US Q2 GDP Plunges
The Covid-19 pandemic has led to the biggest drop in the United States’ quarterly gross domestic product (GDP) in history. Compared with the previous quarter, its second quarter GDP plunged 32.9 per cent, the country’s worst quarterly performance since the 1940s. For the first quarter, the world’s largest economy reported a 4.8 per cent contraction from the fourth quarter of 2019, ending the longest period of expansion since late 2008. The United States measures the quarter-on-quarter economic performance while China measures the year-on-year economic performance. With guidance from your econs tutor Singapore in your econs tuition Singapore class, explain the advantages and disadvantages of these two methods.
Impact Of Covid-19
The unprecedented Covid-19 pandemic has led to many disruptions to the American economy. Many states were forced to impose lockdowns or strict travel restrictions in an effort to contain the spread of the virus in mid-March 2020. As a result, billions of people were ordered to work from home. A large proportion of the blue-collar workers who were unable to work from home lost their jobs. In April 2020, the US unemployment rate reached the all time high of 15 per cent. Please consult your econs tutor Singapore in econs tuition Singapore the various social and economic implications of a high unemployment rate. The unemployment rate has since improved with the re-opening of the economy. In July, 1.8 million new jobs were added, bringing the latest unemployment rate to 10.2 per cent. You may sign up for econs tuition Singapore with a reputable econs tutor Singapore to learn the definition of unemployment rate and its implications.
Though the lockdowns and travel restrictions were partially lifted in some states in May and June 2020, the resumption of economic activities was not sufficient to offset the negative impact from the lockdowns and travel restrictions in March and April 2020. This was despite the government payouts to families and businesses, including but not limited to the US$1,200 for each individual earning an annual income of US$75,000 and below, together with the payout of US$500 per child under the age of 17. In consultation with your econs tutor Singapore in your econs tuition Singapore class, discuss the various types of government payouts and their benefits.
Economic Outlook
As of 9 August 2020, there were 5.05 million confirmed Covid-19 cases in the US, with 162,000 deaths. The country is still grappling with the new wave of outbreaks which threaten to detail its economic recovery. Many states have re-imposed restrictions to curb the spread of the virus. Consumer sentiments remain at all-time low and unemployment rate remains high. You may discuss with your econs tutor Singapore in econs tuition Singapore possible government measures to boost the consumer sentiments in the US.
With more states reopening and economic activities picking up, economists expect the US third quarter GDP to grow by 17.8 per cent, followed by a 6.5 per cent expansion in the fourth quarter of 2020. However, it will still be much lower than the pre-pandemic levels. Further, the road to recovery is uncertain. Epidemiologists believe that it is highly likely that there will another wave of infections in the autumn, based on the typical pattern of respiratory infections in the US. With new wave of infections, some states may roll back to shut down some of the economic activities. If this happens, the labour market will be affected which will in turn lead to reduced disposable income of households and reduced consumption. Your econs tutor Singapore will be able to explain to you in your econs tuition Singapore class the relationship between unemployment rate, disposable income and consumption.
Many economists believe that it may take at least two years for the US economy to reach its pre-pandemic levels. Others hold a more optimistic view that the US economy may reach its pre-pandemic levels in one or two years.
Linda Geng
Economics Tuition Singapore @ Economics Cafe
Principal Economics Tutor: Mr. Edmund Quek