What Is The Economic Cost Of COVID-19?
Posted on February 20, 2021 in Money
Trying to figure out the economic cost of COVID-19 is almost like trying to count the number of shells on a beach: it’s impossible. That being said, there are plenty of things that we do know about how badly the worldwide pandemic has impacted the economy.
According to the World Bank’s semi-annual Global Economic Prospects report, the world economy shrank by roughly 4.3% in 2020. To put that number in perspective, this has only happened historically during The Great Depression and World War I and II. So it’s fairly safe to say this economic setback was catastrophic and will go down in history as one of the worst financial crises the world has ever seen.
Putting The Numbers Into Perspective
Daily reports have been coming out since the beginning of the pandemic with more and more grim numbers about how badly the economy has been impacted and how much COVID 19 has cost. But when numbers begin to reach into the trillions, it may be difficult to imagine exactly what that means. It is roughly estimated now that COVID-19 has an economic cost of $16.2 trillion. This cost is broken down further into four categories:
- Lost Gross Domestic Product: $7.6 trillion
- Premature Death: $4.4 trillion
- Long Term Health Impairment: $2.6 trillion
- Mental Health Impairment: $1.6 trillion
Those numbers can be pretty scary to look at, but they still fail to tell the picture of how bad of an impact COVID 19 has had and will continue to have.
Jobs Lost And The Economic Effect
COVID-19 had an almost unbelievable impact on the job market in 2020 and the effects will be felt for years to come. There were plenty of businesses that were able to shift their staff to remote work from home but some businesses had to lay off employees due to shutdowns and quarantines and other businesses had to close as a result of COVID-19.
The unemployment rate for the U.S. reached an incredible 14.7% which has been the highest total, by far, since the days of the Great Depression. Over 20.5 million people found themselves suddenly out of work. Since this peak the rate has slowly fallen and come back down to more manageable rates but not every job was impacted the same and not every job is recovering the same.
An additional side effect of so many people losing their job is they will spend less money, which will hurt other businesses, impacting them and could result in them laying off employees to counter losses.
This, of course, will lead to less and less spending and a circle of job loss. These are the jobs most impacted by COVID 19:
- Leisure and Hospitality
December 2019 Unemployment Rate:5.0%
December 2020 Unemployment Rate: 16.7%
By far, the most heavily impacted region of the job market has been leisure and hospitality jobs. Restaurants, bars, and stadiums have been going through waves of limited capacity, special restrictions, or often just flat-out shut down since the pandemic started, so many jobs were lost. A staggering 1.3 million workers lost their job in this field as a result of the pandemic.
- Mining and Oil/Gas Extraction
December 2019 Unemployment Rate: 3.8%
December 2020 Unemployment Rate: 13.1%
One of the lesser discussed careers affected has been the miners and extractors of natural resources. With the pandemic severely restricting travel, the sudden shifts in demand have greatly affected these jobs. Lockdowns, job losses, and working from home all contributed to much lower demand, and as a result, roughly 58,000 lost their jobs.
- Travel and Transportation
December 2019 Unemployment Rate: 2.6%
December 2020 Unemployment Rate: 8.4%
The pandemic greatly impacted airlines and railroads since so few people felt safe traveling in 2020. Even truck drivers faced layoffs due in part to business being shut down and therefore having no need for supplies. As a result of lesser travel the airline industry lost around 116,500 jobs while the railroad industry lost about 18,900.
It’s unclear how long they will be impacted as travel is still not advised with hot spots rising potentially anywhere.
December 2019 Unemployment Rate: 5.0%
December 2020 Unemployment Rate: 9.6%
Although not all construction jobs were affected the same, the primary occupation lost here was contractors working on nonresidential buildings. Businesses slowed down their renovations or new office building projects that typically happen in a normal year, and also shifting to remote work prevented maintenance needs. As a result, almost 441,000 construction workers lost their jobs.
- Entertainment Industry
December 2019 Unemployment Rate: 1.9%
December 2020 Unemployment Rate: 6.4%
Perhaps one of the most overlooked occupations, this industry was nonetheless impacted pretty hard as well. The amount of cast and crew required to film a movie or television show can reach higher than expected numbers, and with no way to film safely, many productions were halted or outright canceled.
Additionally, the music industry essentially had to cancel all tours due to both travel restrictions and various lockdown orders, preventing the gathering of crowds. Almost 110,000 lost their jobs, and that number may increase depending on how the pandemic is handled going forward.
Rent Payments and Food Shortages
The two most important things that every human requires to live are food and shelter. Sadly the pandemic put millions of people in jeopardy of losing one or both of these necessities. Rent, in particular, has been challenging, with so many people losing their jobs so quickly.
Millions of Americans struggle to maintain a savings account, and even those that only have so much funding nested away. As a result of the pandemic, it is estimated that 15.1 million adults that are currently living in rented housing (roughly 21% of renters) were not caught up with their rent payments.
Thanks in large part to eviction moratoriums put in place, these people were not evicted, but unless they can find the money to pay their rent, they could be. Another horrifying statistic from the COVID pandemic has been the number of hungry people.
According to a January survey, around 24 million adults (11% of all adults) reported that sometimes or often, they did not have enough to eat within the last week. To truly establish how saddening this statistic is, only 3.4% of adults reported not having enough to eat at some various point in the entirety of 2019.
It could take decades to uncover and measure the economic impact of COVID-19 and even then it still may end up blurry. Millions if not billions of lives have been impacted and changed forever due to COVID-19 and may never return to the normal of pre-pandemic life.
COVID-19 has been one of the deadliest viruses to impact humanity and the economic numbers, as grim as they may be, fail to detail just how impactful this pandemic has been. So many people now find themselves struggling financially either due to job loss or health issues or many other various reasons.
The bright side is there is a light at the end of the tunnel and economic experts predict the worst is over. A return to normalcy may be agonizingly slow but progress is being made and eventually life will return to the way it was before.
Related blog posts
Need expert financial advice?
Let TurboFinance connect you with the best consulting services and resources to help you take control of your finances and find a path to build wealth.Get A Free Consultation Today!