The disruptions caused by the coronavirus are wreaking havoc on individuals, families, the private and public sectors, the health care system, and the economy and society as a whole. In order to “flatten the curve” and prevent a major spike in infections, drastic measures have been taken. The inevitable result has been and likely will continue to be a strong shock to the economy.
Many factors will determine the ultimate effects of the coronavirus on the economy, most of which are highly uncertain at present (and will no doubt be different when you read this than they are as I am writing it).
The length and severity of the outbreak, the nature and magnitude of the policy response, and the capacity of businesses to resume normal activities are among myriad phenomena that will play a significant role.
To provide a perspective on the magnitude of potential losses, we developed a plausible scenario for the ultimate effects based on a variety of public and private source materials including, among others, data from sectors that have been particularly affected, information from areas where the pandemic spread earlier (as well as prior pandemics and natural disasters), performance patterns in other economic downturns and recoveries, and historical responses to oil price fluctuations.
Reasonable measures of potential direct effects by detailed industrial category were used in our dynamic and integrated econometric and impact assessment systems to determine total economic costs of COVID-19 throughout the economy.
We estimate that the COVID-19 pandemic could cost the U.S. economy approximately $972.6 billion in real gross product and 11.4 million jobs on an annual basis (with many more individuals being affected for a portion of the year).
Losses would be spread across the economy, affecting virtually every industry (although there are a few exceptions).
These results assume that some of the anticipated downstream losses will be dampened through aggressive monetary and fiscal policy measures (such as the recent stimulus package). The ultimate outcomes will obviously be different than these projections, but they provide a guideline for planning and expectations.
More detailed results by industry are provided at www.perrymangroup.com. Select: Publications
All of us here at The Perryman Group hope you are safe and well.
We are following the COVID-19 situation carefully and take your need for information very seriously. We are analyzing the economic effects on an ongoing basis and will post everything that we generate as a public service at perrymangroup.com.
Clearly, unlike many economic issues, much of the solution to this situation must come from the health and biosciences sectors. The physical wellbeing of the population is of paramount concern, yet the economic consequences must also be aggressively addressed. Onward!
Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com). He also serves as Institute Distinguished Professor of Economic Theory and Method at the International Institute for Advanced Studies.