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Can the Economy Come Out of Coronavirus-Induced Ventilation?

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The coronavirus pandemic has caused catastrophic devastation across the globe, claiming countless innocent lives and spooking financial markets to bring unprecedented economic loss to all and sundry. Per a report by Moody's Analytics, a subsidiary of Moody's Corporation (MCO - Free Report) , at least a quarter of the U.S. economy has been left idle by the virus outbreak with the daily output falling about 29%.

To add to the woes, more than 701,000 jobs were lost across the United States in March, with the unemployment rate surging to 4.4%. In order to tide over the storm, the U.S. Congress has approved a $2-trillion economic stimulus package that is likely to offer emergency financial relief to several American adults and provide support to businesses affected by the deadly disease.  

With the economy on ventilatory support, the trillion-dollar question is can it emerge stronger for the larger good? Before we delve deeper into this, let us have a brief run-through about the turn of the events.

Deadly Virus Attack

The United States has so far reported more than 9,620 deaths and 336,850 COVID-19 positive cases. With no effective antidote yet against this deadly disease, the only potent weapon at the moment for various government and local administrative officials is social distancing to restrict the spread of the virus. Per the Centers for Disease Control and Prevention (CDC), social distancing refers to “remaining out of congregate settings, avoiding mass gatherings, and maintaining distance (approximately 6 feet or 2 meters) from others when possible.” In other words, it aims to distance people from social gatherings like sporting events, movie theaters, schools, colleges, universities, restaurants, churches or other public events to reduce the probability of exposure to the virus.

The idea is to ‘flatten the curve’ or spread out the new coronavirus cases through social distancing and self-quarantine so that the bulk of the cases do not occur at the same time, thus offering healthcare officials adequate time to respond to the situation.

Economic Blow Strikingly Similar to Human Repercussions

Despite such measures, the rise in positive cases has been alarming. In critically-affected coronavirus patients, ventilator is the key medical equipment that provides life support through continuous oxygen supply and monitors other vital parameters. Often patients are required to be put under ventilatory support for days and even weeks to help fight the disease, while physicians are administering drugs typically used against malaria, HIV and swine flu that have been reported to be quite effective in some cases.

Drawing a similar analogy, it appears the worst affected countries across the world have employed stimulus packages to revive their economies. These are primarily aimed to put money in people’s pockets to enable consumer spending at a time when people are losing jobs and the overall economy has come to a standstill. It further helps to ensure money flow between the borrowers and lenders, with a federal injection of cash to maintain the demand-supply balance. In other words, the stimulus plan is being widely viewed as a cure for a ‘demand shock’ that boosts spending of households, businesses or governments, and not for a ‘supply shock’ caused by factory shutdowns and travel restrictions sparked by the coronavirus.

Is There Light at the End of the Tunnel?

Despite the gloom, experts widely believe that the U.S. economy is not in a bad shape and has enough resilience to bounce back stronger. The federal stimulus plan has instilled hope among various sectors and the market reacted positively to the government-backed economic package.

St. Louis’ Federal Reserve President James Bullard observed, “We’re asking people to stay home to invest in national health, and we’re asking them to use the unemployment insurance program in order to get the transfers they need to be able to pay bills while they’re at home, while they’re not able to work because health authorities are trying to get the virus under control. This is a special quarter, and once the virus goes away and if we play our cards right and keep everything intact, then everyone will go back to work and everything will be fine.”

With diverse firms like Walmart Inc. (WMT - Free Report) , Amazon.com, Inc. (AMZN - Free Report) and CVS Health Corporation (CVS - Free Report) already bucking the layoff trend by hiring a sizable number of employees in response to coronavirus-sparked demand, the future appears encouraging. In addition, with a likely pent-up demand resulting from a prolonged period of low activities, the economy is expected to rebound stronger once the virus dies out.

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