Effect of Covid-19 Pandemic on Unemployment Rate and Economic Growth: The Case of Ethiopia

Abstract

As COVID-19 epidemic spreads all over, lowest, middle-income and developed countries are competing to respond to this gigantic and fast-moving challenge. Jobs are unable to find and economic recession of the COVID-19 crisis is gradually drumming low income countries more severely. This is a very large negative shock to the economy which is anticipated to knowingly lessen income of households and exaggerate the level of paucity. In developing nations unemployment is getting worse and the severity also higher than developed nation, mainly due to the unbalanced relationship between the rate of economic development and the rapid unemployment growth, in Ethiopia this unbalance also exaggerated with COVID-19 pandemic. High rate of economic growth indicate the need for additional labor market. On the other hand, recession indicates increase the unemployment rates due to lose in job. The study considered a secondary research approach by reviewing research findings that have been strained from scrutinizing the different sentiments, actualities and outcomes from researchers on the topic of impact of COVID-19 on unemployment rate and economic growth. Pointers from the findings are that COVID-19 is a global problem, which affects rich and poor countries. A popular classical theory in economics by John Batiste Say has for a second time futile as witnessed in 1930s due to Great Depression. The study look that supply creates its own demand again invalid due to COVID-19. In Ethiopia, if COVID-19 pandemic is sustained, under unemployment and long run unemployment have a great chance to occur in addition to Keynesian unemployment. The conclusion of the study is that there is direct relationship of COVID-19 pandemic and rise of unemployment rate and reduction of economic growth. Thus the government should give more attention than before to control the pandemic before face huge crisis in the country. Even huge government expenditure should be allocate to fight this pandemic by subsidize all sectors, to increase the hiring capacity of our economy.