The Economic Environment: Effects of COVID-19 on Employment and Consumer Spending

This essay discusses the economic environment and its external factors that influence businesses. It describes two important global economic effects of COVID-19 situation, including losses of employment and changes in consumer spending habits. Additionally, it provides a short reflection on the economic learning journey and how economics relates to the degree of study.

The Economic
Environment
BUSN07025

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
QUESTION ONE............................................................................................................................1
Describing with suitable evidence, two important international economic effects of COVID-19
situation........................................................................................................................................1
QUESTION TWO...........................................................................................................................3
Providing a short reflection on economic learning journey with explicit reference to how
economics relates to the degree of study.....................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Economic environment is delineated to all external economic elements which influences
purchase habits of people along with businesses resulting to impacting performances
(Baboshkina, Savina and Morozov, 2018). These factors are outside or beyond control of an
individual and firm. Present essay describes two important global economic effects of situation
of COVID-19. It further provides short reflection on economic learning journey about how
economic is related to a degree of studying.
QUESTION ONE
Describing with suitable evidence, two important international economic effects of COVID-19
situation
COVID-19 situation had resulted on dramatic losses of economic and human life worldwide
as well as presents unprecedented changes to world of work. Economic disruption that is caused
by the pandemic situation is devastating. One of important global economic effect of COVID-19
situation is losses of employment. The continued sharp decline in hours of working at global
level due to the pandemic outbreak means there is immediate danger of having livelihood and
employment destroyed. There are millions of ventures that are facing an existential threat of
COVID-19 pandemic at global level. Because of economic crisis resulted by COVID-19
pandemic, around 1.6 billion informal economy workers which represents most vulnerable in
labour market, out of totality of two billion as well as international workforce of 3.3 billion have
suffered huge damage to potentiality to earn a living (Nagarjun, 2021).
Informal economy workers are more vulnerable as majority of them lacks social protection
as well as lost access to productive assets. Proportion of workers that are living in nations require
workplace closures has declined from 81 to 68 per cent in early duration of outbreak of the
pandemic. At international level, around 436 million businesses are facing intense risks of
serious disruptions. It is a real danger that increases poverty addition to widen inequalities in a
country. It is estimated that drop of around 60 percent income of workers at global level is
impact of the situation (Gallacher and Hossain, 2020). This translates into drop of around 81
percent in Americas and Africa, 70 percent in Central Asia and Europe along with 21.6 percent
in the Pacific and Asia. Without any alternative sources of income, worker’s addition to their
families have no means to survive in pandemic circumstance.
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With uncertainty from situation of COVID-19 persists across the globe, it has changed
consumption trends. Consumer spending can be said to total money that is spent on final
commodities and services through individuals and householders for enjoyment addition to
personal use in an economy. Changing consumer spending is major diving force in global
economy because of COVID-19. Fear of COVID-19, measures of social distancing addition to
outright closures enforced globally at multiple times in 2020 and 2021 which resulted in terrible
changes in amount as well as nature of spending made by consumers (Chronopoulos, Lukas and
Wilson, 2020). Real personal consumption spending has fell as options to make expenditure has
declined and impacts were seen as cut in wallets of people across the globe. With all factors
weighing on consumers, it is analysed that consumer spending have contracted 3.9 percent to 2.4
percent. Consumer sentiments varies widely across nations are impacted by COVID-19.
Consumers across the globe
Across the globe, consumers are extremely anxious for impacts of COVID-19 situations
from perspective of economic and social. Consumers are responding towards the crisis in
multiple ways as some as fueling panic purchases of hygiene addition to staple products.
Because of COVID-19 pandemic, consumer priorities are becoming centred towards most basic
requirements, while making mon essential categories slump. One of factor which influence
decision of consumer is “Purchase Local” trend accelerates. In the pandemic, preference
towards digital commerce have seen a boost because consumers migrate towards online for
shopping that is a rise which is likely to be sustained post the outbreak (Chen, Qian and Wen,
2021). It is no surprise that consumers due to the pandemic have started spending on health of
self, family and friends. While, financial security, personal safety addition to food security were
other leading priorities. Economic consequences of COVID-19 pandemic resulted in consumers
becoming less inclined for making more spending as well as time spent indoors have caused
them to make spending on home entertainment together with groceries only. The outbreaks have
pushed people out of normal routines and they are adapting new behaviors addition to habits
which many anticipate to continue in future.
Sudden and deep decline in consumption across United States, Western Europe addition
to China ranging from 11 to 26 percent have cutbacks to in-person services such as
entertainment, dining, travel and many more (Abay, Tafere and Woldemichael, 2020). It has
been analysed that spending through lower income cohorts decline in COVID-19 pandemic as
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long standing habits of spending, greater adoption and funds spent out of houses was interrupted,
accelerates along with reversed. It is also analysed that depth and speed at which behavioural
changes have embed in consumers depends on practices of industries and decision of
government. For instance, product together with service innovations have shape choices of
consumers while regulation of government nudge behaviour of consumer. Also, operations of
organisations and government in COVID-19 pandemic also played huge role in shaping habits or
trends among consumers.
As per Madnani, Fernandes and Madnani (2020), consumers have foregone enjoying
outside attractions and eating at restaurants because of COVID-19 restrictions. They are
favouring eating at home, in house entertainment, etc. Moreover, homeowners that are stuck at
home are taking long neglected improvement projects as well as investing on offices and gyms.
Ordering everything ranging from yoga pants to bread flour are done online. The new indulgence
in COVID-19 situation is self-care. In long term, forces of changes in demographics together
with productivity growth substantially interrupts short term crisis. Personal saving rate at end of
2020was reported 14.2 % nearly half of what it was in December 2019. All these triggers
greatest international economic crisis.
QUESTION TWO
Providing a short reflection on economic learning journey with explicit reference to how
economics relates to the degree of study
In my degree of BA International Business, economics is a subject that provides me with
understanding about rapidly changing economic environment. Economics is said to studying
about demand and supply. It involves theory about ways in which markets works along with
wealth is distributed in different countries. It concentrates majorly on explanations of
complexities of business in relationship to theory associated to international trade, finance and
changing roles of global institutions. The economic learning journey helped me to collect and
learn about economic factors impacts adversely because of COVID-19. Economics is significant
discipline or subject in my degree as it is about gaining insights of factors effecting economies at
global level. The pandemic has pushed international economy into great recession that states that
it starts shrinking together with stops growth across worldwide. I have learnt that COVID-19 has
resulted in outbreak of international economy. Many people have lost their occupation or jobs
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and ample proportion seen reduction in incomes. Also, unemployment rates have risen to
unexpected level across major economies. Within my degree, I have learnt that if economy is
growing then it means more wealth. However, COVID-19 has reduced economies because of
which situations of recession arise. Spending of consumers are reducing as perspective of people
are shifting towards in house activities or purchasing essential products rather than spending of
leisure or recreation. Throughout the pandemic situation, firms and political system faced
requirement to solve multiple as well as competing priorities in simultaneous manner. In my
learning journey, things that went well includes study about global economy as I have planned
my working by prioritising practices properly. However, global economy is a vast field that
requires huge concentration for understanding about each and every economic factor so to
analyse their impacts. My experience in the learning journey was great as I became aware about
proportionate effects that COVID-19 pandemic had on global economy. Decline in gross
domestic product was biggest at international level. It is estimated that the pandemic cost
equivalent to 255 million people jobs and negative influences of advanced economies. For the
purpose of dealing with impacts of the pandemic, government and organisation are required to
launch innovation and make investment. It is analysed that innovation supports higher growth of
productivity as well as new investment raises standards of living. In future, my learning about
economics will help me to provide information along with forecasting about impacts of
pandemic to inform decisions with firms. Also, analysing influences aids to look at issues
comprising tax and inflation, emerging markets, the environment, interest rates and wealth.
CONCLUSION
From the essay, it is concluded that economic environment entails external factors which
influence business. At macro level, there are ample number of factors that impacts entire
economy along with its participants. The factors are recession, inflation, unemployment rates,
taxes, consumer purchasing level, depression and hence forth. Two important global effects of
situation of COVID-19 pandemic are changes in consumer spending or habits and losses of
employment.
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REFERENCES
Books and Journals:
Abay, K. A., Tafere, K. and Woldemichael, A., 2020. Winners and losers from COVID-19:
Global evidence from Google Search. World Bank Policy Research Working Paper,
(9268).
Baboshkina, A. A., Savina, N. P. and Morozov, I. V., 2018. Management processes in the
development of the socio-economic environment of the region. J. Advanced Res. L. &
Econ.. 9. p.376.
Chen, H., Qian, W. and Wen, Q., 2021, May. The impact of the COVID-19 pandemic on
consumption: Learning from high-frequency transaction data. In AEA Papers and
Proceedings (Vol. 111, pp. 307-11).
Chronopoulos, D. K., Lukas, M. and Wilson, J. O., 2020. Consumer spending responses to the
COVID-19 pandemic: An assessment of Great Britain. Available at SSRN 3586723.
Gallacher, G. and Hossain, I., 2020. Remote work and employment dynamics under COVID-19:
Evidence from Canada. Canadian public policy. 46(S1). pp.S44-S54.
Madnani, D., Fernandes, S. and Madnani, N., 2020. Analysing the impact of COVID-19 on over-
the-top media platforms in India. International Journal of Pervasive Computing and
Communications.
Shao, Z., 2019. Interaction effect of strategic leadership behaviors and organizational culture on
IS-Business strategic alignment and Enterprise Systems assimilation. International
Journal of Information Management. 44. pp.96-108.
Online:
Nagarjun. K. 2021. ILO: As job losses escalate, nearly half of global workforce at risk of losing
livelihoods. [Online]. Available through:
<https://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_743036/lang--en/
index.htm>
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