The pandemic had a strong effect on the US economy because people had to stay at home and avoid public gatherings; this meant that businesses, schools, and others who contributed to the economy had to close up during the lockdown.
Due to this, the economy of the US has taken a different turn. To deduce the US economy’s state; we’ve compiled some essential factors that are indicators of the economy’s growth.
Some of these factors include the employment rate, inflation, goods, the stock market, and several others. These indicators help decide how well the economy is doing and if it has been vital in 2020. Let’s take a look:
Over a Million Jobs Have Being Regained after Millions of Jobs were Lost
Over twenty million jobs were lost in April because there was no demand for products in some sectors to keep workers on the payroll anymore especially sectors that aren’t in the food, healthcare and essential goods sectors needed during the lockdown.
The higher the demand that will keep workers busy, the more jobs would be available, that’s how it has always worked.
However, with the US economy’s battering by the coronavirus pandemic, millions of jobs were being lost as a result of companies retrenching and people working from home as the months went by.
The manufacturing industry has more workers than any other sector, but most manufacturers were left with no choice but to lay off most of their workers due to the epidemic and subsequent lockdown.
This led the economy into a recession because almost 20,000 production jobs were lost in the months of March and April alone.
Unemployment is a strong indicator of the economy; the rate of this was about 8% in August, contrary to the 14.7% recorded in March when most consumers had to stay home and off the street to avoid getting infected by the coronavirus.
Industries are known to hold on until a recession has fully begun before letting workers go. However, it is noteworthy that even if thousands of jobs get created, the unemployment rate usually takes some time to decrease.
Core Inflation Rate Was Lesser than the Target
Inflation usually goes on to shows that prices are rising; the inflation rate measured in August was about 1.7%.
The government prefers to follow the core inflation rate because it usually doesn’t include unpredictable prices like food and gas.
They also choose to follow the YOY rate of inflation because it usually deducts the variations in different seasons.
The government set a target of a 2% inflation rate for the country, which helped the government battle the pandemic.
Due to the target, consumers began to buy things immediately, thinking the prices were bound to arise in the future, and it would be best to purchase now than wait for later. The high level of demand due to this helped the economy grow.
The Second Quarter of the Year Saw a High Rate of Recession
The country’s economy is calculated based on the GDP of the contrary, which is the value of everything created in the previous year in dollars.
This is a significant sign of the economy as the GDP growth compared with last year shows how far the economy has come, and if the economy is doing as well as it should.
When the GDP grows, it shows that the country’s economy is in good shape; this growth is usually about 2% or more.
However, if it is higher than 3%, it might be an indicator that the economy is probably overheating, and if the growth falls lower than 2%, then the economy is in some danger.
When the growth is lesser than zero, then the country is in a recession. The US economy was reported to have incurred over 30% recession in 2020’s second quarter; however, the rate is significantly reducing due to the effect of other factors being mentioned.
The Stock Market is Making a Comeback
When you see the stock market dwindling, then it means investors expect the economy to begin to decline.
The stock market is a prominent pointer of what investors expect of the economy. While companies can mess with their earning to make it look healthier than it truly is, the stock price goes a long way to show how high demand is and how healthy the economy currently is.
If the stock market is experiencing highs, then we are safe, but if it drops significantly in a day, we can view it as a crash.
The crash of the stock market can lead to a recession, as the lower the stock market prices, the higher the chances of a downturn as a recession always follows a crash of the market.
However, the stock market has been rebounding in recent months, so that’s a good sign for the US economy.
The Order for Durable Goods is Slowly Rising
Equipment, machines, and other materials that companies use for their tasks are what we refer to as durable goods.
This includes planes, tanks, and several different equipment types that can be used and trusted to be sturdy for more than three years.
Many companies are beginning to view a plane as a durable good to have, and durable goods can be pricey, so companies only purchase them when it is necessary.
This is why it is an excellent pointer of how well the economy is doing because when companies purchase them, it shows they have high hopes for the future.
The orders for these durable goods increased to about 11% by July, which shows the economy is rapidly recovering.
Before the pandemic, the US’s economy continued to wax stronger under the rule of the present government.
The rate of unemployment drastically went lower than it had in over 50 years.
However, the measures put in place to curtail the coronavirus spread have negated these results and increased the rate of unemployment to a point higher than it was during the Great Depression.
In conclusion however, the US’s economy is making a strong comeback, which is shown through the factors listed above.