Scarlet Speakers in Heart of Your Home series features talk about economic aspect of coronavirus
Thomas Prusa, professor in the Department of Economics, spoke on April 16 about the short and long-term impacts of coronavirus disease (COVID-19) on the economy in "The Long and Short of It: The Economic Impact of the Coronavirus.” The talk was part of the Scarlet Speakers in the Heart of Your Home virtual series.
Prusa began by offering a disclaimer about what the talk is not about: politics, who to blame, public health, forecasts about the stock market or when vaccines will be ready.
“People often think that economists spend their time making forecasts and predictions,” he said. “That's in fact what a striking minority of economists actually do. Most of us spend our time looking and interpreting what's happening to the economy.”
He said the goal of the talk was to understand the historical event that is taking place by discussing the facts that are currently known, the federal government’s response and potential short-term and long-term effects.
“We're living through the biggest economic shock that the world has ever seen,” he said.
Prusa discussed the idea of the “perfect storm” factors causing recessions, such as supply-side shock, demand-side shock and financial factors. He said while it is usually one primary factor that leads to a recession, all three are happening at the same time to economies all over the world.
He said in January and early February, economists thought the COVID-19 outbreak would be mostly limited to China and how a shutdown in China would be a shock, but the impact in the United States would be small.
In the middle of February, though, they realized early predictions were too optimistic, he said. COVID-19 was beginning to spread through Europe and other parts of the world, resulting in far more seriously ill patients and many countries starting to socially distance themselves.
Prusa said many different industries may become bankrupt, such as the service industry and manufacturing industry. This also includes the shipping industry, which has a large port in Newark, New Jersey, he said.
The government’s strategy for social distancing, Prusa said, is that instead of having a short gross domestic product (GDP) negative, many more people are staying home and the negative GDP will be longer. He said the first priority is to protect public health, protect economically vulnerable companies, especially those that can recover and maintain the resiliency of the economy.
Prusa said the healthcare industry is an important priority for the government. He discussed how a doctor from Robert Wood Johnson University Hospital said one hospital, the New York-Presbyterian Hospital, will lose one billion dollars over a three-month period.
He said state budgets may also need to be reduced, which may impact the funding in the education system. He said the unemployment rate is expected to rise from 3.5 percent to approximately 15 percent within one month.
“There has been unprecedented fiscal and monetary economic response, and that is a hopeful sign,” Prusa said.
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