Some Economic Effects of the Ongoing Covid Pandemic

By Lambert Strether of Corrente.

NC seems not have had a round-up on the economic effects of the Covid pandemic recently. (Most of our work on this topic seems to have been done in 2020 and 2021, close to the Before Times. This article provides a useful summary of data from that time.). So, despite the crippling disability of not knowing much about mainstream macro, I thought I would undertake the task. A caveat: As with so much that is important, we don’t know very much. There is much we do not know simply because of time lags in data collection and publishing. We would know more if governments and public health establishments, at least in the West, and certainly the Anglosphere, hadn’t deliberately vandalized our Covid data collection capabilitities. We would also know more if the press and officialdom didn’t throw up their hands and exclaim “‘Tis a mystery!” at every encounter with immune dysregulation or loss of executive function, but instead investigated. We will also know more as the course of the pandemic continues, as it seems likely to do, and for some time. So this will in no sense be an exhaustive or even an expert post, but I hope it will serve you to at least create a coherent narrative about where we are, and even, perhaps, what to expect. And since I’m dependent now on the horridly crapified Google, I invite readers with sources I’ve missed to add them in comments.

I’ll begin with global economic effects, then move to global and country studies, most of which will be expressed in dollar terms (or other currency). Then I will look at the economic effects of interventions, pharmaceutical and non-pharmaceutical. I will move to individual aspects of Covid, with particular focus on the labor market. Then I will move on to “belief scarring” and mortality. I won’t be doing a lot of analysis; just trying the get my arms round the fact set. Imagine me emptying out a box of index cards!

Global Economic Effects

The World Bank, in “Rebuilding economies after COVID-19: Will countries recover” (September 2023), presents this handy chart, comparing Before Time GDP projections to today’s:

(Happy memories of the same kind of chart during and after the Great Recession.) Summarizing:

But COVID-19 caused the deepest global recession in decades, reducing global GDP by 3.1 percent in 2020. Today, 95 percent of people live in countries with lower GDP growth than forecast before the pandemic.

From Statista, “Impact of the coronavirus pandemic on the global economy – Statistics & Facts” (2024):

The global COVID-19 coronavirus pandemic had severe negative impacts on the global economy. During 2020, the world’s collective gross domestic product (GDP) fell by 3.4 percent. To put this number in perspective, global GDP reached 84.9 trillion U.S. dollars in 2020 – meaning that a 3.4 percent drop in economic growth results in over two trillion U.S. dollars of lost economic output. However, the global economy quickly recovered from the initial shock, reaching positive growth levels again in 2021….

As far as industries:

The COVID-19 pandemic had a varied impact on different sectors and industries. As countries around the world closed their borders and imposed travel restrictions, especially the [superspreading –lambert] travel and tourism industry was heavily affected. The travel restrictions led to a sharp decrease in the number of flights worldwide. On the other hand, the internet trade boomed as an increasing number of people either chose or were forced to buy their non-essential goods online, as retailers were forced to close their shops during the pandemic. For instance, Amazon’s net sales revenue reached new records both in 2020 and in 2021, a trend that continued into 2022.

Now to countries; mostly the United States, to be fair, due to the limitations of this temporally pressed researcher.

Country Economic Effects

For the United States, from Economic Modelling, “Macroeconomic consequences of the COVID-19 pandemic” (March 2023), the Introduction:

COVID-19 has had major consequences for the economy of the United States. Several studies have estimated its total impacts on GDP in the trillions of dollars, even before the Delta and Omicron variants ran their course (del Rio-Chanona et al., 2020; Dixon et al., 2020; Ludvigson et al., 2020; Thunström et al., 2020; Walmsley et al., 2021b). The pandemic’s total economic impacts are estimated to be twice as great as those of the Great Recession, 20 times greater than the 2001 World Trade Center attacks, and 40 times greater than any natural disaster that befell the country in this century (Rose, 2021). The more than 1,000,000 COVID-19 deaths in the U.S. through December 2022 (CDC, 2022), are greater than the U.S. death toll over the past four decades of the HIV/AIDS epidemic of approximately 700,000 people (KFF, 2021) and U.S. deaths from the Spanish Flu a century ago of approximately 675,000 people (CDC, 2020h). U.S. deaths from COVID-19 are more than nine times the country’s death toll from the influenza pandemic of 1957–1958 (CDC, 2020h) and the Hong Kong flu in 1968 (CDC, 2020h).

The method:

We estimate the economic impacts of COVID-19 in the U.S. using a disaster economic consequence analysis framework implemented by a dynamic computable general equilibrium (CGE) model.

My eyes just glazed over, but the authors estimate the total impact nets out at $14 trillion. Given the litany of horrors in the Introduction, I’m not sure whether I care if it’s $12 trillion or $24; it’s real money no matter how you look at it.

The numbers are also enormous for Long Covid alone. From David Cutler, “The Economic Cost of Long COVID: An Update” (2022):

In a 2020 JAMA Viewpoint [here], Lawrence Summers and I guessed at the possible economic costs of long COVID. At the time, we thought the cost might be $2.6 trillion. With more data, that estimate can be updated. I do so here.

Adding across the three areas, Table 1 shows the total cost of long COVID is $3.7 trillion. 59% of the cost is lost quality of life; the remainder is reduced earnings and greater medical spending. The total amount is roughly $11,000 per person, or about 17% of pre-COVID US GDP. By another metric, the cost of long COVID rivals in aggregate the cost of the Great Recession.

I keep seeing that word, “trillion”! Given that this paper is 2022, the costs might be higher today, since we know more about the course of the illness.

For “developing countries,” Science, “Falling living standards during the COVID-19 crisis: Quantitative evidence from nine developing countries” :

We assemble evidence from over 30,000 respondents in 16 original household surveys from nine countries in Africa (Burkina Faso, Ghana, Kenya, Rwanda, Sierra Leone), Asia (Bangladesh, Nepal, Philippines), and Latin America (Colombia). We document declines in employment and income in all settings beginning March 2020. The share of households experiencing an income drop ranges from 8 to 87% (median, 68%). Household coping strategies and government assistance were insufficient to sustain precrisis living standards, resulting in widespread food insecurity and dire economic conditions even 3 months into the crisis.

Economic Effects of Interventions

Here are economic considerations concerning the main pharmaceutical intervention, vax. From medRxiv (preprint), “Impact of Vaccination Rates and Gross Domestic Product on COVID-19 Pandemic Mortality Across United States” (January 2024), from the Abstract:

Regression analysis reveals that both vaccination and GDP are significant factors related to mortality when considering the entire U.S. population. Notably, in wealthier states (with GDP above $65,000), excess mortality is primarily driven by slow vaccination rates, while in less affluent states, low GDP plays a major role. Odds ratio analysis demonstrates an almost twofold increase in mortality linked to the Delta and Omicron BA.1 virus variants in states with the slowest vaccination rates compared to those with the fastest (OR 1.8, 95% CI 1.7-1.9, p < 0.01). However, this gap disappeared in the post-Omicron BA.1 period…. The interplay between slow vaccination and low GDP per capita drives high mortality.

“Interplay” is doing a lot of work, there. Nevertheless:

Our study consistently identifies a correlation between lower economic capacity and higher pandemic-associated fatalities, even when vaccination coverage is similar. Recognizing the influence of income levels, specifically GDP per capita, on pandemic excess mortality highlights the critical need to address socioeconomic disparities in public health initiatives. Additional resources are crucial for states with lower economic capacities to bolster pandemic mitigation strategies.

And for non-pharmaceutical interventions, Nature, “Global evidence on the economic effects of disease suppression during COVID-19.” From the Abstract:

Governments around the world attempted to suppress the spread of COVID-19 using restrictions on social and economic activity. This study presents the first global analysis of job and income losses associated with those restrictions, using Gallup World Poll data from 321,000 randomly selected adults in 117 countries from July 2020 to March 2021. Nearly half of the world’s adult population lost income because of COVID-19, according to our estimates, and this outcome and related measures of economic harm—such as income loss—are strongly associated with lower subjective well-being, financial hardship, and self-reported loss of subjective well-being.

Our detailed policy analysis reveals that school closings, stay-at-home orders, and other economic restrictions were strongly associated with economic harm, but other non-pharmaceutical interventions—such as contact tracing, mass testing, and protections for the elderly were not.

(Lambert here: Yes, we should have paid people to stay home.MR SUBLIMINAL But then who will feed the vaxed and relaxed PMC brunch?!.)

Effects on the Labor Market

First, the labor market generally. From China, in Nature, “Large-scale online job search behaviors reveal labor market shifts amid COVID-19” (2024):

The COVID-19 pandemic has had an unprecedented impact on labor markets, significantly altering the structure of labor supply and demand in various regions. We use large-scale online job search queries and job postings in China as indicators to assess and understand the evolving dynamics in regional labor markets…. [W]e observe that the intention of labor flow recovered quickly from pandemic conditions, with a trend of the central role shifting from large to small cities and from northern to southern regions, respectively. Following the pandemic, the demand for blue-collar workers was substantially reduced compared with demand for white-collar workers. In particular, our analysis reveals a decreased central role of the metropolises and a decreased regional supply–demand mismatch of labor markets. This implies that, under the unprecedented levels of uncertainty and stress amid the pandemic, [in general, apparently] that align with regional demand.

Sadly, this one is paywalled, but I’d truly love to know what “relatively” [spin!] “rational” [ideological] could possibly mean. Presumably, workers decided to accept a non-zero risk of infection to feed their families and reproduce their labor power?

Now, Long Covid and productivity. Here are estimates from the European Commission, “Long COVID: A Tentative Assessment of its Impact on Labour Market Participation and Potential Economic Effects in the EU” (January 2024);

The paper estimates the prevalence of long COVID cases at around 1.7% of the EU population in 2021 and 2.9% in 2022. This yields a negative impact on labour supply of 0.2-0.3% in 2021 and of 0.3-0.5% in 2022, combining the effect of lower productivity, higher sick leaves, lower hours, and increased unemployment or inactivity.

These figures imply that long COVID could have caused on output loss of 0.1-0.2% in 2021 and 0.2-0.3% in 2022.

Speculative: Neuropsychological Deficits and Loss of Executive Function. We have to start out with some quotes from chirpy therapeutic types. Connections in Mind:

Executive functions are a family of top-down mental processes that make it possible to mentally play with ideas; approach unanticipated challenges with flexibility; take the time to think before acting; resist temptations, and to stay focused.


Executive functions are the skills people use to remember, plan, and organize their lives. Executive functions control our working memory, mental flexibility, and emotional regulation.

We use our executive functions at home, school, and work. So when someone struggles with these skills, problems can arise. This can sometimes be managed in a person’s home, but workplaces are often less flexible.


Executive function refers to the cognitive and mental abilities that help people engage in goal-oriented actions. Executive function directs our actions, self-regulations, behavior and motivation to achieve goals and prepare for future events… If you are a physical, occupational or school-based therapist, you may have noticed your patients or students struggling with executive function skills. These might include procrastinating more and having trouble managing time effectively. The COVID-19 impact on executive function has been noticed across the board, mainly due to the shift to remote learning.

(Nuh-uh that last part; minimization. The “struggle” is “mainly due” to sequelae of Covid infection.)

You can easily see — though I did carefully label this section “speculative” — that brain fog from Long Covid, or even neurological sequelae from a mild case, would lead to lost executive function (and hence, many anecdotes about worsened and coarsened public behavior, especially when driving). The redoubtable Ed Young gives a vivid description of “brain fog“:

On March 25, 2020, Hannah Davis was texting with two friends when she realized that she couldn’t understand one of their messages. In hindsight, that was the first sign that she had COVID-19. It was also her first experience with the phenomenon known as “brain fog,” and the moment when her old life contracted into her current one. She once worked in artificial intelligence and analyzed complex systems without hesitation, but now “runs into a mental wall” when faced with tasks as simple as filling out forms.

Filling out forms, it is said, is useful in the workplace. More:

[“Brain fog”] is not psychosomatic, and involves real changes to the structure and chemistry of the brain. It is not a mood disorder: “If anyone is saying that this is due to depression and anxiety, they have no basis for that, and data suggest it might be the other direction,” Joanna Hellmuth, a neurologist at UC San Francisco, told me. And despite its nebulous name, brain fog is not an umbrella term for every possible mental problem. At its core, Hellmuth said, it is almost always a disorder of “executive function”—the set of mental abilities that includes focusing attention, holding information in mind, and blocking out distractions. These skills are so foundational that when they crumble, much of a person’s cognitive edifice collapses.

Clearly, a person with brain fog would stay home from work, since they couldn’t contribute…. Ha ha! What was I thinking? This is America, there’s no sick leave! Anyhow, The Lancet, in “Long COVID is associated with severe cognitive slowing: a multicentre cross-sectional study“, in the Discussion:

The present study reported a significant psychomotor slowing in individuals diagnosed with [Post-Covid Condition]. Importantly, this cannot be attributed to poor global cognition as measured by a cognitive screening test (MoCA), fatigue, mental health-related symptoms, or speed-accuracy trade-off. Additionally, the data indicate that this impairment does not improve over time. We also replicated this finding within each individual participant as well as with a separate cohort of patients with PCC diagnosed by a different clinic located in a different country.

I don’t know if anybody was calculated the economic effects of loss of executive function, and maybe that won’t happen until an executive jet or two goes down. But whether those with “brain fog” manage to struggle into work, or whether they stay home, the sheer numbers of those with Long Covid mean that the economic effect will be significant.

Sadly, I have to skip over the economic effects of Covid in retail, health care, and meatpacking to get to an intriguing final effect–

Belief Scarring

NBER Working Paper 27429, “Scarring Body and Mind: The Long-Term Belief-Scarring Effects of COVID-19” (2020), from the conclusion:

No one knows the true distribution of shocks to the economy. Macroeconomists typically assume that agents in their models know this distribution, as a way to discipline beliefs. For many applications, assuming full knowledge has little effect on outcomes and offers tractability. But for unusually large events, like the current crisis, the difference between knowing these probabilities and estimating them with real-time data can be large. We argue that a more plausible assumption for these phenomena is to assume that agents do the same kind of real-time estimation along the lines of what an econometrician would do. This introduces new, persistent dynamics into a model with otherwise transitory shocks. The essence of the persistence mechanism is this: once observed, a shock (a piece of data) stays in one’s data set forever and therefore persistently affects belief formation. The less frequently similar data is observed, the larger and more persistent the belief revision. When we quantify this mechanism, our model’s predictions tell us that the ongoing crisis will have large, persistent adverse effects on the US economy, far greater than the immediate consequences. Preventing bankruptcies or permanent separation of labor and capital, could have enormous consequences for the value generated by the U.S. economy for decades to come.

(This article has a lot to say about tail risk, and maybe some enterprising reader can plough through it and summarize for the rest of us.) The following article from Economic Theory, “Long-run belief-scarring effects of COVID-19 in a global economy” (2024) picks up the theme. From the Abstact

While COVID-19 lockdown measures disrupt production worldwide, they also shock workers’ perceptions and beliefs about the economy and may hence have long-lasting effects after the pandemic. We study a belief-scarring mechanism in the context of labor markets and embed this mechanism into a multi-country, multi-sector Ricardian trade model with input–output linkages. Our quantitative analysis indicates that pandemic shocks leave persistent and substantial belief-driven negative impacts on the post-COVID economy. We find that international trade (without sectoral input–output linkages) worsens the post-COVID economic losses due to a labor-misallocation effect when workers misconceive comparative advantages, whereas input–output linkages dampen such losses. When allowing both trade and input–output linkages, a third and negative effect emerges because the presence of the global supply chain amplifies the stake of efficient allocation according to true comparative advantages and hence makes information friction even more costly. Thus, trade, with input–output linkages, exacerbates the post-COVID losses for the globe as a whole.

(I guess “belief scarring” is better than “ideological hysteresis” ha ha.) Both these articles consider belief scarring within the capitalist class. One wonders what belief scarring in the working class is like.

Economic Effects of Covid Mortality

From Scientific Reports, “Assessing the impact of one million COVID-19 deaths in America: economic and life expectancy losses” (February 2023). From the Abstract:

Between February 2020 and May 2022, one million Americans have died of COVID-19. To determine the contribution of those deaths to all-cause mortality in terms of life expectancy reductions and the resulting economic welfare losses, we calculated their combined impact on national income growth and the added value of lives lost. We estimated that US life expectancy at birth dropped by 3.08 years due to the million COVID-19 deaths. Economic welfare losses estimated in terms of national income growth supplemented by the value of lives lost, was in the order of US$3.57 trillion. US$2.20 trillion of these losses were in in the non-Hispanic White population (56.50%), US$698.24 billion (19.54%) in the Hispanic population, and US$579.93 billion (16.23%) in the non-Hispanic Black population. The scale of life expectancy and welfare losses underscores the pressing need to invest in health in the US to prevent further economic shocks from future pandemic threats.

More real money.


So intimations of mortality bring my canter through Covid economic thinking to a close, as is fitting. I hope to continue digging at this topic, and any pointers from readers in comments will be most welcome, since the literature is larger and more ill-organized than I imagined. Also, I think “belief scarring” is a good find, with potentially wide application.

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