Our study presents a framework to estimate economic costs of the COVID-19 pandemic for the U.S. economy. We characterize whether the pandemic-related damages are short-lived or long-lasting. The potential damages are estimated in terms of losses in eight major variables, including employment, consumption, and GDP. To estimate damages from the pandemic, we utilize the pre-COVID potential level of the target variables, GDP for example, as a benchmark and compare these estimates with those that are calculated during the COVID pandemic. Our study suggests damages from the pandemic are not short-lived as the major sectors have shifted to a lower growth trajectory compared to the pre-COVID growth path. Focusing only on the real GDP level would paint an illusion of a stronger recovery back to the "normal." Furthermore, the illusion of a stronger recovery may lead to a sooner-than-appropriate policy normalization.
Keywords: COVID-19; Economic cost; Employment; Output; Policy-errors.
© National Association for Business Economics 2021.