After the reccesion of economy caused by Covid19, why do experts expect a ‘U’ shaped recovery rather than a ‘V’ shaped recovery?In your answer explain the difference between the two types of recoveries. Although the virus has delayed the budget until October .. last week the secretary to theTreasury dropped some big hints on what to expect. In evidence to the Senate committeeinquiring into the response to the virus, Dr Steven Kennedy started with the outlook for thelabour market. The latest figures from the Australian Bureau of Statistics are for the fourweeks up to mid-April. In round figures, they show that 900,000 people lost their jobs duringthe period (although 300,000 gained jobs), 1 million people worked fewer hours and three-quarters of a million kept their jobs but worked no hours (most of them protected by theJobkeeper wage subsidy scheme). So that's a total of 2.7 million workers - about one workerin five - adversely affected by the snap recession. Total employment fell by 4.6 per cent, buttotal hours fell by twice that - 9.2 per cent, telling us much of the pain was borne by part-time workers. The rate of under- employment (mainly part-timers working fewer hours thanthey want to) leapt by almost 5 percentage points to 13.7 per cent. The "good" news is,Kennedy thinks that's most of the collapse in employment we're likely to see. We may get abit more in the figures for May, and maybe even a fraction more in June. But that should beit. The trick, however, is that though the underlying position won't be getting much worse,we'll see the rate of unemployment shooting up. It had risen by "only" 1 percentage point to6.2 per cent by mid-April, but Kennedy expects it to be closer to 10 per cent by mid-June.(And it would have gone a lot higher but for the Jobkeeper scheme.) Such a strange outcome- it's not actually getting much worse, but the unemployment rate is rocketing - is explainedby the strange nature of this "corgnacession": a recession caused by the government, actingunder doctors' orders. In an ordinary recession, almost all the people who lost their jobs inApril would have immediately started looking for a new one, and so met the bureau's tightdefinition of being unemployed. This time, most people didn't start looking because manypotential employers had been ordered to cease trading and, in any case, you and I had beenordered to stay in our homes and rarely come out. As the lockdown is eased, however,people will start actively looking for work, and the bureau will change their status from "notin the labour force" to unemployed, making the figures look a lot worse. On Wednesday, thebureau will publish the "national accounts", showing what happened to real gross domesticproduct – the change in the economy's production of goods and services - during the Marchquarter. (Note, GDP fell 0.3% in the March quarter- MS.) Kennedy is expecting real GDP toPage 1 of 2921 wordsEnglish (Australia)E Focus89% have fallen a bit, mainly because of the bushfires and the ban on entry to Australia by foreigntourists and overseas students. He's expecting the big fall to come in the June quarter, andfor the combined fall since December to be as much as 10 per cent. If it's anything like thatbig it will be humongous. The total contraction in the last recession, in the early 1990s, wasjust 1.5 per cent. But, as with the job figures, Kennedy is expecting the contraction in GDP toend with the June quarter. The big question is, what happens after that? With most of theeconomy reopened - but, of course, our borders still closed to international travel – willmost of us be back at work and producing and spending almost as normal? That is, will theperiod of the economy dropping like a stone be followed by it bouncing back like a rubberball, producing a graph that looks like a big V?No. Kennedy told the Senate committee "I'm not predicting a V-shaped recovery in anysense, but the way we entered this (downturn], and the nature of this shock, give me somehope that if governments respond well, particularlytheir fiscal levers (that is, theirbudgets), we needn't have what's called the L-shaped recovery".That is, economic activity drops a long way, but stays there without growing. Kennedy saysthe L-shape is probably what people would think of as more like a depression.Kennedy noted that, according to separate figures from the bureau, the number of jobs inthe accommodation and food sector fell by more than 25 per cent in just the three weeks toApril 4, while jobs in the arts and recreation services sector fell by almost 19 per cent.He drew some hope from the fact that the sectors worst affected by the lockdown are "quitedynamic". "They're sectors that have high turnover in businesses coming and going, quitehigh turnover in employees and a lot of casuals," he said. So, in the right conditions, they hadthe potential to re-establish quickly. In contrast, it was hard to re-establish a manufacturingplant quickly. In this strange recession, manufacturing, construction and mining had beenallowed to continue without much disruption. If you rule out V-shaped and L-shapedrecoveries, what's left is a U-shape. You go down fast but bounce along the bottom beforegoing back up. But our success in suppressing the virus means we've been able to startdismantling the lockdown earlier than the six months initially expected. "So in some wayswe're actually a little more optimistic (than we were] – maybe we just squeeze the Utogether a bit," he saidPage 2 of 2921 wordsEnglish (Australia)E Focus89%

The recession leads to a significant decline in the economic activity, real income, real GDP,…

After the reccesion of economy caused by Covid19, why do experts expect a ‘U’ shaped recovery rather than a ‘V’ shaped recovery? In your answer explain the difference between the two types of recoveries.

After the reccesion of economy caused by Covid19, why do experts expect a ‘U’ shaped recovery rather than a ‘V’ shaped recovery? In your answer explain the difference between the two types of recoveries.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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