I’m working on a series of posts tied to various topics surrounding the COVID-19 outbreak. One of the issues is economic impact. We can hope and have some reasons for relative confidence that the US can avoid the worst outcomes from this outbreak. But we can already see lots of reasons to understand that the economic shock will be massive – and a lot of it has already happened. It’s baked in.
Let me point you to just one stunning datapoint.
A few days ago the Port of Los Angeles reported that it expects a 25% drop in container volume traffic just in February. Just in February. The Port’s executive director said he expects of a year over year drop of 15% for the quarter. This is just the tip of the supply chain impact. So even if things started getting back to normal in China faster than people expect a lot of the jolt is still in the future.
It’s important to remember that in general we measure boom times and recessions as fairly small undulations in the total economy, 2 or 3% up or down which means plenty or pain across the economy. International trade is only part of the economy of course. One of the big advantages of the US economy is that a huge amount of it is an internal domestic economy. Still, a sudden 25% drop at a key artery of global trade is just a massive impact.
I don’t have the economic knowledge to predict how that drop figures into a larger calculus of the national economy. But it’s big. There’s no question about that.