

Conclusion 

Hence, it can be more than millions of people in the United States and worldwide in March 2020 entered the lockdown. Necessary steps were taken to bring down the coronavirus outbreak. The (IMF) international monetary fund estimations that the economy of the world is declined by more than 3% in 2020, in 2021, 5.9% growth, and it will grow by 4.9% in 2022. Vaccinations have helped slow the virus's spread; worldwide, vaccinations have helped reduce the effect of coronavirus. The government of the U.S brings various fiscal and monetary policies during a pandemic. Major Stimulus and relief packages are made to help all people in the nations; this also helped in U.S economy rebound. U.S congress has passed many bills to help in financial downfall due to the covid-19 crisis. Coronavirus Aid relief, pay check protection program, and economic security (cares) Act are passed in 2020 march. Governments of the world are collaborated with WHO (world health organization) and other partners like UNICEF is outbreaking the cause of Covid-19, and taking necessary steps to overcoming from all the situation, proper sanitisation, wearing mask, and social distancing like things has helped people in large number and also reduces the effect of covid-19 situations. UNICEF ensures essential support by providing necessary health services equipment in whole world. In these way countries all around the world are overcoming from worst economic crises. 

Impact of Covid-19 on Inflation

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