Economic Implications of COVID-19

COVID-19 has – and continues to have – a huge impact on America’s economy.  A team from the BBVA Research has published its Q3 2020 Economic Outlook.  Led by Nethaniel Karp, chief BBVA  economist, the results found that the coronavirus has actually brought to the forefront previously concealed troubles in the economy.  Indeed, it is believed that what we are now dealing with is potentially the worst recession since World War II.

The 2020 growth baseline has been maintained at -5.1 percent and 3.5 percent in 2021.  And with no signs of the virus coming to a halt or a vaccine being found any time soon, there is no real sign that the economy will recover either.  Some parts of the economy continue to reopen but there are many that remain shuttered.  Many individuals are still concerned about venturing out which also doesn’t help the economy.

Nonetheless whatever kind of level of return to normal activity there is will be helpful. In addition, some US states will fare better than others depending on their level of infection and their willingness to come out and re-enter active life.

Coronavirus and US Consumer Confidence

Shockingly consumer confidence in the US economy is on the up according to the Consumer Confidence Index.  In fact, it is highest since it has been in nearly 10 years.  Economists are also surprised by this figure. 

Bloomberg economists put the index at 90.5 but it was actually substantially higher at 98.1. According to Conference Board Senior Director Lynn Franco:

“The re-opening of the economy and relative improvement in unemployment claims helped improve consumers’ assessment of current conditions. Looking ahead, consumers are less pessimistic about the short-term outlook, but do not foresee a significant pickup in economic activity. Faced with an uncertain and uneven path to recovery, and a potential COVID-19 resurgence, it’s too soon to say that consumers have turned the corner and are ready to begin spending at pre-pandemic levels.”

Another source of optimism is the White House’s call to bosses to make a  “Pledge to America’s Workers,” in an effort to work toward the creation of more jobs and strengthening of the economy.  To date – according to the White House – over 430 companies have signed it. A Press Release stated:

“The Coronavirus pandemic has highlighted the need to build and expand high-quality pathways that will lead to good jobs and rewarding careers for all Americans, especially those most affected by this crisis. The Trump Administration remains committed to supporting the millions of workers who need assistance right now while building a resilient, agile workforce for the future.”

How Long will it Really Take for the Economy to Bounce Back

In our last piece we spoke about how some finance experts believe that the American economy is bouncing back ahead of schedule.  But now we have other experts predicting that it is going to be an extremely long haul and that the next 10 years will see the country recovering.

An analysis by the Congressional Budget Office indicating that a reduction in economic output in America over the next decade will reach $7.9 trillion.  That damage – for now leaving aside inflation costs – will translate to $15.7 trillion.  The CBO did however add a caveat, pointing out the huge level of uncertainty and unknown surrounding the pandemic.

Capital Economics Group Chief Economist Neil Shearing said:

“While the slump in output caused by the virus seems to have bottomed out, the recovery is likely to be slow going and uneven. Most economies are still likely to be below their pre-virus paths of GDP by the end of our central forecast horizon in 2022,” 

He gave three reasons for this:

  1. Tremendous Loss: We tend to forget – as we see the economy recovering – that so much output was lost during lockdown.
  2. Consumer Spending Predictions: these remain unclear from high frequency data we are receiving.
  3. Reopening Worries: Governments and policy makers are still trying to figure out the best way to re-open, “shift[ing their decisions] from crisis mode to recovery.”

Another issue to consider – as pointed out by a recent Bloomberg analysis – is that while businesses are beginning to re-open, given that this is within a context of rising COVID-19 cases, panic is mounting and this will likely negatively impact the economic recovery as well.

Re-Opening of the US Economy

Last month the re-opening began. Throughout the country different states began opening their economies for business along with certain guidelines.  Nonetheless there are some concerns about the timing with some experts warning against the potential of catalyzing a second wave and thus an even greater spike in re-infection and economic hardship.

COVID-19: Fiscally Recoverable?

We know that the global COVID-19 crisis is hitting firms and individuals very hard in many ways, not least of all financially.  What economic experts and financial organizations saying about this?

On the one hand, Kristalina Georgieva, IMF Chief, points out that there has not been a fiscal crisis this bad for over a hundred years, since the Great Depression.  She believes it to be “the worst crisis since the Great Depression a century ago,” and not only that, but there will likely be lasting damage.

In the space of merely three weeks, 17 million US employees are now hitting the unemployment line.  New York Federal Reserve Bank economists are thus comparing this to a natural disaster (such as a massive earthquake) as a standard financial crisis usually happens over a longer period of time.  However, given that there are not the same physical consequences, it is believed that a faster economic recovery will be more likely.

Former US Treasury Chief Economist and Peterson Institute for International Economics  contributor Karen Dynan – while noting the 20 percent plummet in the US economy in April and May – is predicting a 7.2 percent rebound in the US economy next year, year-over-year.

Further, on the other hand, some economists are predicting a “solid rebound” once people can get back to work.

Coronavirus Relief Bill

There is a $2 trillion Relief Fund Bill for Employee Retention set up by President Trump.  But should that run out of money, he has pledged to seek additional funding from Congress.  During a COVID-19 White House briefing, Trump said:

 “This is money that’s really going directly to the people who need it, the small businesses who need it, and the workers that need it. When we open, we want to open strong with businesses that are going.”

Known as the CARES Act – the Coronavirus Aid, Relief and Economic Security Act – this has been hailed as “the largest economic stimulus bill in modern history,” more than 100 percent higher than the Stimulus Act initiated during the Financial Crisis of 2009.

Hope for US Economy

President Donald Trump said Tuesday he wants the U.S. economy to “open” back up by Easter Sunday, despite expert warnings about the deadly threat of the coronavirus. Easter is April 12, less than three weeks away. Medical experts had recoiled at Trump’s suggestion that Americans could gather en masse amid the coronavirus outbreak.

Staying connected while working from home

Munear Ashton Kouzbari Offers Bosses Direction on Managing a Team Working from Home

Most of us spend a substantial portion of our waking hours at our workplace. Or at least we did before the corona pandemic upended our lives and forced us to spend all our time at home. Managers and employees, CEOs and support staff, are all navigating this new reality. Munear Ashton Kouzbari offers insight for bosses and administrators looking to weather the transition to remote employment successfully.

Have your Resources Ready

The 21st century is ready for working from home. There are so many free or low-cost options to establish and maintain a virtual office team.  Sit down with your tech crew and review your specific needs. Then you can select the set-up that is most suitable for you and your employees. Some managers mistakenly believe that they can rely exclusively on email to communicate with workers. You’ll want to use some kind of chat platform for regular check-ins and maintain an “administrator only” channel for updates.  Make sure that all the internal platforms and files that employees need to do their jobs are available outside of your office network.

Munear Ashton Kouzbari recommends the best tools for your business

This whole work-from-home thing happened very quickly. Few employers had time to properly train staff on using all the remote tools. Tech support will likely need to do some online training sessions, or even one-on-one calls, to guide people through the new processes. It will take time, but it is worth the investment.

Also, if practical, let employees take office equipment home. Laptop computers might be obvious, but office chairs, screens, keyboards, and even desk lamps can greatly enhance the home office experience.

Be Clear and Reasonable

Just because your team is now scattered, it doesn’t mean you should not be clear about what is expected of them. Set well-defined parameters of acceptable behavior and gently remind everyone that working from home is not a pseudo vacation. If you had weekly meetings in the office, maintain that schedule in a virtual forum (zoom, workspace, etc.). Attendance, and reasonable attire, should be mandatory.

BUT, keep in mind that many of your workers will also be juggling childcare during the pandemic. While most workers can stay task-focused while in the office, school and daycare closures have most parents struggling to find a work-life balance. When scheduling online meetings and calls, give plenty of advanced notice and ask for optimal times. Give as much leeway as possible on deadlines and understand that most parents will be putting in a lot of late-night hours once the kids are asleep.  

Maintain the Positive Office Environment

One of the reasons social distancing is such a struggle for most of us, is because we are social beings. As bosses, it is important to maintain a friendly and positive office culture so that employees enjoy coming to work and spending time with their colleagues. Now that working from home is the reality, your teams are probably missing each other, which can have a tangible impact on output. Use the tools mentioned above not only for work-related meetings but also to simulate kitchenette camaraderie.  Encourage colleagues to connect and consult with one another.

Encourage everyone to work together, even when they are apart

Communicate Regularly

When you and your staff are working remotely, keep the lines of communication open. Now that they can’t just pop their head into your office, make sure they know how to find you—and that you want to be found. Touch base with each member of your team on a regular basis. Whether you call by phone, ping them on a workplace platform, or initiate a video chat, take the time to genuinely express interest in how they are doing. This reality isn’t easy for anyone. Show them that you care about more than just the bottom line.  Your workers are likely to surprise you with their resilience and motivation to do well in this less-than-optimal situation. Use this time to uncover hidden talents or interests in your employees that didn’t necessarily come across in the regular work environment.

As we all figure out how to work through the current corona crisis, it is worth viewing this period of working from home as an opportunity rather than a challenge. Digital teams and communities are effective. Productivity, engagement, and even business growth can be obtained, even remotely, when managed correctly.

America’s Economy

America’s Economy is the world’s wealthiest and most powerful.  Even macro-economists find it challenging to picture this as it is just so large.  But the numbers speak for themselves. Since 1871 America has been the world’s largest economy.  Indeed in 2018 it was measured at $20.58 trillion in 2018 in nominal terms.

For comprehension purposes the only way even macro-economists can fathom this enormity is by looking at GDP and labor force numbers as well as trade balances.

So let’s now look at trade balances.  Last year goods and services trade deficit was valued at $616.8 billion; imports – $3.1 trillion and exports – $2.5 trillion – not the best figures.  Adding insult to injury the trade deficit just for goods was $866 billion.

However, there was still a decline in the overall trade deficit for America in 2019 so that is definitely a good sign. Moreover, the US’s goods deficit with China declined too. Still, experts believe that many more stringent policies must be put in place to further reduce the deficit.