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Although a pandemic can cause a contraction in the economy, once the pandemic ends, the economy can rebound. The lockdowns can lead to a ripple effect that brings spending in many markets to a standstill. This is especially true for travel, tourism, and other service-oriented industries.

Government intervention has helped the economy rebound, and it is important to understand how it happened. Take a look at the economic impact of pandemics.

How the Economy Is Interconnected

Certain industries received a more severe impact from the pandemic than others. The travel industry suffered a great deal because nobody was traveling, and hospitality was shut down with shops and restaurants closing. Any business that depends on tourism was impacted, and it was hard.

There were secondary effects to this, such as manufacturing slowing. Banks absorbed the costs of mortgages, and people didn’t need to buy gas. With people staying at home, the economy slowed dramatically.

How to Measure the Effect

It is a challenge to measure the effects of a pandemic. There aren’t a lot of examples to look at, and the closest comparison for COVID-19 is the Spanish flu 100 years earlier. There wasn’t a lot of economic data back then, and the disruption was short-lived.

The mortality rate for COVID-19 is lower than the Spanish flu, but the economic impact is there. Many people stayed home, which slowed the economy. The dip in manufacturing was the most severe since the 1940s. Unemployment went up to 14.8% before going down to 6.2% the following February.

What Is the Role of Government Intervention?

The government can help mitigate economic issues. In the United States, the government gave out a few rounds of stimulus checks, and the president signed a law to help the American public. The government helped people when they lost their jobs or had working hours cut. This created liquidity when money wasn’t flowing.

Another way that the government helps is by giving small businesses loans to keep going and pay staff during the pandemic. The important thing is for people to protect themselves in case of a pandemic. They need to learn from this one and build up an emergency fund for the future.