Updated: Mar 13, 2021
COVID-19 has made the year 2020 odd and irregular, not only affecting lives but also affected the way how people are living. The pandemic affected the rate of unemployment, debts, stocks, and the gap between the rich and the poor. Some people starve and live hard day by day, while others live high on the hog.
The first and foremost economic impact that the US experienced was the rate of unemployment. People closed their shops, lost jobs, and companies went bankrupt. As employers can’t make profits during the pandemic, they started firing workers or closing the business, hoping to resume when COVID alleviates. According to the U.S. Bureau of Labor Statistics (BLS), The unemployment rate in April 2020 increased by 10.3 percentage points to 14.7 percent. This is the highest rate and the largest over-the-month increase in the history of the data (available back to January 1948). The number of unemployed persons rose by 15.9 million to 23.1 million in April. The sharp increases in these measures reflect the effects of the COVID-19 pandemic and efforts to contain it. 23 million people are about 7% of the US population. These people can’t find an alternative to pay for their rent, cars, or food to feed their families. As people struggle to afford their living, it gets more challenging for them to pay tax, which leads to the federal debt. According to the U.S. Bureau of Labor Statistics (BLS), when workers are unemployed, their families lose wages, and the nation as a whole loses their contribution to the economy in terms of the goods or services that could have been produced.
2. Increase of housing debt
Fear of infection, social distancing, business closures, losing accommodations, and closing job opportunities had a large and persistent economic impact across the United States. Due to such impacts, closure in job markets made people lose their overall income. As a result, people are loaning money to pay for their rents, mortgage, credit cards, student loans, and even for necessity needs. According to Congressional research service, “U.S. household debt had reached a record high in the fourth quarter of 2019, at $14.15 trillion, according to the New York Fed's Quarterly Report on Household Debt and Credit. The Federal Reserve Bank of New York's Center for Microeconomic Data today issued its Quarterly Report on Household Debt and Credit, $14.27 trillion in the second quarter of 2020." This shows that total household debt was increased by $12 billion in 2020. The value of a currency goes up when the domestic economy is stable. To do that, an appropriate balance of import and export with a reasonable interest rate has to take place. However, as the number of national debt increases, money loses its value and inflation occurs. Inflation encourages people to loan money, which accumulates household debt. US household debt is calculated as more than 14 trillion currently. This rate has gone up by $87 billion only in the third quarter of 2020.
3. Stock Investment
The year 2020 was the year of stock investment. With the stock market plummeting due to the COVID-19 this time, many young people in their 20s and 30s started to get interested in stock investments. Nasdaq and S&P 500 dropped strikingly in March when the COVID-19 cases spiked up in the US, however, it soon recovered even better than the rate before the pandemic. According to an article by Fortune, “In the S&P 500, the first half's best-performing stocks included Clorox (up nearly 45% as its sanitizing wipes sold out everywhere) and Amazon (rising more than 49% as people relied more on e-commerce), as well as electronic payments company PayPal (up 61%) and semiconductor giant Nvidia (up almost 62%). In an even bigger surprise, the two biggest winners in the S&P 500 were both health care stocks—though their performance can't entirely be credited to a coronavirus boost. The best-performing S&P 500 stock was DexCom, a maker of smart glucose monitors for diabetes patients, which rose more than 85%, followed by Regeneron (up 66%), which is trying to replicate its success with Ebola treatments in finding an antidote for COVID-19.” People found a way to make money at home through stock investments. Considering the obstacles and difficulties of stable income, it would be the only hope open to everyone equally. Individual investors made money through stock investment, but many major companies also grew their net worth astronomically. The current situation may seem every unstable and risky; however, it is the only way for people to survive in such an extraordinary period.
4: the gap between the rich and the poor.
Jeff Bezos, CEO of Amazon, and Elon Musk, CEO of Tesla and SpaceX are some of the richest people in the world right now. The year 2020 was for billionaires, rich people got richer and poor people poorer. As referred to earlier, 23 million people lost their jobs, but billionaires’ wealth and net worth skyrocketed after and during Covid-19. According to Time, “The surge in net worth among tech entrepreneurs this year — Amazon.com Inc.’s Jeff Bezos and Tesla Inc.’s Elon Musk both added more than $60 billion to their net worth in 2020, according to the Bloomberg index — has led to increased scrutiny as millions in the U.S. lost their jobs amid a slumping economy. There is a growing gap between the haves and the have-nots because companies that are focused on digital and technology companies like Google, Apple, Amazon, Microsoft, Zoom, Facebook and Netflix, and Tesla whereas, Companies that are focused on older industries may in turn suffer and kept firing employees to make a balance between profit and loss.
COVID-19 did not only affect people, but it affected the economy as well. We can say the year 2020 was a year for billionaires. Wealthy people got wealthier, whereas ordinary people lost their jobs and were led to the streets. Many experts have expected that even if the vaccine is completed, our lives will never be the same as before. The economy is an unpredictable index because it can be affected by all unforeseeable factors, but the consequences are bigger than just a rate and the number.