Pandemic’s long economic shadow - Project Syndicate
Tashkent, Uzbekistan (UzDaily.com) -- The negative impact of COVID-19 on the US economy is expected to be serious. While mass vaccinations indicate the end of the pandemic itself, it does not provide immunity from long-term economic damage to the country. The source of the coming economic downturn is unlikely to come as a surprise. Despite remarkable breakthroughs in vaccines, therapies and treatment protocols, the second wave is far worse than the first in terms of infection, hospitalization, and mortality.
In the US, the negative economic impact is reflected in the growing number of jobless claims since December 2020 and the sharp decline in retail sales in November. With about three quarters of US states having partial lockdowns, a decline in economic activity in early 2021 seems highly likely.
Employment is still 9.8 million below its pre-pandemic peak, and consumer spending on services has offset only 66% of the decline seen during the spring lockdown.
Partial lockdowns will only exacerbate the turmoil that is now overwhelming in most major US cities, including overcapacity in office space and public transportation, as well as devastating hospitality, entertainment and retail businesses.
The second wave of COVID-19 and the double downturn in the US economy left US policymakers no choice but to approve another aid package, this time worth US$900 billion.
Overall, experts speculate that US inflation is unlikely to be immune from further dollar depreciation, which seems increasingly likely given the sharply worsening US current account deficit, the strengthening of the euro, and the propensity of the Federal Reserve, which remains committed to zero interest rates, towards weak dollar.