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Impact of Covid 19 on the US Economy

Covid 19 was initially recognized as corona virus that erupted in Wuhan China that led to a

pandemic globally. In the year 2020 Covid 19 shook the economic growth of in the world. The

most advanced economy in terms of GDP, US economy, was also affected negatively and led a

recession. First and foremost, delay or ignorance to define the factors that led to the spread of

Covid 19 and people were not decided to obey the “stay at home” prevention and control

requirement. Secondly, there was no adequate information provided by policymakers about the

virus. In 2020 Covid 19 led to a reduction in nominal gross domestic product (GDP) by almost

3.4%. However due to the structural, characteristics of the US economy the recession was below

average. Tourism, healthcare, health and financial sector were among the most affected sectors in

the United States. The main economic sectors being affected led to negative impact on gross

domestic product GDP, millions of businesses and their suppliers closed down and tens of

millions of workers were rendered unemployed. Financial markets were also affected due to a

collapse in share prices and reduction in foreign investments.

Without doubt, the most susceptible economic sectors were affected by the pandemic

hence a reduction in the gross domestic product (GDP) by about 3.8 % in 2020. For instance,

according to the World Tourism Organization (UNWTO), tourism which is a major contributor

of the economy reduced arrivals internationally by 73% in 2020 (Rodousakis, Nikolaos and

Soklis 2). Tourism plays huge part in employment and growth worldwide in the recent past, the
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effects of reduction in tourism activities during the pandemic are huge on most economies

nationally. For instance, before the pandemic, tourism was responsible for 10.4% of worldwide

GDP. In addition, UNWTO recognized that in 2019 tourism contributed receipts of USD 193.3

billion and USD 76.1 in 2020, leading to a reduction of 61%. Consumption contributes 70% 0f

the US GDP, but it has reduced as businesses close.

According to Gharehgozli, Orkideh et al business closure is often caused by reduction in

consumption due to households reducing and postponing main purchases as they worry about

finances and the fate of employment (561-573). In the US, investments comprise of 20 % of

GDP and businesses are foregoing future investments due to the unpredictable events caused by

Covid 19. Music, sports, entertainment and restaurants constitute of 4.2 % GDP and their closure

has disrupted the economy because supply chain industries will have to cease business due to

prediction of reduced demand. Business closure caused by factories not carrying out production

has led to unemployment.

In July 2020, unemployment rate had risen from January the same year from 3.6% to

10.1%. People lost their jobs during the pandemic and this led to another round of a decline in

incomes and consumption levels. In United States, banks, railways, hotels, restaurants and films

went to a verge of bankruptcy and rendered millions of workers unemployed. When jobs and

incomes fall, consumptions and savings also fall. High income earners reduced spending at

businesses producing nontradables causing the businesses to lay of some of their employees.

Since some spending has to continue, with the unemployment status people are left with no

option but withdraw savings and past deposits from banks and financial institutions. Generally, a

recession in economy follows the downfall in employment rate.

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Providing liquidity to businesses may not uplift employment to levels it was pre-Covid

19 but policymakers have to come up with new ideas to promote sustainable recovery from the

pandemic downturn. This can be done by inventing ways in which workers would pursue new

jobs in productive sectors such as online working sectors.

The United States government has been inventing strategies such as stimulus packages

and employment in different monetary policy tools to mitigate the economic downfall.

Works cited

Gharehgozli, Orkideh, et al. "Impact of COVID-19 on the Economic Output of the US

Outbreak’s Epicenter." Economics of Disasters and Climate Change 4.3 (2020): 561-573.

Rodousakis, Nikolaos, and George Soklis. "The Impact of COVID-19 on the US Economy: The

Multiplier Effects of Tourism." Economies 10.1 (2021): 2.

Economic Impact of Covid-19 Pandemic

https://www.researchgate.net/profile/Shohini-Roy/publication/343222400_ECONOMIC_IMPA

CT_OF_COVID-19_PANDEMIC

COVID-19 Pandemic, Oil Prices, Stock Market, Geopolitical Risk and Policy Uncertainty Nexus

in The US Economy. https://www.semanticscholar.org/paper/COVID-19-pandemic