"DISCUSS THE EFFECTS OF COVID 19 ON LABOR MARKETS AND THE ECONOMY"

ATTACHED ARE ARTICLES TO SUPPORT YOUR RESPONSES. SHORT ANSWERS ARE NOT ACCEPTED OR ELSE SOLUTION WILL BE REPORTED.

ANSWER THE FOLLOWING QUESTIONS:

1. Why did the unemployment rate increase in the year 2020?

2. How Did COVID-19 Unemployment Insurance Benefits Impact Consumer Spending and Employment?

3. How has the pandemic impacted inflation?

4. How did Covid-19 effect the U.S stock market?

FOR FINANCIAL ADVISORS Nationwide' By Nationwide Economics How Has the Pandemic Impacted Inflation September 14, 2021 After a decade of muted price gains, inflation fears have cropped up again as the costs of many goods and services have spiked this year. The ongoing pandemic has played a leading role in the jump in inflation as lingering COVID- induced supply chain disruptions have made it difficult to find some items while driving up consumer prices. Predicting future inflation can be difficult as current readings only reflect where prices have been trending rather than where they are headed. Moreover, temporary supply or demand shocks within specific industries (L.e. - oil and gasoline) can swing inflation for periods of time. For these reasons, tracking the longer-term influences on price gains can provide a clearer picture of the inflation outlookPost-pandemic inflation spike among the highest in 30 years 6.0 - Current level 5.0 4.0 3.0 2.0- 1.0 -10 - -2.0 3.0 1988 Source: Bureau of Labor Statistics Historical impact of pandemics on the economy Historically, health pandemics have caused significant shocks to the U.S. economy. Flu pandemics in 1957 and 1968 were followed by economic downturns while the 1918 Spanish flu was extremely disruptive to the entire society at the time. The nature of a pandemic causes both a demand shock as consumers pull back on activity and a supply shock as businesses shut down or reduce operations. Moreover, there is little to no warning for consumers, businesses, or governments that an extreme shock will occur, making for a sharp shift in overall economic conditions. The supply shock component of the pandemic has the largest impact on inflation as the productive capacity of the economy falls. For example, the oil supply shocks of the 1970s helped to cause the highest spikes in consumer inflation seen over the past 70 years. As the economy comes out of the pandemic, demand will increase, potentially sharply, surpassing the ability of businesses to supply products. This could lead to shortages of goods and services and higher prices for the items that are available. Short term impact of the pandemic on inflationInflation typically increases coming out of downturns as demand outpaces supply early in the recovery, but this tendency has been exacerbated by COVID- 19 impacts. Demand for many goods dropped in 2020 and remained lower into 2021 as further waves of COVID cases led to government restrictions on consumer behavior. As cases waned in the spring of 2021, these restrictions were mostly lifted, driving a surge in demand. Supply conditions of many inputs (l.e. - lumber, steel, and microchips) were depressed during the pandemic, too in anticipation of reduced demand with the downturn and due to pandemic limits on the number of workers. Once the economy reopened more fully, total production within many industries lagged as businesses had difficulty finding inputs and workers. The resulting supply crunch led to higher costs for producers which were passed into many of the prices seen on shelves, with the annual change in the consumer price index spiking to 5.4 percent in mid-2021. While the pandemic remains disruptive for many parts of the global supply chain, including shipping and ground transportation, these impacts should fade in the second half of 2021 and into 2022. As such, the Federal Reserve and many economists feel that the recent rise is an example of transitory inflation. What is transitory inflation? This is a period where prices spike temporarily due to an imbalance between supply and demand in the market, as has occurred over the past year. Once the shock passes and supply chains heal, inflation should settle at a lower level that is more in line with long-term trends. Most forecasts project that inflation will fall to around 2.5 percent by the end of 2022. Long term post-pandemic outlook on inflation Not all the recent price increases are gpected to be transitory, however, as lingering pandemic impacts could drive up wages and housing costs for several more years. Average inflation over the next five years could be slightly higher than the pre-COVID trend as a result, running between 2.5-3.0 percent. Still, it is expected that inflation expectations will remain in check as longer-term price depressants caused by increased online purchases (the so-called \"Amazon effect\") and the offshoring of production should continue. Moreover, one of the objectives of the Federal Reserve is long-run price stability which they define as an average of 2.0 percent annual inflation. While the Fed will likely let inflation run above its 2.0 percent target for a short period of time, economic conditions should improve enough to prompt interest rate increases by late 2023. The eventual tightening of monetary policy will act to slow the economy and, thus, prices keeping inflation near its long-run average. The COVID-19 pandemic has been highly disruptive for the U5. economy with effects that could linger for years. While price gains have increased sharply this year, much of the recent inflationary pressure is expected to be transitory as COVID impacts on supply chains fade heading into 2022. There is a risk that inflation could run hotter than expected in the future, but long-term price depressants and eventual Fed action should keep inflation in check beyond the current spike. Still, given the uncertainty around forecasting inflation, these trends bear watching for an unexpected shift in prices. NFM-21213AO Keywords: #COVlD-19 #economic growth #habits #pandemic Congressional Research Service I I . , . (is. Informing the Ioglslatlvo debate SII1061914 June 24, 2022 How Did COVID-19 Unemployment Insurance Benefits Impact Consumer Spending and Employment? The COVTD-19 pandemic dramatically disrupted the economy with mass layoffs and business closures. The economy was shocked with stay-athome and shutdown orders designed to limit person-to-person contact. These restrictions on the ow of labor and commerce reduced economic demand. They also increased the number of workers unable to work. Additionally, the increased workplace hazards created by the COVTD-19 pandemic further limited certain jobseekers' options for employment, creating unusual shifts in the labor market. Congress recognized the potential threat that such massive earnings losses posed to the national and global economy and responded by augmenting the joint federalstate Unemployment Insurance (UT) system to maintain the economy, among many other measures that provided income support. Recent studies have examined the impact of these UT expansions on consumer spending and em ploym ent. UI Benets During the Pandemic Congress enacted key changes in the UT system in response to the high levels of unemployment resulting from the COVTD19 pandemic and recession (February 2020 through March 2020). Typically, the UT system provides income support to unemployed workers through weekly benefit payments. UT payments help (1) provide temporary partial wage replacement to involuntarily unemployed workers and (2) stabilize the economy during recessions. Permanent-law JT programsUnemploym ent Compensation (U C) and Extended Benefits (313)7automatically respond to layoffs and business closures. However, unprecedented job loss during the COVTD- 9 pandemic prompted Congress to enact a series of extraordinary measures: Federal Pandemic Jnemploym ent Compensation (FPUC), Pandemic Emergency Unemployment Compensation @EUC), and 3andemic Unemployment Assistance (PUA). These UT measures helped to maintain consumer spending and stabilize the economy during this period. PEUC was similar to congressional actions taken in previous recessions as it extended the availability of regular UC benefits (available for up to 26 weeks) for up to an additional 49 weeks. However, two of these interventions, FPUC and PUA, were unprecedented when compared to responses during previous recessions. 0 FPUC provided a weekly supplement on top of all UT benefits. FPUC provided a $600 weekly supplement between April and July 2020 and was reauthorized at $300 weekly from January 2021 through the beginning of September 2021. FPUC payments from April 2020 through September 6, 2021, totaled $442.3 billion. 0 PUA uniquely expanded the population eligible for UT to include the self-employed, gig workers, and others not previously eligible for UT or those unable to work for certain COVID-lQrelated reasons. PUA payments totaled $131.2 billion. Research on the COVI D- I 9 UI Benets An emerging research literature leverages new and rich sources of data to examine both (1) the role that COVTD19 UT benefitsparticularly FPUC and PUAplayed in boosting spending and consumption in US. households that experienced unemployment and (2) whether the supplemental UT benefits decreased the likelihood that unemployed workers found work. A strength of recent studies is their use of new sources of data to evaluate UT impacts, particularly on personal consumption patterns. Measuring the personal consumption response to government programs is traditionally challenging. Data on consumption are scarce and often contain significant measurement error, which makes statistical inference difficult and imprecise. The research discussed below, however, benefits from new proprietary data sources that harness anonymized bank account and lending data to provide weekly information on income, spending, and employment. Additionally, the research uses another new source of household level data: the Household Pulse Survey, an experimental weekly survey conducted by the Census Bureau in collaboration with several federal agencies that includes information on individuals' employment status, spending patterns, food security, housing, physical and mental health, access to health care, and application for and receipt of benefits. Some studies of employment effects are also strengthened by the ability to analyze job applications to an online jobs platform. However, research findings related to the impact of the COVTD-l9 UT benefits may not be generalizable to other periods or labor market conditions. The COVTD-19 recession was created by an abrupt, exogenous shock attributed to public health and safety concerns rather than a series of economic stresses, which are associated with a more typical recession. Additionally, the federal response to the pandemic included several other forms of assistance to employers and employeesisuch as the Payment Protection Program, the Employee Retention Tax Credit, and Economic Impact Payments to householdsithat may also have affected personal consumption and the incentives for employment. COVTDlQspecific factors, such as the availability (or scarcity) of vaccines, childcare, and in person school, may have also contributed to unusual patterns in returning to work during this period. https:/lcrsreportscongressgov How Did COVID-19 Unemployment Insurance Benefits Impact Consumer Spending and Employment? Consumer Spending and COVID-19 UI Payments While the recent research studies did find that the expanded One of the primary objectives of UI is to alleviate the UI benefits had disincentive effects on working, the impact hardships that result from loss of wages during was smaller than expected when compared to estimates unemployment. Typically, UI benefits replace up to 50% of based upon models from prior recessions and non- previous earnings, temporarily supporting workers' basic recessionary periods. Marinescu et al. (2021) reported that needs, but UI benefit recipients' expenditures are often although the weekly $600 FPUC substantially decreased lower than when they were employed. Without UI, the applications to an online jobs platform, labor demand was unemployed are more likely to report that they are unusually depressed, and thus FPUC had little impact on experiencing food and housing insecurity and are more employment levels. Similarly, Ganong et al. (2021), using likely to exhaust personal savings, sell assets, draw upon bank account data, found a smaller negative impact on retirement savings, and further reduce expenditures. Using employment than expected. They observed that a high level a range of data sources, recent studies indicate that COVID- of employees being recalled to work by their former 19 UI payments played a key role in supporting employers helped reduce the disincentive effects of the consumption and general economic security of households. $600 FPUC payment on employment. Furthermore, they found that after the $600 payments ended, most individuals Using Household Pulse Survey data, Carey et al. (2021) did not exit unemployment despite a precipitous drop in found that unemployed individuals who did not receive UI their weekly income, suggesting that other factors were benefits were more likely (than those who received UI) to impeding employment. Coombs et al. (2021) found that it report food insecurity, housing insecurity, and difficulty in was the termination of the underlying UI benefit rather than meeting household expenses. A working paper by Ganong the loss of the $300 FPUC payment that increased the et al. (2021) using bank account data found that once likelihood of reemployment. Greig et al. (2021) found that COVID-19 UI payments were deposited into workers' PUA recipients were younger, had lower income, and were accounts, spending immediately rebounded at or above pre- more likely to have worked in non-traditional jobs or self- unemployment levels (a result that is in contrast to employment but had similar reemployment responses to generally suppressed consumption patterns in previous those receiving regular UC benefits. recessions). Holzer et al. (2021) found that, in states that terminated FPUC and PUA early, the unemployed were References five percentage points more likely to report difficulty CRS Report R46687, Unemployment Insurance (UI) paying for expenses than in states that continued the Benefits: Permanent-Law Programs and the COVID-19 benefits. Similarly, Coombs et al. (2021) used payday loan Pandemic Response. data to examine consumption patterns of low-income individuals who were receiving COVID-19 UI benefits Carey, Patrick et al. "Applying for and Receiving immediately before early state terminations of these Unemployment Insurance Benefits During the Coronavirus benefits. These researchers found that the loss of benefits Pandemic." Monthly Labor Review (September 2021). led to an average 20% reduction in consumption. Coombs, Kyle et al. "Early Withdrawal of Pandemic Unemployment Insurance: Effects on Earnings UI and Disincentives to Work Employment and Consumption." Harvard Business School, The timing, generosity, and duration of UI benefits can Working Paper (August 2021). influence job search behavior of the unemployed. There is Ganong, Peter et al. "Spending and Job Search Impacts of existing evidence that higher benefit levels and lower Expanded Unemployment Benefits: Evidence from thresholds for benefit eligibility can cause recipients to be Administrative Micro Data." Becker Friedman Institute, less willing to accept a job (and thus increase spells of Working Paper (February 2021). unemployment). However, previous economic research Ganong, Peter et al. "US Unemployment Insurance generally found that the employment disincentive effect of Replacement Rates During the Pandemic." Journal of UI during recessionary periods is relatively small, as job Public Economics, vol. 191, no. 104273 (September 2020). openings are limited; thus, Ul income is not a particularly large contributor to high unemployment rates. Greig, Fiona et al. "When Unemployment Insurance Benefits are Rolled Back: Impacts on Job Finding and the During the COVID-19 pandemic response, weekly UI Recipients of the Pandemic Unemployment Assistance benefits often provided significantly higher levels of Program." JPMorgan Chase & Co. Institute (July 2021). income replacement compared to previous recessions. Holzer, Harry J. et al. "Did Pandemic Unemployment Ganong et al. (2020) estimated that from April to July 2020, Benefits Reduce Unemployment? Evidence From Early the combination of the $600 weekly FPUC supplement plus State-Level Expirations in June 2021." NBER, Working the regular UI payment replaced more than 100% of pre- Paper no. 29575, December 2021. pandemic earnings for more than 75% of UI beneficiaries. Marinescu, Ioana et al. "The Impact of the Federal The estimated replacement rate for workers receiving the Pandemic Unemployment Compensation on Job Search and $600 FPUC varied significantly, with a median replacement Vacancy Creation." NBER, Working Paper no. 28567. rate of 145% and a median replacement rate of over 300% March 2021 for UI beneficiaries with the lowest 10% of earnings. These changes (if implemented during a typical recession) would Julie M. Whittaker, Specialist in Income Security have been expected to substantially dampen the incentive Katelin P. Isaacs, Specialist in Income Security for workers to find employment. IF 12143 https://crsreports.congress.gov