The COVID Economic Shadow Part 1

You would be hard pressed to read any sort of financial/economic commentary at this point in time that does not make the claim that economies will return to normal as Covid is brought under control via more effective vaccine rollouts. How true is this?
Linking Covid outbreaks and economic normalcy makes quick, intuitive sense. After all, economies all over the world seem to be taking turns to enter and exit some form of government mandated lockdown. As the virus eases, either due to natural factors and/or vaccination drives, it follows that economies will open back up. And many of them have, after emerging from their respective second/third waves. So far so good.
Unfortunately, this is the point where things become more murky and uncertain. No one knows, or can say with any certainty, what will happen after that. While it would not be unreasonable to expect a surge in consumer spending and a possibly quite large spike in people finding jobs again, would this be enough?
Which of course, begs the question, what is “enough”? “Enough”, in this case, would be for the economy to return to its prior trend. This means that simply recording higher GDP growth rates or having the economy make up for the loss in production during the Covid recession is not enough.
Why is returning to its prior trend important? If the economy can do so, it would mean that the economy has managed to return to its previous trajectory of growth without too much permanent damage. Permanent damage meaning some component of the economy that was contributing to the economy before the virus, but not after (or more generally, before and after economic shocks).
This puts the spotlight on the labor market, which has suffered greatly during the past year of Covid induced stasis, especially in the United States. Over the course of the pandemic, American labor lost 700,000+ jobs a week for 55 straight weeks. Fortunately, that number has come down to the 400,000 to 500,000 level in the past 2 months or so, although it is important to bear in mind that the pandemic is still not over yet. That’s at levels higher than at any point prior to Covid, every week, for a whole year, and every weekly number only tells the story of those who had just lost their jobs.
What about those who lost their jobs earlier in the pandemic? Unfortunately for them, one of the harsh truths of the labor market is that the longer one is out of a job, the harder it is to find work. After a while, people who spend too long looking for a job without managing to find one get discouraged and stop looking for work altogether.
To be concluded…
Do You Want To Make Money Trading?
Learn how to, and more, in our Trading Courses.