ii
Executive Summary
There is no doubt that 2020 will not be a conventional year. The novel coronavirus is
having a major impact on the overall economy. Economies like the American that
experienced significant employment growth in 2019 are now struggling due to the
deliberate rise in unemployment.
The high level of infectivity of the virus caused great fear in the economy; forcing
businesses to close and consumers to stay home. The severe lockdown lasted almost a
month in the United States and had a severe domino effect on both the goods market and
the labor market. In the goods market, the economic freeze created a high degree of
uncertainty, which led to a high reduction in private consumption and, hence, a drastic
drop in demand for non-essential goods and services. Consequently, the output level
(GDP) and private income decreased accordingly. In the labor market, both temporary
shutdowns and lower demand created financial distress for companies, leading to massive
layoffs and wage cuts. Thus, the unemployment rate skyrocketed.
Unemployment is rising so fast that some experts believe that it may exceed the highest
peak of unemployment of the Great Depression in 1993. Yet, so far, there is still no valid
unemployment rate estimate, as the duration and negative consequences of the pandemic
are currently not foreseeable.
, iii
List of Figures
Figure 1: March true unemployment rate…......……………………………….…...........2
Figure 2: Goods market equilibrium………………………...…………………….….…4
Figure 3: Labor market equilibrium……..........................................................................5
Figure 4: Coronavirus effect on the goods market…...…………..………….…………..7
Figure 5: Coronavirus effect on the labor market…………….…..………..…….….…..9
, iv
List of Tables
Table 1: Faberman’s June unemployment forecast…………………………………..…3
, v
List of Formulae
Formula 1: The aggregate demand formula …….……………………………..…..…5
Executive Summary
There is no doubt that 2020 will not be a conventional year. The novel coronavirus is
having a major impact on the overall economy. Economies like the American that
experienced significant employment growth in 2019 are now struggling due to the
deliberate rise in unemployment.
The high level of infectivity of the virus caused great fear in the economy; forcing
businesses to close and consumers to stay home. The severe lockdown lasted almost a
month in the United States and had a severe domino effect on both the goods market and
the labor market. In the goods market, the economic freeze created a high degree of
uncertainty, which led to a high reduction in private consumption and, hence, a drastic
drop in demand for non-essential goods and services. Consequently, the output level
(GDP) and private income decreased accordingly. In the labor market, both temporary
shutdowns and lower demand created financial distress for companies, leading to massive
layoffs and wage cuts. Thus, the unemployment rate skyrocketed.
Unemployment is rising so fast that some experts believe that it may exceed the highest
peak of unemployment of the Great Depression in 1993. Yet, so far, there is still no valid
unemployment rate estimate, as the duration and negative consequences of the pandemic
are currently not foreseeable.
, iii
List of Figures
Figure 1: March true unemployment rate…......……………………………….…...........2
Figure 2: Goods market equilibrium………………………...…………………….….…4
Figure 3: Labor market equilibrium……..........................................................................5
Figure 4: Coronavirus effect on the goods market…...…………..………….…………..7
Figure 5: Coronavirus effect on the labor market…………….…..………..…….….…..9
, iv
List of Tables
Table 1: Faberman’s June unemployment forecast…………………………………..…3
, v
List of Formulae
Formula 1: The aggregate demand formula …….……………………………..…..…5
