Coronavirus, The Stock Market, And The Economy

In short, those who don’t have a lot of money in the stock market should view its ups and downs as you would any other spectator sport. It doesn’t have a lot to do with you. (Even those who do have lots of money in the market can be consoled by the fact that lower prices today mean higher future returns – not exactly a disaster story.)

The Coronavirus and the Economy

While the drop in the market by itself may not be bad news, the prospect of the spread of the coronavirus certainly is. In addition to the very serious health risk it poses to tens of millions of potential victims, it also could have a very large economic impact.

There already has been much written how the efforts to contain the disease in China have led to the shutdown of many factories, leading to shortages of important production inputs here. This can force factories to curtail production until alternative sources of supply can be found or Chinese suppliers are back up and running. But this is just the beginning of the sorts of economic disruptions that we may see if the coronavirus spreads quickly across the United States.

In a Huffington Post piece, Hayley Miller and Arthur Delaney examine the economic consequences of the sort of school closures that we have seen in Japan and elsewhere. A large percentage of the affected workers will be forced to stay home since they will be unable to make alternative child care arrangements. This could mean millions of workplaces are unable to maintain normal operations since they are understaffed. Look to longer wait times at everything from restaurants and barbershops to doctors’ offices and hospitals. The lines at the latter will also be affected by the increased demand from people who either are infected with the virus or are worried that they could be.

And, many people who miss days of work will also be missing days of pay, since they don’t have paid sick leave. That will mean less demand in the economy since these people will have less money to spend. And of course, another effect of the lack of paid sick leave is that many people will go to work sick, causing the virus to spread more widely.

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Charles Howard 1 year ago Member's comment

Dean Baker It’s been a rollercoaster market in recent days for equity investors, and today we appear to be on the downward leg for that ride.

Gary Anderson 1 year ago Contributor's comment

Well, it is in Maryland now. It will eventually hit DC and we will see if Trump gets more serious.