After markets experienced their worst falls since 2008, analysts at the Centre for Economics and Business Research, the deepest recession since the financial crisis is now all but unavoidable, with output to plunge by 15% in the second quarter of the year. Outside of the financial crisis of 2008, this would be the weakest full-year growth out turn since 1992.
Are we really heading towards a recession?
With unemployment surging and the global financial markets suffering, it is pretty much assured that we will, at some point, face a recession. How large this recession is and how long it lasts for, however, is up for debate.
The Coronavirus outbreak has resulted in an increase in unemployment and a decrease in consumer spending, as businesses shut and people were ordered to stay at home. However, it is expected that the lockdown restrictions are to be eased in time for the third quarter as testing becomes more widely available and people can start going back to work and business can resume. This means that some are expecting the shock to be short and sharp, and with economic stimulus from the government the economy could see a quicker recovery.
However, it appears that a large amount of government involvement is needed to enable this to happen, including a potential cut in VAT to kickstart consumer spending and measures to promote investment.
What is happening to the unemployment rate?
It is thought that despite government incentives to avoid companies letting go of staff, the number of unemployed is expected to increase rapidly over this period, up to 8% which is around 2.75 million unemployed due to the impact of Coronavrius.
The Department of Work and Pensions reported last week that 477,000 people had registered for universal credit in the previous nine days, up from an average figure of 55,000 a week. A snap poll by YouGov also found that 5% of people in Britain reported having lost their job as a result of the coronavirus outbreak. Even as this article is being written, BrightHouse and Italian restaurant chain Carluccio’s have entered administration, putting over 4,000 jobs at risk.
The employment rate before the Coronavirus outbreak, the three months to January, was 3.9%, a near-record low.
What is happening to the house prices?
Employment rates aren’t the only thing taking a hit due to Coronavirus. According to data from property website Zoopla, there has been a 40% drop in housing demand, and it is predicted that there will be a 60% fall in transactions between April and June.
As the country is on lockdown and with predictions of a recession as we have seen above, people are reconsidering large purchases such as a new home, not to mention social distancing measures causing property viewings to stop almost completely.
Despite this, house prices aren’t expected to fall immediately, but this could change if unemployment continues to increase and the economy continues to shrink.
You can read more updates on how the Coronavirus outbreak is impacting the business and finance world here.