Economic Growth and Unemployment

Economic Growth and Unemployment
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Economic Growth and Unemployment
According the Economist article published on 2nd May 2020, the COVID-19 pandemic has increased the rate of unemployment in the US. In March, US firms shed approximately 700,000 jobs and 2 million in April. Around 26 million Americans filed for unemployment insurance with 10 percent receiving unemployment benefits by 18th of April. This has led to an unemployment crisis in the US that was last witnessed in the year 1930. As predicted by America’s Congressional Budget Office (CBO), the unemployment rate is expected to rise by 14 percent in the second quarter and 16 percent in the third quarter which is expected to be the peak. The future magnitude of the unemployment rates will be dependent on the plumbs on economic activities.
The unemployment crisis will have severe effects on the American economy for a longer time post Covid-19 pandemic. The Gross Domestic Product (GPD) has fallen by 1.2 percent. The CBO projects the figure to fall by 12 percent in the second and third quarters at the rate of -40 percent annually. This means there will be less cash flow in the market to buy goods thus the poor will suffer more. There could be a rise in the number of people living below the poverty line. The most efficient way out of this is for the government to provide stimulus programs to the affected people which is already in action. However, firms in the US may resort to the use of automated technologies to streamline production which could end up reducing labor demands. A fall in GDP also decrea...