The pandemic has disrupted the economic state of millions of Americans and continues to push us closer and closer to a state of crisis. The economic crisis is unprecedented in its scale: the pandemic has created a demand shock, a supply shock, and a financial shock all at once. Needless to say, the eviction crisis is on the rise and we have been living a nightmare. While the list goes on and on of all the ways the pandemic has caused the global economic slowdown, there are many ways the economy has been impacted that you may not be aware of. Check out these 5 unexpected economic impacts that COVID has bestowed upon us.
1) Small business revenue is down 20 percent since January: Millions of small businesses have had to shut their doors since the beginning of this COVID crisis. Those who remain open have faced a number of obstacles that has caused a slowdown in revenue. In line with these declines in revenue, significant declines in employment at the beginning of the recession were seen in small businesses. Being that small business is the backbone of the American economy, this has caused major holes in our current economic climate. If we want to see our economy turn around, fixing the heart of the small business is the first step.
2) In 26 states, more than one in five households was behind on rent in July. Without jobs, millions of Americans can’t sustain their way of life including keeping a roof over their heads. With no agreement in sight for the second round of stimulus checks, many families are left months behind on rent with no way to come up with the funds. Not to mention, the orders in place to protect families economically impacted by COVID from getting evicted have long worn off. Now, homelessness is knocking on the doors of millions of families at this point.
3) In April 2020 the U.S. personal savings rate reached its highest recorded level. This is an uplifting surprise effect of COVID. As a way of preparing for what’s in store, at the start of COVID, many people started to spend less and save more. The personal saving rate peaked at 34 percent in April, its highest level in recorded history. It has decreased since then but remains significantly elevated.
4) From 2018 to mid-2020, the rate of food insecurity doubled for households with children. Families are at risk of starving because of the lack of jobs and financial security. This has really hit hard for families with children. Why? Because on top of the financial hardships families are facing, many children are utilizing online learning, meaning schools can’t relieve the burden of feeding the children throughout the day. Unfortunately, many children in low-income families are dependent upon free breakfast and lunch programs for their daily source of food. In June and July, rates of very low food security among children worsened, increasing from 16.4 percent in the first week in June to 19.0 percent by the third week of July.
5) New business formations fell off in the spring, but are on track to outpace recent years. While many small businesses have had to close due to the impact of COVID, many entrepreneurs saw this as an opportunity to capitalize off of the unique needs created by COVID. By early June 2020 cumulative high-propensity business formations were 4.4 percent lower than they were at the same time in 2019; however, by mid-August, there were actually 56 percent more new business applications than in mid-August 2019. People have begun to wake up and recognize that the only way for you to truly prevail in this tough economic situation is to take matters into your own hands.
COVID has had a profound impact on the global economy. As with everything, some of the effects were good, others very bad. The one thing we can agree on is that many of the changes will have long-term consequences and will never return to "natural." It's crucial that we keep up with the massive changes that are taking place around us so that we can adapt. Only those who can learn and adapt will live. So take all the impacts of COVID with a grain of salt and prepare accordingly.
Ziad K. Abdelnour, Chairman, President & CEO of Blackhawk Partners Inc, is widely regarded as one of the world's top business leaders. In addition to being a best-selling author, he is also a founder and Chairman of the board of the Financial Policy Council.