America’s gross domestic product (GDP) was $21.4 billion last year. If it resets down between 12% and 13% this year, the figure will go back to the $18.7 level of 2016. Of course, GDP will be produced in different ways than it was four years ago.
The difference between the 2016 and 2020 figures is based on a 20% drop in the second quarter of this year, followed by 10% in the third and between a 5% drop and flat in the fourth quarter of 2020. It also assumes that the spread of the coronavirus will hit 15% of the U.S. population, will peak in late May and the rise in infection per week fall to zero by August.
Parts of the hospitality industry may fall off of over 50% in the second quarter and slowly recover throughout the rest of the year. It represents 3% of the U.S.
Retail could reset down 10%, with bricks and mortar sales off closer to 20% and e-commerce moving up to 30% or better. Unfortunately, e-commerce sales have traditionally been less than a quarter of total retail sales dollars. The industry is about 16% of the American economy.
Manufacturing is harder to gauge because it encompasses aircraft manufacturing and the automotive business. This entire sector is a third of the American economy, or $7 trillion. Airplane building could drop 50% for the year, with much of it coming in the March to September period. Car sales could drop by 20% based on industry experts. Again, most of it will come in the early part of the year. The biggest danger to aircraft builders is that airlines are slow to get back to near normal, and then hold older planes for a longer time than usual.
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Construction is 7% of the American economy. Home and commercial space construction may continue into the second quarter after projects begun in the first quarter are competed. The drop in the second and third quarters could decrease by 40% to 50% as homes go unsold and demand for office and retail space nearly disappears in the middle of the year.
State and local government are 9% of GDP, and may not fall at all. Possibly, the number of people in this sector could grow as the need for the government to manage the disease rises.
The financial part of the economy, which is 8% of GDP may only be affected in the first half. Bank branches will lay off people. The institutional part of the business may see a sharp rise later in the year, as lending and personal bank activity moves back to more normal levels.
Health and social care are 8% of the economy. GDP of this sector is likely to rise. It could move higher by 10% to 15% as hospitals and related care centers need more and more people.
The federal government is 5% of GDP. It may be flat for the entire year, as the healthcare and financial parts of the economy require support at rising levels.
What will the economy look like in 2021, if there is full recovery to 2019 levels? Retail and manufacturing may not recover for years. Health care GDP could stay at a higher level indefinitely. Government activity will remain flat or rising. Construction will recover as pent up demand for homes and buildings moves to make up for lost construction in the past three quarters of 2020. Retail and service, particularly hospitality, may take years to rebound.
Some parts of the U.S. economy will be depressed for half a decade or more. E-commerce, government, and health care will drive the economy.
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