Coronavirus Recession. Table of Contents


How Did Coronavirus Affect the United States?

According to the latest data, US unemployment rate reached 13.0% in May.

That rate was the second highest one in the post WW2 era.

For comparison: in February, before the coronavirus, the indicator was at the record low of 3.8%.

Now, there are more than 20.5 million unemployed Americans. Here some of the changes and facts:

  1. ‌The unemployment rate for women in May (14.3%) was higher than the unemployment rate for men (11.9%).
  2. ‌By May, the unemployment rate for immigrants had risen to 15.7%, compared with 12.4% for US-born workers.
  3. Unemployment rates in the coronavirus downturn are lower among workers with higher levels of education.

Traders will keep a close eye on the American unemployment figures.

Follow the data and FBS analytics to know how it will influence the value of the USD.

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A positive trend may deviate from what is typically expected

With global sentiment trending positively, it makes for a fruitful market.

This week we will focus on risky assets as this situation could prove to provide high yields on high-risk assets.

The growing concern of coronavirus presents a persistent challenge, since we are approaching nine million infected globally.

We are taking close attention to the accelerated rate of infected in some countries.

For example, in the U.S. the number rose sharply.

The increased rate of those infected may lead the U.S. to place more economic measures to ensure stability, which may adversely affect the dynamics of economic recovery.

In this case, investors may fear that growth may slow and begin to reduce the volume of risky assets they deal with, which in turns puts pressure on their quotes.

Another risk is the constant tensions between the U.S. and China.

The intensification of the confrontation between the U.S. and China will harm trade relations between countries and may cause market instability.

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The Coronavirus Recession and Global Economy Situation in 2020

During less than 6 months, the coronavirus pandemic has turned our lives upside-down.

The world will be different from what we knew in the post-coronavirus-era.

Let’s examine together some of the effects of this virus on trade and the global economy, the investment and employment sectors, and how our salaries and private incomes will be affected.

But before we begin, don’t forget that the world before this crisis was already in turmoil and full of problems such as Brexit, the US election and Donald Trump’s trade wars between China and Europe.

It seems that COVID-19 came to double these challenges and make it more difficult for us.

1. Worst Global Recession since World War 2

worst global recession since world war 2

The global economy has experienced 14 global recessions since 1870; the coronavirus downturn will be the deepest recession since the end of World War II in 1945-46, and twice the depth of the recession that followed the global financial crisis in 2008.

Global GDP growth is expected to shrink by 6.2%.

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2. Sharpest Decline of Oil Demand

Sharpest Decline of Oil Demand

Oil consumption usually decreases during global recessions.

The biggest fall in oil consumption was in 1980-1982, by 9%.

Strict measures were required such as enforcing lockdowns, closing economies, restrictions on travel and movement, and quarantine to get the coronavirus under control, which has caused the demand for oil to collapse historically to unprecedented levels.

That also resulted in a massive increase in global inventories.

The International Energy Agency (IEA) expects that the decline in oil demand will be the largest in history in 2020.

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3. Deepest Decline in World Trade Volumes

Deepest Decline in World Trade Volumes

COVID-19 will establish polarization policy between countries, nationalism, and isolationism will increase, and the conflict between globalization and protectionism will worsen.

Many countries will work on their domestic supply chains and manufacturing their products to rely on themselves, not only on imports.

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4. Lower Investment Rates

Lower Investment Rates

It is expected that the productive investment will receive a big hit from this pandemic, which has caused the loss of many capitals, skills, human resources, and labor forces.

That will lead to long-term losses in productivity and output.

We will see a huge fall in the investment rate during 2020.

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5. A Big Blow to Real Income Per Head

A Big Blow to Real Income Per Head

This virus was the direct reason why millions of people lost their jobs and savings, while many companies have collapsed and declared bankruptcy.

Businesses are expected to continue with layoffs, employment reduction, and cutting wages.

Governments will also increase taxes as countries will emerge from the pandemic with much higher deficits and debts than previously expected.

All of this would affect the real income per head, witnessing a sharp drop in its rate in 2020.

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In the end, we still don’t know much about the coronavirus and its consequences for our future.

We don’t know if the global economy survives this crisis or not or when will find the expected vaccine.

What we know is that this pandemic is causing political, economic, and social chaos.

The longer it lasts, the more problems will be there.

But don’t lose hope, we have a lot of options and solutions.

All we have to do is choose the right ones.

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