Calculating the unprecedented economic costs of COVID

Healthcare worker Azucena Estrada (center) takes a nasal swab at a COVID-19 testing facility for drivers in El Paso, Texas, January 12, 2022. (Paul Ratje/AFP/Getty Images/TNS)

The economic toll of the COVID-19 pandemic in the United States will reach $14 trillion by the end of this year, our team of economists, public policy researchers and other experts estimate. This makes it by far the costliest disaster the country has suffered this century.

Putting a price on all the pain, suffering and upheaval that people here and around the world have experienced as a result of the pandemic is obviously difficult. More than 1.1 million Americans have died from COVID, and many more have been hospitalized or lost loved ones.

We used data from the first 2.5 years of the pandemic to project the total economic losses caused by the pandemic over four years, from January 2020 to December 2023.

Our team used economic modeling to estimate revenue lost due to the mandatory shutdown at the start of the pandemic. We also used modeling to assess the economic consequences of many changes in personal behavior that continued long after lockdown orders were lifted, such as the tendency to voluntarily avoid restaurants, theaters and other crowded places.

The biggest losses resulted from absenteeism from the workplace and lost sales. The latter were primarily due to closed shops, limited air travel, and limited public gatherings. At the height of the pandemic in Q2 2020, our research found that air travel decreased by almost 60%, eating out by 65% ​​and shopping in stores by 43%.

The three sectors that lost the most in the first 30 months of the pandemic were air travel, food service, and health and social services, which shrank by 57.5%, 26.5% and 29.2%, respectively.

These losses have been offset to some extent by a surge in online shopping, a series of major government stimulus and relief packages, and an unprecedented rise in the number of Americans working from home, many of whom have been able to do jobs that would otherwise have been cut.

From 2020 to 2023, the net economic output of the United States is expected to be approximately $103 trillion. According to our analysis, if not for the pandemic, that figure would be around $117 trillion – almost 14% more in 2020 inflation-adjusted dollars.

We also estimated what the cost of the pandemic would have been if more or less people had died of COVID due to more or less effective public health strategies in the first 2.5 years of the pandemic.

Direct healthcare expenditures during this period, mainly due to hospitalizations, amounted to approximately $214 billion. In the best-case scenario we analyzed, in which 65,000 Americans would die from January 2020 to June 2022, health care costs would be about one-tenth that figure, or $20 billion. In the worst-case scenario we analyzed, assuming that around 2 million people died during this period, health-related spending would be $365 billion.

While we found that most of the economic losses caused by the pandemic did not result from direct healthcare spending, these scenarios show how much these losses could have varied depending on the country’s response.

This highlights the need to better prepare for similar or even worse pandemics in the future. Economic losses could be reduced by better assessing the need for mandatory closures, better risk communication to reduce unnecessary avoidance of public spaces, and more targeted and better managed fiscal stimulus.

The economic impact of the COVID-19 pandemic on the United States is unprecedented in many ways. The estimated impact on the country’s gross domestic product is twice that of the Great Recession, 20 times that of the 9/11 terrorist attacks, and at least 40 times that of any other disaster to hit the country in the 21st century.

Although the federal government has now lifted the COVID emergency, the pandemic continues to affect the US economy. For example, the labor force participation rate has only recently approached pre-pandemic levels.

Our analysis was limited to the standard economic effects of the pandemic. We have not estimated the wide range of indirect costs, such as lost years of work due to premature deaths and prolonged COVID, the impact on the physical and mental health of the population, and the loss of learning that students experience. All of this suggests that the costs are even greater than the staggering loss we have documented.

Jakub Hlávka is an assistant professor in the field of health policy and management at the USC Price School of Public Policy and a member of the USC Schaeffer Center for Health Policy and Economics and the Center for Risk and Economic Analysis of Threats and Crisis Situations. Adam Rose is a research professor at USC’s Price School of Public Policy and emeritus director of the Center for Risk and Economic Analysis of Threats and Emergencies. © 2023 Los Angeles Times. Distributed by Tribune content agency.

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