Tags
China virus, coronavirus, COVID 19, Economic Policy Institute, Employment, employment multiplier, Jobs, output, output multiplier, production, {What's Left of) Our Economy
The short answer to the headline’s question? “Really big.” Which is kind of obvious. So today I thought I’d present some information on techniques economists use to come up with a somewhat more specific idea.
First let’s look at jobs – because jobs obviously affect people and their ability to provide for themselves. Economists taking a “put people first” approach would start by looking at the official federal government data on how many Americans are employed by those parts of the economy that clearly will be most seriously affected. Those numbers look like this as of last month’s preliminary figures, in millions of employees:
retail trade: 15.659 1.22
educational services: 3.838 1.94
(includes public & private institutions)
leisure & hospitality: 16.873
arts, entertainment, & recreation: 2.494 3.79
performing arts & spectator sports: 0.516
spectator sports*: 0.146
accommodation & food services: 14.379 1.61
accommodation: 2.092
restaurants & other eating places: 11.103
*January figure
The indented categories are industries of special interest that are sub-sectors of the larger categories below which they appear. And if you add up the major categories, you come up with 54.193 million workers – nearly 42 percent of the total U.S. private sector workforce.
Sharp-eyed readers will notice a number to the right of the worker figures – that number shows what’s called the employment multiplier for the sector in question. Simply put, it means how many jobs in other parts of the economy the maintenance, creation, or loss of a single job in the first sector affects. In other words, every job in American retail companies and stores affects 1.22 jobs elsewhere (e.g., from suppliers that furnish that industry with the inputs it needs to function, and from the purchases its own workers make from other industries).
Employment multipliers aren’t easy to find – these come from a Washington, D.C. think tank called the Economic Policy Institute, and don’t cover all the initially affected sectors. But from these data alone, it’s obvious that the total number of U.S. jobs that could be lost, or see a cutback in hours, is much greater than the employment damage done, for example, by the simple closing of a single restaurant or sports stadium.
Most economists would also look at how much output the most seriously affected industries contribute to the gross domestic product (GDP – the total sum of all the goods and services Americans turn out during a given time period). GDP and output matter, of course, because if businesses aren’t producing goods and services, they won’t need employees. Here how they look, according to a measure called “value-added” – which seeks to eliminate various forms of double-counting that result when trying to gauge production in sectors that make final products, and sectors that make their parts, components, materials, ingredients, and other inputs. Also important – these figures are not adjusted for inflation.
Percent of total U.S. value-added
retail trade: 5.50 0.66
healthcare services & social assistance: 7.60
educational services: 1.20 0.72
performance arts, spectator sports, museums &
related activities: 0.70 0.81
accommodation & food services: 3.10
accommodation: 0.80
food services: 2.30
Again, the sub-categories are indented. Here the total percent figure is much smaller than the employment figure. But at 21.20 percent, it’s not bupkis, either.
And as with employment, don’t forget those multipliers (also presented to the right)! Here, the readily available data is scantier, and those I use are from 2012. But clearly the indirect output (and growth) impact will be non-trivial. (These output multipliers come from the Manufacturing Institute of the National Association of Manufacturers.)
Even if the China Virus situation wasn’t still evolving – and possibly dramatically, no one should take these numbers to the bank. Especially important is remembering that none of them take into account the danger that all these jobs and output and income and related business revenue losses bring about the kind of financial system seize-up seen during the financial crisis of 2007-2008. Moreover, although business and entire industry shutdowns will be extensive in the above and other sectors, they won’t be total, or (usually) anywhere close. And the damage will not last forever, or anywhere close.
All the same, we’re talking major drops in employment, incomes, and production – which is exactly why the economic response from Washington needs to focus on getting and guaranteeing money and credit where it’s needed pronto.
RealityChek 