Coronavirus and the Economy’s Recovery – Lee Chandler

COVID-19 or otherwise known as the coronavirus has affected the United States and global
economy in a devastating way. With stores, shops, and restaurants closing down in an effort to
contain the disease, the backbone of the US economy has taken a drastic hit. With the US
Labor Bureau claiming a 13.3% unemployment rate and the Peterson Institute for International
Economics finding that the unemployment rate is more realistically at around 17.1%, the
economy is far from recovering. However, with states beginning the reopening process, some
analysts believe that the economy is on the road to recovery. The stock market, just one
measure of consumer confidence in the economy, has recovered remarkably since its crash in
early April given the high rate of unemployment. This has prompted the V shaped recovery that
many analysts have discussed in their predictions for how the economy will fare over the next
few months.
While optimistic, there are doubts – with the rising number of cases in states like California,
Texas, and Florida that were the first ones to begin the reopening process, there are fears that
these states may pause or even roll back some of the plans to open businesses as COVID
cases continue to grow. WSJ reporter Grep Ip discussed that this could lead to a flatline of the
economy’s recovery making the V shaped curve look more like a “square root” for the overall
economy.
At the same time, there are bright spots in the economy. With some industries that have
capitalized on the stay-at-home economy, they have seen immense growth and potential
long-lasting changes in a post-COVID world. Delivery services for example such as UberEats
and GrubHub believe that the convenience of the take-out delivery service will become a part of
a new normal even after restaurants reopen for good. In fact, a proposed merger between these
two leaders in the gig-economy delivery space is in the works as the majority of the M&A
practice has slowed down due to companies trying to retain as much free cash flow as possible.
In fact, as companies focus on conserving, global M&A activity fell 55% YoY according to
Refinitiv the lowest it has been since 2004.
Ultimately, while there are bright spots in the COVID stricken economy, the overall M&A practice
and the rest of the general economy as shown by labor statistics still has strides to make before
returning to normal.
Sources:
https://seekingalpha.com/news/3587417-global-m-activity-suffers-in-q2-virus-fuels-uncertainty
https://www.wsj.com/articles/a-reverse-square-root-recovery-11593602775?mod=hp_lead_pos5
https://www.piie.com/blogs/realtime-economic-issues-watch/us-unemployment-rate-higher-it-loo
ks-and-still-high-if-all

By admin

Leave a Reply

Your email address will not be published. Required fields are marked *