The Aftermath of COVID-19 on Industries and Economy
Economic Impact on Households
- The threat of COVID-19 and social distancing measures have led to lay-offs, to the extent that the "U.S. Department of Labor figures to be released Thursday are expected to shatter the old record for the greatest number of new unemployment claims filed in a single week."
- In Louisiana, where, normally, 1400-1500 people file for unemployment per week, 71,000 people filed for unemployment during the week of March 15th.
- The pandemic is projected to have an acutely negative economic impact on lower-income households since the vast majority of the 40.6 million people living in poverty in the U.S. have no savings they can use to cope with a potential loss of income.
- In a Center for Global Development study done on the potential economic impact of COVID-19 in low and middle-income countries, the authors stated that wage and income falls as well as poverty hikes are likely to be the short-run effects of the pandemic and could threaten the livelihoods of many people; they also mentioned that low-wage workers are often the least able to engage in remote work, resulting in a loss of income for their families.
- In the U.S., to help households face the economic challenges brought on by the pandemic, the government has devised a stimulus plan that offers lower and middle income adults $1,200 each, as well as $500 for each child; the deal also extends and expands unemployment benefits and boosts it by adding $600 per week.
Economic Impact on Industries
- A quick facts sheet on the effects of COVID-19 on American, British, Canadian, Australian, New Zealand and German industries can be found here.
- The U.S. mining industry is expected to be the most negatively affected of all American industries since it is globalized and highly dependent on Chinese consumption; since March 24th, the price of West Texas Intermediate crude oil was down by ~25%.
- Because of travel restrictions and stagnation in trade, the British transportation and warehousing industry is experiencing economic concerns. There has been a 70% drop in the number of rail passengers. Port and freight companies are experiencing delays, and less than 5% of passengers are expected to engage in airline travel.
- Canadian businesses in the agriculture, forestry and fishing sector rely on heavily exports are expected to experience significant decline and the country anticipates an overall reduction in revenue in this sector because of potential labor shortages within the farming industry.
Global Economic Impact
- The slowdown that occurred within the Chinese economy, as a result of the pandemic, will likely cause a decrease in Chinese demand for raw materials from several countries, especially in Africa, and a reduction of imported goods, from China, to those countries; ultimately, the developing world is set to be negatively impacted by Chinese "production and export stoppages."
- China's economic stagnation is also expected to negatively impact many Asian countries since Korea, Japan, and other Asian countries export a great deal of goods to China.
- Many companies around the world will likely face market and supply chain disruptions because they rely heavily on Chinese intermediate inputs and sales, the economy of affected regions, goods imported from affected regions, transportation services, as well as travel and tourism--all of which have been negatively impacted by the pandemic.
- The disruptions in inputs and production as well as the sense of uncertainty generated by the pandemic will, most likely, negatively impact financial firms and markets on a global scale.
Production Challenge for Industries #1: Supply Chain Disruption
Production Challenge for Industries #2: Delivery Delays
Planning & Management Strategy #1: Virus Containment Strategies
- To ensure virus containment, governments worldwide can utilize funds to "prevent, detect, control, treat, and contain the virus, and to provide basic services to people that have to be quarantined and to the businesses affected. "
- Also, national governments worldwide can create a plan to send resources directly to local governments so that those municipalities can dispatch clinicians and medical professionals to affected regions.
- The Chinese and Korean governments have supported local regions so that health care workers could be sent to affected areas.
Planning & Management Strategy #2: Cash Flow Relief
- To provide economic relief to individuals and businesses, governments can devise cash flow plans which include providing wage subsidies, extending and expanding social safety nets such as unemployment insurance, and offering tax relief to those who need it.
- In addition, governments should also consider rectifying "distortive tax policies that could impede recovery efforts."
- Several countries like Italy, Korea, Vietnam and China have provided businesses with tax extensions.
Planning & Management Strategy #3: Business Continuity Plan
- Governments need to create continuity plans because individuals and businesses need to be reassured of the continuity of services during a pandemic.
- In the US, the Federal Emergency Management Agency manages the continuity of operations for the federal government.
Overcompensation Strategy #1: Non-Domestic Production
- Many Chinese factories are experiencing production delays and are looking for solutions abroad to stabilize business.
- To compensate for losses in production time, these factories are utilizing American manufacturers for production so that they can meet product deadlines and delivery dates.
Overcompensation Strategy #2: Increased Production Shifts
- Many factories in Asia are increasing production shifts so that shipments can be made in a timely manner.
- By increasing the production shifts within its Chinese facilities, the beauty brand e.l.f. has shipped products for its annual spring resets and has experienced a ~90% recovery.