The Trump Lockdowns did hit the US economy like a thunderbolt. Between February 2020 and April 2020, the nonfarm payroll plunged by nearly 22 million jobs or by 14.3% and the official unemployment rate jumped from 3.5% to 14.8% in just 60 days. In all, real GDP plunged at a 33% annualized rate in Q2 2020 or by four times more than the 8.3% drop during the worst quarter of the Great Recession.
Nevertheless, the impact of the lockdowns and the core source of household income---wage and salary payments---was not nearly as severe as the headline jobs numbers suggest. That's partly because the initial sharp employment contraction in April-May rebounded significantly during the balance of the year and into 2021, and also because the layoffs were overwhelmingly focused in the low-wage, part-time sectors of the economy led by Leisure and Hospitality (L&H).
Thus, as the restaurants, bars, hotels, gyms and other socialization venues were ordered to be closed by Dr. Fauci, employment in the Leisure and Hospitality sector plunged by 8.2 million jobs or 48% in April, thereby wiping out in one fell swoop nearly 40-years of jobs growth in the sector. By contrast, the job loss outside of the L&H sector amounted to just 10% in April and was back up to the pre-Lockdown starting point by February 2022.
Impact Of Lockdowns on Leisure and Hospitality employment Versus Overall Nonfarm, September 2019 to February 2022.
Needless to say, the lockdown impact on the Leisure and Hospitality sector had a bifurcated impact with respect to available household spending power. To wit, the forced household savings from the closing of bars, restaurants, movies, gyms and malls, substantially exceeded the total loss of wage and salary income on an economy-wide basis.
We arrive at this conclusion by trending forward the pre-covid spending growth rate for services PCE ending in February 2020. That computed to 4.41% per annum and was applied to the next 16 months through June 2021. The latter date marked the end of the severe phase of the Trump-Fauci nonpharmaceutical interventions, as state-level economies were re-opened at different rates around the country thereafter.
When we compare the pre-Covid trend level for services PCE encompassing March 2020 to June 2021 with actual household spending, the reduction computes to $1.157 trillion or 11%. Crucially, that huge reduction in services spending can be considered largely involuntary or forced savings, not the result of a Keynesian-style macro-economic contraction. The proof lies in the fact that goods which could be delivered to the front doorstep, suffered no drop from prior trend during the same 16 months period. As amplify later, durables PCE clocked in 15% above the pre-Covid trend during March 2020 through June 2021, while non-durables PCE came in 3.6% higher than the 5-year pre-lockdown growth trend.
