This paper examines the effect of the COVID-19 pandemic, and the resulting world recession, on American export-related jobs. It argues that an additional, and larger, issuance of Special Drawing Rights — reserve assets at the International Monetary Fund — would help bring those jobs back and create more.
Since the beginning of the pandemic, lockdowns and other containment measures as well as their effects on certain sectors of the US economy, have been the focus of much analysis. Millions of jobs were lost as businesses that focused on, for example, the retail trade and tourism, shuttered.
One less examined aspect of the pandemic has been the effect of declining external aggregate demand on American industries and sectors that depend on exports. Not only were these businesses hurt by containment measures and other effects of the virus in the United States itself, they have faced reduced demand for their goods and services from the rest of the world.
Many low- and middle-income countries have experienced more severe economic crises due to the pandemic than high-income countries, and thus have imported less from countries like the United States. This has led to the temporary loss of millions of export-related jobs in the United States.
This fall-off in demand also means that rate of the return of American export-related jobs — jobs both directly and indirectly involved in the production of exports — is dependent upon a broad economic recovery in the rest of the world.
Special Drawing Rights, which are cost-free for the United States, can help boost global demand for American exports by improving the financial position of low- and middle-income countries. Increased demand for American exports would bring back these export-related jobs back more quickly, as well as put the US economy on a path to creating more export-related jobs over the next five years. The US economy is still down about 6.5 million jobs from its pre-pandemic level of employment, and 9.2 million below the pre-pandemic trend.
SDR-Export-FinalTo read the full report from the Center for Economic and Policy Research (CEPR), please click here.