The Impact of the COVID-19 Pandemic on the Global and the US Economy
The COVID-19 pandemic has profoundly impacted economies worldwide, including that of the United States. The virus, which first emerged in Wuhan, China, quickly became a global pandemic, affecting millions of people and significantly impacting economies worldwide. The pandemic has caused a sharp decline in economic activity, leading to significant job losses, business closures, and economic contraction. The impact of the virus has been felt across various sectors of the economy, resulting in major changes in the housing market, international trade between countries, international oil prices, and drastic changes in the job sector.
The COVID-19 pandemic has significantly impacted the housing market in the United States, leading to both short-term and long-term effects. Before the coronavirus pandemic struck, the housing market thrived with low-interest rates and few homes for sale. Home sellers enjoyed the benefits of a solid market and many homeowners watched their homes appreciate, increasing their home equities. However, when the pandemic began, the housing market almost reached a standstill as buyers and sellers grew warier about actively engaging in real estate transactions due to economic uncertainty brought by the lockdown measures. In 2020, real estate sales dropped by 8.5 percent from 5.8 million in February to 5.27 percent in March (Glink and Tamkin 1). By April, real estate sales had dropped 18 percent to 4.33 million (Glink and Tokin 1). With home sales falling, the construction of new homes dropped by 15 percent to the lowest rate of new construction in almost seven years (Glink and Tamkin 1). The COVID-19 pandemic resulted in numerous Americans losing their jobs, contributing to the housing market’s decline.
Nevertheless, as the pandemic persisted, the housing market began to rebound. One of the most notable impacts of COVID-19 on the housing market has been the shift in housing preferences. With many people working remotely and spending more time at home, the housing market saw an increased demand for larger homes and outdoor space. According to Glink and Tamkin, there was an apparent mass relocation from urban centers as people moved from condos and rental units heading into the suburbs to acquire bigger and spacious homes with outdoor facilities by June and July (1). Additionally, with historically low mortgage rates, many buyers became incentivized to enter the market, leading to a surge in demand for homes in suburban and rural areas. In effect, home prices started to rise. Since the pandemic, real estate prices have risen 14.3 percent, with new home listings dropping by 27 percent and homes taking less time to sell (Glink and Tamkin 1). Due to the pandemic, fewer new homes were being put up for sale. In 2021 more people were looking to buy homes than there were, making it harder for people to find homes. As a result, home prices were projected to increase by a further 10 percent (Glink and Tamkin 1). Another effect of the pandemic contributing to fewer home listings in the housing market is the low mortgage rates that allow homeowners to refinance and stay in their homes instead of selling (Glink and Tamkin 1). All of this meant fewer homes were for sale, making it harder for people to find homes to buy.
Overall, the impact of COVID-19 on the housing market has been complex, with both short-term disruptions and long-term changes in housing preferences and transactional behavior. In the early stages of the pandemic, the housing market experienced a significant decline in activity. Buyers and sellers alike hesitated to engage in real estate transactions due to economic uncertainty and lockdown measures. As people continued to work remotely and spend more time at home, the for larger homes and outdoor space increased. Further, as the pandemic persisted, the housing market began to rebound, with many factors contributing to shifts in the market.
The COVID-19 pandemic has also significantly impacted globalization and international trade between countries. The pandemic has caused widespread disruptions in global supply chains, resulting in critical goods and services shortages. Travel restrictions, border closures, and quarantine measures have also impacted the movement of people, goods, and capital across borders. In their article, Nový and Jarý analyze the expected effects of COVID on individual globalization factors affecting the supply and demand sides of selected national economies and economic units. The COVID-19 pandemic affected the institutional preconditions of globalization, meaning governments became more involved in regulating international trade. National governments introduced stricter health and safety standards to reduce the spread of the coronavirus, which became barriers to international trade (Nový and Jarý 7). Additionally, the pandemic led to the closure of national borders, completely paralyzing the internationalization of businesses.
In the globalized economy, national governments often had to work with many interest groups to make decisions, but their actual influence on budgeting was minimal. However, COVID-19 temporarily weakened the power of interest groups, including transnational corporations, due to the closure of national economies, making lobbying or financing election campaigns by transnational corporations ineffective (Nový and Jarý 7). As a result, transnational corporations lost their ability to influence individual governments. Additionally, the COVID-19 mitigation measures imposed in individual countries resulted in the reassessment of cost-effective sectors of the economy. Therefore, governments reevaluated their expenditures on strategic reserves to support domestic production and achieve economic self-sufficiency. For instance, the pandemic highlighted the importance of domestic pharmaceutical and medical device production (Nový and Jarý 7).
The COVID-19 pandemic had a significant impact on international oil prices. The lockdowns and travel restrictions imposed by many countries in response to the pandemic caused a massive drop in global oil demand, leading to a surplus of oil and a sharp decline in prices on a short-term basis. According to Malliet et al., the drop in demand was further exacerbated by the pre-existing imbalances in the global oil markets, including poor coordination between OPEC and non-OPEC producers (873). Additionally, a price war between major oil producers, Saudi Arabia and Russia, further fueled the decline in oil prices. As a result, international oil prices were projected to drop by 50 percent in 2020 (Malliet et al. 873). As businesses shut down and people stayed home during the pandemic, the demand for transportation fuels, such as gasoline and jet fuel, plummeted. This significantly dropped crude oil prices as producers struggled to find buyers for their excess supply.
The COVID-19 pandemic profoundly impacted the job sector, particularly small and medium-sized enterprises (SMEs) and self-employment. The pandemic led to widespread business closures and reduced economic activity, resulting in job losses and reduced working hours for many individuals. According to Belitski et al., the social distance containment measures mainly affected the job sectors that relied on physical proximity, such as self-employed individuals and small businesses (594). Thus, the pandemic directly influenced self-employed individuals and small businesses more than employed individuals and large businesses in the United States and Europe. Despite this difference, the pandemic increased unemployment rates globally. In the US, there was a three million increase in first-time unemployment beneficiaries in the first week of May 2020, bringing the total number of applications to 33.5 million during the first three months of the lockdown (Belitski et al. 594). Furthermore, the number of active business owners in the US dropped from 15 million to 11.7 million between February and April 2020 (Belitski et al. 594). The situation was similar in the UK, as the pandemic affected employment. According to Belitski et al., the UK saw its unemployment rates reach its highest level since 2017 (594).
Moreover, the COVID-19 pandemic led to a significant shift in the nature of jobs, with a large number of Americans now working from home part-time or full-time. The change was driven by lockdowns and social distancing measures implemented to prevent the spread of the virus. However, the fact that 71 percent of Americans want to continue working from home even after the pandemic ends suggests that this shift may be more long-lasting (Glink and Tamkin 2). The pandemic forced companies and individuals to adapt to remote work and digital communication, and many have found that they prefer this new way of working.
The COVID-19 pandemic had a profound impact on the global and United States economy, leading to significant changes in the housing market, international trade between countries, international oil prices, and drastic changes in the job sector. Understanding the impact of the pandemic on different sectors of the economy can provide insights into how various industries and businesses have been affected and how they might recover in the future. This information can be useful for policymakers, investors, and businesses as they make decisions about allocating resources and developing strategies to navigate the ongoing economic challenges posed by the pandemic.
Belitski, Maksim, et al. “Economic effects of the COVID-19 pandemic on entrepreneurship and small businesses.” Small Business Economics 2022: 594–609. DOI: https://doi.org/10.1007/s11187-021-00544-y.
Glink, I., and S. Tamkin. “Challenges and opportunities in the COVID-driven housing market.” The Washington Post (2021). ProQuest, https://login.proxy189.nclive.org/login?url=https://www.proquest.com/blogs-podcasts-websites/challenges-opportunities-covid-driven-housing/docview/2502075025/se-2?accountid=15152.
Malliet, P., Reynès Frédéric, Gissela, L., Hamdi-Cherif Meriem, & Saussay Aurélien. (2020). Assessing short-term and long-term economic and environmental effects of the COVID-19 crisis in France. Environmental and Resource Economics, 76(4), 867-883. DOI: https://doi.org/10.1007/s10640-020-00488-z.
Nový, Miloš, and Čestmír Jarý. Economic and Social Impacts of COVID 19 on National Economies from the Point of View of Economic Theory. vol. 92, EDP Sciences, 2021. ProQuest, DOI: https://doi.org/10.1051/shsconf/20219201036.