- AMERICAN INSTITUTE FOR ECONOMIC RESEARCH - Oct 10, 2020 -
Amelia Janaskie -
To this point, the destruction caused by state and Federal Covid-19 lockdowns has largely been expressed in aggregates. Yet along the same line as a popular critique of Keynesianism, economic aggregates present a greatly truncated story by smoothing over minute but revealing evidence at lower levels. Looking at the policy impact on a smaller scale – regionally, and in terms of industries/sectors – exposes the impact of mandated shutdowns in greater detail.
In response to the Covid-19 pandemic, widespread lockdown restrictions were imposed, ostensibly to keep hospitals from being overwhelmed and medical resources from being consumed to exhaustion. Whether policymakers purposely or out of ignorance disregarded them, the tradeoffs of stay-at-home orders were immediate and severe: a massive spike in unemployment, rivaling the Great Depression; similarly historic drops in GDP, and others. By looking at disaggregated data, though, the devastation of lockdowns becomes all the more apparent.
We examined the US economy in the period leading up to the Covid-19 policy implementations in two ways: regionally and in terms of industries.
For our analysis, U.S. geographic regions are broken into the following areas: New England, Mideast (Midatlantic), Great Lakes, Plains, Southeast, Southwest, Rocky Mountain, and the Far West. These were compared using data on GDP, imports, exports, business formations, and unemployment.
In the second section, industries are grouped and analyzed in a two-fold manner, by specific sector, and by location on the vertical supply chain. The following metrics were used:
Industrial Production Index: This index (IPI) represents the output of industrial sectors, specifically: consumer goods, non-industrial supplies, materials, and mining. As an index, industrial production is measured against the baseline, which is that 2012 levels were set to 100, and subsequent years compared against it.
Capacity utilization: Capacity utilization (CU) is denoted as the percentage maximum potential output that is actually utilized. Functionally, this is
Sales/inventory: Sales figures represent, as a dollar figure, the operating revenue of goods sold or services rendered. Inventory is, as a dollar figure, the amount of product that has been produced and stored, but not yet sold.
GDP Value-Add: This metric is the dollar amount that a certain sector/region has on the United States’ Gross Domestic Product (GDP).
Change in employment: This value represents the number of jobs gained/lost in a particular measuring period compared with that of the preceding period.
Although the lockdown clearly and incontrovertibly damaged industries in aggregate, the breakdown shows clearly that the effects were by no means universal.