The COVID-19 pandemic has had a severe impact on the world economy. From local businesses to large concerns, every aspect of the economy has been touched by the influence of the pandemic. Unemployment rates are skyrocketing as service and retail jobs lay off millions of workers. Even those people who are fortunate enough to work from home have experienced cuts in their hours and salaries.
Rusty Tweed explains how the challenging conditions of the COVID-19 economy have touched every aspect of life and changed the way businesses operate.
The global airline industry represents $2.7 trillion, or 3.6 percent of the world’s GDP. The airline industry has been devastated by the COVID-19 pandemic, as much of the international and domestic traffic around the world has been halted by travel restrictions and fears of disease. The airline industry may need to be bailed out by governments around the world as the pandemic continues. It may take years before airline traffic and passenger numbers reach the level that they had achieved before mid-March 2020.
Manufacturing firms in some industries, such as food and consumer products like paper products, have been deemed essential but many other manufacturers have been shut down. Auto assembly lines have come to a halt, and other types of manufacturing have also been negatively impacted. When there are not enough goods being produced, the economy suffers from a lack of supply. Demand remains high, so prices will be driven up over time. This can also negatively impact customers who are already experiencing financial problems.
Retail businesses have been shuttered in many areas around the world. Some shops have been able to survive on curbside pickup and online sales. Overall, small retailers have a much greater chance of failing in today’s economy. Even large retailers like JC Penney are declaring bankruptcy due to the lack of customers and the inability to open their stores. It is likely that the COVID-19 pandemic will change the landscape of retail as we know it.
Big box stores like Target, Walmart, and Home Depot have stayed open as essential businesses, and they are gaining an even greater market share. As the pandemic continues, it is the big box store that will succeed.
The hospitality industry, like small retailers, has been hard-hit by the pandemic. Hotels and restaurants have been ordered to be closed. Hotels have been able to host only essential workers and those who have a demonstrated need, as in the case of domestic violence victims and people who need to self-isolate away from their family members but cannot do so at home.
The hospitality sector has let millions of workers go in the United States alone. These workers are receiving disproportionate amounts of unemployment funding, putting a strain on the already overburdened system. Some workers are declining to go back to work even as their restaurants gradually reopen because they receive more money from unemployment and the CARES act than they did when they were working.
While some aspects of healthcare like hospitals treating COVID-19 patients have experienced a great deal of activity, elective surgeries and other ordinary procedures have dried up completely. This means that many healthcare employees like nurses and office assistants have been let go. This sector of the economy is expected to rebound more easily than others, but for the time being, it is in serious trouble.
Grocery stores have experienced a boom never seen before. As restaurants are closed except for takeout and delivery, more people are cooking all of their meals at home. In addition, workers and schoolchildren who normally eat their meals away from home are dependent on eating with their families. Grocery stores have hired thousands of temporary workers to help with the influx of customers.
Some consumer goods have become difficult to find. The manufacturing industry is ramping up its production of paper products, hand sanitizers, and disinfectants, but some of these industries are not agile enough to keep up with demand. Consumers will need to deal with shortages and skyrocketing prices in some areas for many months to come.
At the same time, it is important to understand that frontline employees like grocery store workers are exposing themselves to a serious risk of catching COVID-19. Precautions have been put in place including 6-foot social distancing, mask usage, and limited store occupancy.
Oil and Gas
The oil and gas industries have been hard-hit by COVID-19. The demand for gasoline dipped so low that oil futures were actually negative for a short time. Americans are paying rock-bottom prices at the pump because they are not driving long distances. Some people are only leaving the house to do essential shopping and errands.
The educational landscape has experienced serious upheavals during the coronavirus pandemic. Schools in every state were ordered closed at some point during the spring of 2020, and they moved to a distance learning model. Some schools were better prepared to meet these challenges than others, due to funding and Internet access discrepancies.
K through 12 schools have experienced problems, but higher education has been seriously impacted as well. Students have gone home to complete their distance learning, and university campuses have been closed down. In college towns, the local businesses that depend on students for their revenue have been decimated.
Even though the direct impact on businesses has been devastating, the longer-term prospects of the economy may be shaky. Cities and states are losing their tax base as businesses fail. This means that public funding will be much lower in the years to come.
Prospects for Recovery
Even though some businesses are reopening, it is possible that the virus may resurge in areas that are not practicing proper social distancing. This could result in further closures in the fall and winter of 2020. Rusty Tweed cautions that economies need to reopen carefully and that safety regulations must be followed.
Rusty Tweed via FoxChronicle.com