Harvard Economist, John N. Friedman, examined the impact of COVID-19 on the economy of United States. Today, he will impart how the economy thrives despite the changing spending behavior of households, attributed by the pandemic and how it will impact the future.
According to Friedman, today’s recession is different because of the response of the consumers. He explained that the high income earners rapidly cut off their spending habits which significantly affect local businesses in developing cities.
Moreover, it is important to note that the wealthiest citizens obtain half of the spending reduction during today’s pandemic. As a result, there are higher unemployment rate.
“For the past 40 years in the U.S., we’ve seen incomes grow much faster at the top than at the bottom. In the past few years, we were starting to see signs of more balanced growth, where median incomes started to tick up. But the pandemic ended that quite suddenly,” Inc report stated.
Having said that, the future of the economy may not be favorable to small businesses because of limited liquidity reserves. Friedman predicted that in the next 12 months, more small business will stop to operate.
But with today’s situation, there are a lot of people learn to find new sources of income through entrepreneurship. Thus, new things are still occurring amidst the pandemic.
Interestingly, Friedman concluded that businesses that can adopt immediately with today’s situation can survive and optimize more opportunities.
“Businesses need to find ways to stay true to core competency, but maybe deliver it in a new way. Maybe there’s a slightly different type of service that leans on the same set of main business workings, but adapts itself for the times,” Friedman suggested.
“Small businesses, because they can be more nimble and agile in response, can be best positioned to shift focus in this way,” he added.