The Cost of the Covid-19 Crisis: Lockdowns, Macroeconomic Expectations, and Consumer Spending

By Olivier Coibion, Y. Gorodnichenko, Michael Weber. Social Science Research Network, 2020

573 citations recorded by the source corpus.

We study how the differential timing of local lockdowns due to COVID-19 causally affects households’ spending and macroeconomic expectations at the local level using several waves of a customized survey with more than 10,000 respondents. About 50% of survey participants report income and wealth losses due to the corona virus, with the average losses being $5,293 and $33,482 respectively. Aggregate consumer spending dropped by 31 log percentage points with the largest drops in travel and clothing. We find that households living in counties that went into lockdown earlier expect the unemployment rate over the next twelve months to be 13 percentage points higher and continue to expect higher unemployment at horizons of three to five years. They also expect lower future inflation, report higher uncertainty, expect lower mortgage rates for up to 10 years, and have moved out of foreign stocks into liquid forms of savings. The imposition of lockdowns can account for much of the decline in employment in recent months as well as declines in consumer spending. While lockdowns have pronounced effects on local economic conditions and households’ expectations, they have little impact on approval ratings of Congress, the Fed, or the Treasury but lead to declines in the approval of the President.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/fc955a55d94ff282994187805f923797d34ff58b

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Citations in the corpus

News and uncertainty about COVID-19: Survey evidence and short-run economic impact (2020, background): “Others have focused on implications of lockdown policies or the stock market’s reaction for household expectations ( Coibion et al., 2020b; Hanspal et al., 2021; Miescu and Rossi, 2021 ).”
The Effects of COVID-19 on U.S. Small Businesses: Evidence from Owners, Managers, and Employees (2020, unknown): “Less than a quarter of our unemployed respondents were actively looking for a job (columns (4)–(6)), consistent with Coibion et al. (2020c), who show that many who lost jobs during the pandemic were not actively looking for a new one.”
Fear, lockdown, and diversion: Comparing drivers of pandemic economic decline 2020 (2020, unknown): “Other work also has included data on various measures of private sector spending such as Alexander and Karger (2020), Chetty et al. (2020), and Coibon et al. (2020).”
Poverty and economic dislocation reduce compliance with COVID-19 shelter-in-place protocols (2020, unknown): “…and quantify negative consequences of shelter-in-place policies in terms of customer activity ( Goolsbee and Syverson, 2020; Carvalho et al., 2020; Chetty et al., 2020; Coibion et al., 2020 ) and job losses ( Friedson et al., 2020; Chudik et al., 2020; Gupta et al., 2020; Beland et al., 2020 ).”
Why Working from Home Will Stick (2020, background): “9 In May, when stay-at-home orders covered most of the country (Coibon et al., 2020), over 40 percent of respondents worked from home, while only 25 percent worked on business premises.”
Socio-Economic Impacts of COVID-19 on Household Consumption and Poverty (2020, background): “Out of a survey of 10,000 participants, (Coibion et al. 2020) found that 50% of respondents had an income loss with an average of more than $5,000 due to the coronavirus lockdown.”
Effects of social distancing policy on labor market outcomes (2020, unknown): “However, note that Coibion et al. (2020a) use data from an early-April household survey and find that unemployment rate may greatly exceed unemployment insurance claims.”
Unemployment Effects of Stay-at-Home Orders: Evidence from High-Frequency Claims Data (2020, background): “Coibion, Gorodnichenko, and Weber (2020a) study the effect of lockdowns on employment and macroeconomic expectations.”
A literature review of the economics of COVID‐19 (2020, unknown): “Coibion et al. (2020b) find that the level of unemployment and job losses in the United States is more severe than onemight judge based on the rise in UI claims, which is to be expected given the low coverage rate of the UI regimes in the United States.”
The impact of COVID-19 on international trade: Evidence from the first shock (2021, background): “, 2020), unemployment insurance claims (Kong and Prinz, 2020), household spending and macroeconomic expectations (Coibion et al., 2020), and indicators of economic activity, such as nitrogen dioxide emissions (Dang and Trinh, 2020; Deb et al.”
The Unprecedented Stock Market Reaction to COVID-19 (2020, background): “See Coibion et al. (2020) and Gupta et al. (2020b) for early causal evidence on the negative economic effects of stay-at-home mandates and forced business closures during the 2020 coronavirus pandemic.”