As of May 25, 2020, there were over 1.6 million cases of COVID-19 in the US. At a survival rate of 98.6% (calculated for New York) most of these people will recover and live healthy lives again. Unfortunately, the same cannot be said of businesses that were locked down to control the spread of the pandemic. Although there has been so much loss and devastation for businesses, many companies are trying to reopen and prepare for bringing employees back to work.
To put things into perspective, the largest quarterly GDP decline observed during the Great Recession of 2008 was 8.4%. According to the figures that are emerging, we’re already facing a GDP decline of 30% to 40% in the second quarter of 2020.
The US lost 2.6 million jobs in 2008. The recession killed 170,000 small businesses between 2008 and 2010. It happened when the GDP dipped by less than 10 percent and there was no pandemic. We still haven’t recovered from COVID-19 and the crippling social distancing measures that it has necessitated; and we’re already sitting at 30%-40% decline in GDP.
A Model for Economic Recovery
Is there a projection for the economic recovery? From the very optimistic Z-shaped recovery to the increasingly probable L-shaped recovery curves, the variants of recovery projections include V, U, W, and even a shape that resembles Nike’s swoosh. Here’s a brief look at each.
- The Z: The economy will bounce back to the pre-pandemic levels, cross that level, and settle back on its previous growth path.
- The V: The losses during the pandemic will be irrecoverable; however, the economy will bounce back quickly to regain its earlier growth rate.
- The U and the Swoosh: The recovery will take a long time, but the economy will eventually regain its momentum and growth.
- The W: The initial recovery will be interrupted by a second surge in the pandemic before final recovery. How many such surges will be there after the eventual recovery is not known.
- The L: In the worst case scenario, the economic activity will not return to its pre-pandemic level of growth for a long time to come.
How Long Will the Economy Take to Recover?
In the Great Recession, the total number of jobs did not return to November 2007 levels until May 2014. That was when businesses were not required to adhere to the new norm of social distancing.
This time around, businesses that are reemerging from the lockdown will have to curtail economic activity because of the social restrictions. Airlines will be flying fewer travelers, offices will be able to accommodate fewer people in the workspace, restaurants will have fewer full tables at a time, and mass gatherings such as sporting events and concerts will probably remain prohibited for several years.
Will Some Businesses Benefit From the Crises?
While the overall impact of COVID-19 upon the workplace and business appears disastrous, there are sectors that are slated for accelerated growth. Robotics, face recognition, Internet of Things, touchless access control systems, cloud computing, remote working aids and tools, 5G technology, personal protective equipment, and pharmaceuticals are some of the businesses that are likely to emerge as winners from this crisis.
What Actions Are Being Taken to Help the Economic Recovery?
The United Nations Development Program (UNDP) has been tasked to provide the technical lead in the efforts for global socioeconomic recovery. UN teams covering 162 countries and territories will roll out this recovery plan in the next 12 to 18 months. The five pillars of the socioeconomic recovery strategy include:
- Protecting health services and systems
- Social protection and basic services
- Protecting jobs and small- and medium-sized enterprises, and the most vulnerable productive actors
- Macroeconomic response and multilateral collaboration
- Social cohesion and community resilience
Political and business leaders everywhere are stressing the need for a bold and ambitious recovery plan. In Europe, MEPs demanded a E2 trillion package last week to support people and businesses. António Guterres, the Secretary-General of the United Nations, has estimated the cost of a large-scale, coordinated and comprehensive multilateral response to be at least 10 percent of global GDP.
The US government has been quick to respond and has already taken many actions, such as the grant of $660 billion in forgivable loans to small businesses, $300 billion in recovery rebate checks to households, and $268 billion in increased and expanded unemployment insurance.
Most of these measures are temporary, however. For example, the $1,200 checks to adults were one time. The unemployment insurance cover runs out in July and the forgivable loans cover eight weeks of payroll. A lot needs to be done a lot faster to keep a U shaped recovery from degenerating into an L.
This blog was originally produced by Swiftlane. Printed with permission.
About the Author: Imran Anwar is working as a content developer and future trends analyst at Swiftlane, a company providing facial recognition based touchless access control solutions to public and private organizations. Imran is a business graduate with vast experience of writing about future tech, business, and marketing. He can be reached at [email protected].