Let’s face it. The year 2020 isn’t exactly what most of us envisioned, or expected it to be. Everything seemed to be going well in the first few weeks until suddenly, the economy crashed.
The coronavirus pandemic happened and people were advised to stay home and make arrangements to work remotely temporarily. Sadly, for others, this led to the loss of their employment. Along with the increasing job losses also came the travel ban which halted the movements of goods and people in and out of the country. All these, unfortunately, led to a decline in economic activities.
It’s safe to say that businesses are suffering the impact of this pandemic. Human interaction is still very much dangerous as the virus can be transmitted through human droplets. With lesser interactions, businesses still cannot operate on full capacity. As a result, many entrepreneurs find it hard to break even and remain profitable while the virus still roams free.
What Does Recession Mean?
Before we talk about the facts related to the 2020 global recession, it’s important to have a quick review of what it is first. Generally, a recession happens when there is a decline in economic growth in a country, or even across the world.
This is associated with increasing rates of inflation, high unemployment, and a lower gross domestic product.
A global economic recession, as the term implies, happens around the world in numerous countries. The International Monetary Fund (IMF) uses different criteria in determining whether the world is experiencing a global recession, including a decrease in GDP. Essentially, when there is a decline in the GDP for two consecutive quarters (6-months), a true recession is happening.
So far, there have been four recorded recessions since the end of the 2nd World War: 1975, 1982, 1991, and in 2009. With the current pandemic still unfolding, the signs indicate it may be happening again.
The US is Now Experiencing the Worst Recession of the Century
The United States is among the countries that have been hit hardest with the pandemic.
Despite having one of the best healthcare systems in the world, the country is still struggling with the effects of the virus. There are reports claiming thousands of people have lost their lives.
Recently, the National Bureau of Economic Research has recorded the last peak of business expansion in February 2020. Since that report was released, economic activity has steadily declined.
Today’s recession is even tagged as the worst economic recession of the century. What’s worse, is that even economists cannot tell how long the recession will last. All indications are, it will last for a long time.
Until there’s no concrete plan of how the pandemic will be controlled, the future of the economy will continue to look grim. As of now, the cases for COVID-19 are still on the rise, and the authorities and healthcare system has yet to determine new ways to flatten the curve and stabilize the situation. Once this is resolved, only then can we start to work on repairing the damages the economic downturn has brought.
How the 2020 Recession is Different
Unlike the previous recessions which stemmed from the issues around financial markets, and monetary policy, today’s recession is due to a public health crisis. While the previous cases were solved through raising interest rates to curb the inflation rate, the situation today called for hitting a pause on the economy.
According to Jason Furman, an economist at the Harvard Kennedy School, the recession today can be likened to that of a “medically-induced coma”. It needs to be temporarily halted in order to avoid more damages from happening.
What has shocked most economists today, is the rapid decline of the market. In 2008, it took nearly 2 years for the stocks to decline to 50%. Now, within a span of a few months the stock market collapsed, catching the majority of the stockholders off-guard. Moreover, the recession today has also caused millions of Americans to be laid off at their jobs.
How Businesses Can Cope
Unfortunately, for many businesses, today’s situation comes as a shock. While some may have prepared for the worst, others are still struggling to make ends meet. However, even with a loss in sales and profitability, many entrepreneurs remain to be optimistic about the future.
The good thing is that the government has passed the Coronavirus Aid, Relief, and Economic Security (CARE) Act for small businesses during the pandemic. They can also avail the Paycheck Protection Program that allows them to keep their employee’s payroll going amidst the health crisis.
Additionally, they can also apply for this program through the SBA., and of course, businesses can still attempt to apply for small business loans that help them in mitigating the losses they will inure during the recession.
During times like these, financial aid is extremely important. Businesses must think of ways on how they can combat the recession if they want to remain solvent and continue to operate.
Without a doubt, the 2020 recession is hitting numerous companies very hard.
While the people in the financial industry were the first to experience the consequences of the recession, the reality is, it’s now affected virtually every person in the American workforce.
Regardless of the industry, it’s expected that persons from all areas of the economy will experience the effect of the COVID-19-induced recession.