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Is the COVID-19 Pandemic a Supply or a Demand Shock? | St. Louis Fed

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Is the COVID-19 Pandemic a Supply or a Demand Shock? | St. Louis Fed

For this reason, most economists would agree that the pandemic combines aspects of both supply and demand shocks. A supply shock is anything that reduces the economy's capacity to produce goods and services, at given prices. Lockdown measures preventing workers from doing their jobs can be seen as a supply shock. A demand shock, on the other hand, reduces consumers' ability or willingness to purchase goods and services, at given prices. People avoiding restaurants for fear of contagion is an example of a demand shock. Additionally, as service sector workers lose their jobs and income, they stop purchasing all kinds of goods, such as cars and appliances, which can also be thought of as a sectoral demand shock.

Conventional monetary and fiscal policy can offset some types of aggregate demand shocks, but other policies may be more appropriate to counter supply shocks. Understanding whether supply or demand causes a particular shock is therefore very important for policy design. The government doesn't want to stimulate activity in certain service sectors because of concerns about further spreading COVID-19. The government could, however, stimulate sectors that are not part of the lockdown but are subject to aggregate shocks. This means that it is important to understand whether supply or demand shocks or both affect each sector.

Coronavirus Live Updates : NPR

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Fed’s Powell Says Sharp Economic Downturn Won’t Last : Coronavirus Live Updates : NPR

Federal Reserve Chairman Jerome Powell warns it could be another year and a half before the U.S. recovers from the economic fallout of the coronavirus pandemic. But he says this will not be another Great Depression.

"It's going to be a very sharp downturn," Powell said in an interview with 60 Minutes that aired Sunday. "It should be a much shorter downturn than you would associate with the 1930s."

Powell, who is set to testify before the Senate Banking Committee on Tuesday, reiterated his view that Congress may need to authorize additional relief spending to keep families and businesses afloat until the virus is under control.

Coronavirus Live Updates : NPR

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Fed’s Jerome Powell Says More Relief Spending May Be ‘Costly, But Worth It’ : Coronavirus Live Updates : NPR

Additional government spending may be necessary to avoid long-lasting fallout from the coronavirus pandemic, Federal Reserve Chairman Jerome Powell said Wednesday.

Powell said the economy should recover once the virus is under control. But he cautioned that without more help, many small businesses may not survive that long. And he warned that a wave of business and household bankruptcies could do lasting damage to the nation's economic output.

Coronavirus Live Updates : NPR

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14.7% Unemployment, 20.5 Million Jobs Wiped Away : Coronavirus Live Updates : NPR

The Labor Department delivered a historically bad employment report Friday, showing 20.5 million jobs lost last month as the nation locked down against the coronavirus. The jobless rate soared to 14.7% — the highest level since the Great Depression.

The highest monthly job loss before this was 2 million in 1945, as the nation began to demobilize after World War II. The worst monthly job loss during the Great Recession was 800,000 in March 2009.

Americans are discovering frugality – Vox

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Washing Ziplocs, eating bread crusts: Americans are discovering frugality – Vox

Frugality is a trait and a value as old as time, spiking in certain cultures and generations, living situations and individuals, out of both necessity and outlook. Behaving economically with money or resources has become both a rare virtue — on aspirational blogs like the Frugality or self-help tomes like Your Money or Your Life — and a cultural punchline, good for a joke about hoarders or one’s immigrant family, grandparents who lived through the Great Depression, or good old-fashioned tightwads. "What’s newer, in fact, is the idea that some items are immediately and obviously disposable"

What’s newer, in fact, is the past 70-ish years of American materialism, which birthed the idea that some items are immediately and obviously disposable, or that eating food that you bought and paid for, food made of food, is inherently strange. As a widespread attitude, it’s historically unusual and it may be, at least for now, fading.

Since quarantine started, following the spread of Covid-19, there has been a move away from this culture of waste. This new strain of frugality — call it the novel frugality — is defined by its attachment to this moment and its participants’ motivations. While it might mirror long-held practices (like not throwing away aluminum foil or consciously saving scraps of leftovers to make new meals), its impetus is slightly different.