The over $2 trillion relief package released by the United States government in the wake of the COVID-19 pandemic through the CARES Act may have some positive effects on the economy. This is according to a recent analysis released by the University of Pennsylvania’s Wharton School which estimates that roughly 1.5 million jobs could be created as a direct result of the relief program of the government.
This translates to an increase in GDP of $812 billion over the next two years, the analysis says. The reduction in GDP is also expected to slow down to 30% in Q2 of 2020 rather than the initially projected 37% which would have played out without the relief in place. The unemployment rate which could have risen to 12% will now be limited to 11%, also as a result of the relief package.
Stimulus effect is limited
The stimulus package seems to be a good source of relief to the citizens of the United States as well as the businesses considered vulnerable. However, the analysis also reveals that the effect will not be absolute as some sectors of the economy are unable to produce due to the lockdown imposed on workers who cannot work from home.
“There are limits on the effects of the stimulus because many sectors are simply unable to meet demand due to stay-at-home orders,” the analysis says.
Workers have been ordered to stay at home if they are in non-essential sectors. The exceptions are those in the line of medicine or other sectors considered to be essential at this point in time. This was in a bid to curb the spread of the virus in the country while intensive research on the virus is ongoing.
The U.S currently runs 49 medical studies related to COVID-19 according to our Coronavirus Research Index (CRI).
Moreover, based on confirmed cases our Coronavirus calculator estimates that 0.11% of the US population is infected with the virus. Additionally, the methodology used by experts predicts that the real number of potentially infected US citizens could be drastically higher varying between 11,756,320 to 26,451,720 cases.
While the stimulus package has been criticized in several quarters as a potentially huge source of inflation in the future, it may be comforting to know that the action does have some positive impacts on the economy despite the damage being caused by the virus on the population.
The CARES Act
The CARES Act is an act of the U.S federal government that gave rise to the relief package for COVID-19, mainly to help cushion the effects of the Stay-at-home order. The act splits the package into Unemployment Benefits, One-time Checks, Income Support, Small-Business Loans and Grants, Loan Programs for Large Businesses & Governments, Transportation Support, Direct Aid to State and Local Governments, Health and Disaster Spending, Education, Individual Taxes, Business Taxes, and Other Spending.
Although the relief package is as major support that could ensure faster recovery for the economy than otherwise possible, the rate of unemployment is projected to rise in the future as the COVID-19 pandemic is still very active in the country and 100,000 deaths have been projected with possible harsher economic effects.
Further analysis is to be done as the U.S Congress is still considering more stimulus packages to tackle unemployment and provide support for small businesses.