The lockdowns’ greater economic impact
The differential impacts of the pandemic and its lockdowns are now unmistakable. Originally, the pandemic, lockdowns and recession so closely overlapped that it was possible to mistake cause for effect. Only as they have extended and altered, has the true relationship become distinguishable: The lockdowns’ have had the greater economic effect.
Illusions rest on compelling simplicity. The coronavirus and recession relationship is no exception. Today’s pandemic is the greatest in 100 years, and the unexpected economic collapse is the greatest in over 90. Unquestionably joined, the two had to be cause and effect.
As tempting as this circumstantial evidence is, there is a superficiality to this logic. After all, going to the theater did not kill Abraham Lincoln; being shot did.
The current pandemic’s biggest canard is that coronavirus killed America’s economy. Such shorthand explanation leaves out the lockdowns’ decisive role. With sufficient time having elapsed, and the ebb and flow of pandemic and responses having occurred, it is possible — and important — to establish the real relationship.
On Jan. 21, America documented its first known coronavirus case. Cases then spread, likely to a greater extent than then known; however, lockdowns would not begin until March. During the pandemic’s pre-lockdown phase, the economy continued to function, with employment increasing in both January and February.
Not until March’s lockdowns did the real economic impact occur. According to the Bureau of Labor Statistics, nonfarm payroll shed 1 million jobs (from 151.076 to 150.073 million). So great was the late impact that the gross domestic product (GDP) in the first quarter fell a dramatic five percent. However, this was just a foretaste of lockdowns’ full impact.
As lockdowns extended and tightened, employment plunged unprecedentedly. Employment in April fell almost another 20 million jobs (from 150.0073 to 130.317). This led the way for Q2’s overall 31.4 percent plunge in GDP — even as lockdowns would begin being relaxed toward quarter’s end.
With lockdowns’ relaxation, employment rebounded. In May, total nonfarm employment grew by over 3 million jobs (from 130.317 million to 133.432 million). In June, jobs grew by over 5 million to 138.502 million; in July to 139.076 million; in August to 140.718 million; and in September to 141.855 million.
While still over 9 million below February’s 151.076 peak, the economy has added back over 11.5 million jobs during five consecutive months of growth. It has done so even though new coronavirus cases have increased.
Using Worldometers.info data from Oct. 11, daily new cases were just 647 on March 14; by April 1, they were 27,326 and on May 1, they were 36,196. After falling to 19,196 on June 1, daily new cases then “surged” to 52,846 on July 1 and up to 59,566 on August 1. While below the peaks, they still remain higher (42,266 on Sept. 1 and 47,538 on Oct. 1) than April and May’s initial levels.
What the employment and new case numbers tell us is: If the coronavirus directly caused the enormous economic contraction, we would expect to see employment following as cases increased. Instead, almost the opposite has been occurring. When the virus was taking hold initially, employment was continuing to increase. When the lockdowns took hold, new case numbers were falling but employment plummeted. When the lockdowns were relaxed, new case numbers again rose, but so has employment.
If the virus were the economic collapse’s direct cause, this could not have happened. In such a scenario, people could have been too sick to function in the economy, but that has not occurred. Instead the economic retrenchment has more closely followed the lockdowns than the virus.
This is not to say that the imposed lockdowns’ intent was wrong — though clearly, they were poorly designed, targeted and imposed — or that people do not have a right to self-impose their own. The latter too would have an economic impact, one that is embedded in the less stringent current lockdowns; however, the resulting economic impact would have been far closer to Q1’s than Q2’s.
It is equally mistaken to assume that simply locking the economy down sooner would have lessened the recession. The opposite can be cogently argued. At best, an earlier lockdown would have shifted the economic impact forward, but not necessarily reduced or shortened it.
Unquestionably, coronavirus has not hurt the economy like the lockdowns have. This is true even without attempting to tabulate lockdowns’ untold social costs or their economic costs that promise to continue well into the future — and well beyond the virus itself.
Lincoln did go to the theater and he did die shortly thereafter. However, the crucial omission is the actual story: He was shot there. Similarly, the crucial missing facts in the coronavirus recession linkage are the lockdowns. Coronavirus has merely wounded the economy; it is the lockdowns that have threatened to kill it.
J.T. Young served under President George W. Bush as the director of communications in the Office of Management and Budget and as deputy assistant secretary in legislative affairs for tax and budget at the Treasury Department. He served as a congressional staffer from 1987 through 2000.
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