It quickly became clear that social distancing in response to the coronavirus pandemic will create serious economic fallout. Large parts of the US economy have almost completely shut down. New jobless claims have risen dramatically, eclipsing past records, both nationally and in Missouri.
I analyzed data from several economic sectors most affected by the crisis. In 2018, these sectors accounted for 18.5% of aggregate United States production (gross domestic product). We don’t yet know by how much each will shrink, but to roughly calculate the severity of the upcoming slowdown, I have estimated the production loss of each sector between mid-March and the worst week of the crisis, which is expected to occur. during the second trimester. . Estimates of the contraction range from 20% in wholesale trade, 40% in retail trade, and 80% in air travel, restaurants, entertainment, recreation and hotel accommodation.
While many uncertainties remain, the possible effect on the total gross domestic product of the United States is staggering: a drop of almost 8% in just a few months. A production collapse of this magnitude is unprecedented in modern US economics. Most economists consider the Great Recession of 2007-09 to be the worst contraction since the 1930s, but during that crisis output fell “only” by 4% over 18 months. Even if the economic effects of this pandemic are half as large as what my estimates suggest, the coming contraction will be historically severe.