Government officials around the world have ordered businesses shut and families to stay in their homes except for essential activities. This fact estimates the opportunity costs of lockdown relative to a normally functioning economy.
National income accountants have found that adding a nonwork day to the year reduces the year’s real GDP by about 0.1 percent. Adding a nonwork day to a quarter would therefore reduce the quarter’s unadjusted real GDP by about 0.4 percent. Extrapolating from this finding, removing all of the working days from a quarter is 62 or 63 times this, or 25 percent. In other words, if seasonally-adjusted GDP for 2020-Q2 would have been $5.5 trillion at a quarterly rate (see Table), then changing all of that quarter’s working days to the functional equivalent of a weekend or holiday would reduce the quarter’s GDP to $4.2 trillion. Applying the same approach to 2020-Q1, with a lockdown occurring for one-eighth of the quarter, 2020-Q1 real GDP (in 2020-Q2 prices) would be $5.4 trillion. The quarter-over-quarter growth rate of seasonally-adjusted real GDP would, expressed at annual rates, therefore be -10 percent in Q1 and -63 percent in Q2.
Bottom line: Given these and other facts, while even negative 50 percent is an optimistic projection for the annualized growth rate of US GDP in 2020-Q2, (assuming nonessential businesses stay closed over that time), this large figure may understate the true effect, which could total nearly $10,000 per household per quarter.