Effect of COVID-19 Pandemic on U.S. Economy

Latest Update: 4-2-20

Table of Contents

(releases are listed with the most recent first)

6 million unemployment claims this week “the tip of this iceberg of loss;” 104M workers actually losing income

Michigan, California, New York, and Florida hardest hit

East Lansing, MI—The effects of the stay-at-home orders, restrictions, and shut-downs have proven as damaging as we feared when we first estimated that 104 million Americans would lose significant income this month.

“The 6 million new unemployment claims are just the tip of this iceberg of loss,” said Patrick Anderson of Anderson Economic Group. “We expect 90 percent of those losing income have not filed for unemployment, particularly those who are self-employed or in small businesses struggling to keep their doors open.”

The loss in states like Michigan and Illinois confirm the Midwest is suffering:

  • Michigan’s unemployment claims of 311,000 this week, on top of 128,000 last week, are the worst in the Midwest. The combination of the auto assembly shutdown, and the stay-at-home order, on top of the seriousness of the outbreak, are making Michigan the most seriously hurt state in the Midwest.
    We estimated in mid-March that 1.4 million workers in that state were likely to lose income this month. Unfortunately, that appears to be happening.
  • Illinois’ unemployment claims of 178,000 this week and 114,000 last week, while very large in normal times, are below those of Ohio (272,000) and Michigan.

Dr. Matthew McMahon, an AEG consultant with Forensic Economic Services in California, states that “This week’s unemployment claims were unprecedented in magnitude and will surely have a lasting impact not only in California but across the entire country.”

“Astonishingly,” continued Dr. McMahon, “California alone accounted for approximately 8% of those initial claims. Given recent developments in California’s employment law, the legislative response to COVID-19 pandemic, and the increasing uncertainty in Californians’ everyday lives, it is likely that the volume of claims will persist in the short run. The lasting effects of the pandemic are yet to be felt.”

The hardest hit states nationally are Michigan, California, Florida, and New York; along with Ohio, Pennsylvania, and New Jersey:

  • California (with 878,000 this week), Florida (with 227,000) and New York (with 366,000) join Michigan as the most heavily damaged states in the country. These states have both acute outbreaks and deep restrictions on the economic activity, with Florida the most recent to adopt a statewide order.
  • Other states, including Ohio (272,000), New Jersey (205,000) and Pennsylvania (455,000) are also seriously affected.

We note that differences in state unemployment laws and systems account for some of this variation, and our assessment of the hardest hit is based on broader economic and epidemiological factors.

This analysis was prepared by Anderson Economic Group economists Brian Peterson and Patrick Anderson in East Lansing, Michigan and Chicago, Illinois, along with consulting economists Matt McMahon and Roman Garagulagian in Los Angeles, California.

For additional information or to schedule interviews with Mr. Patrick Anderson (East Lansing), Mr. Brian Peterson (Chicago), or Dr. McMahon (Los Angeles) please contact the AEG offices at 517.333.6984 or send us a note.

5 Points on Tax Revenue Impact

3-25-20: Immediate impact on state and local tax revenue, corona-recession:

  • Income tax revenue for states where “stay at home” orders are in place and closures of bars and restaurants have occurred will “fall off a cliff.” That includes Michigan, Illinois, New York, and California. AEG estimates from last week were that between 800K and 1.4M Michigan workers would lose 2 days’ wages or more over the next month and a half. Given the “stay at home” order and the closure of Detroit 3 assembly plants, these losses are likely to grow.

This drop in income—and income tax—will be particularly acute for small businesses organized as S-corps, LLCs, and partnerships, where income tax is paid on the business through the owners’ tax return.

“None of those restaurants, taverns, and small businesses that were forced to close are  going to be paying income tax for the next couple of months.”

  • Sales tax revenue will take a significant hit, especially on sales of big-ticket items. However, people are still buying for their home consumption.

Some products and services—notably home-delivery food, home-use electronics, and services that let workers be productive at home—are going to increase.

  • Property taxes are a big risk for the fall and winter. There is no question that property values will fall, especially for businesses—affecting next year’s revenue. I also expect many taxpayers that are seeing schools closed and their own employers shuttered will be unhappy about paying property taxes later this year.

Because Michigan and many other states collected most of its Winter taxes in January and February, this is an issue that we will face starting in the Fall.

  • Gas tax revenue will also be dropping, as will registration fees on new vehicles. Gas tax revenue tracks usage of roads very closely, and commuting traffic has also nearly dropped off a cliff. Gas and diesel tax revenue from trucks, however, will not be affected nearly as much.

“Many delivery drivers will be working overtime, putting a lot of miles on the road, and a lot of dollars into tax revenue.”

  • Marijuana excise tax revenue will grow. This will be a drop in the bucket for state governments, and it will make people scratch their head and ask, “why is it illegal for me to go to work, but ‘essential’ that marijuana dispensaries stay open?”

“I think pretty soon we will need a better answer to this question than ‘flatten the curve.’” –Patrick L. Anderson

Updated COVID-19 Analysis: Over 100 Million US Workers Will Likely Lose Income in April 2020

3-19-20: US workers likely to lose significant income in April due to disruptions, closures, quarantines, travel restrictions, and illness caused by the COVID-19 outbreak.

This assessment builds on the economic analyses previously released by the company on the effects of the coronavirus outbreak, the first of which was released on February 4th that identified the coming disruptions to the US auto industry as well as the human calamity that was then occurring in China. It details the number of workers likely to lose significant income during the month of April due to disruptions, closures, quarantines, travel restrictions, and illness caused by the COVID-19 outbreak in the United States.

Very Large—and Possibly Unprecedented—Number of Workers Losing Significant Income

The revised assessment continues to project an extremely large, and possibly unprecedented, number of workers losing significant income in a single month. These workers include those laid off, furloughed, placed on sick leave, required to self-isolate or quarantine, unable to work due to illness or care of immediate family members who are sick or out of school, and those directed to not work by their employers or by orders of state governments. We estimated the number of workers that would lose at least two days of wages during this time period.

Workers Losing Income in New York, Michigan, and Illinois

Anderson Economic Group economists estimate that, beginning this week and extending through April, the number of workers who will suffer significant lost income to be in excess of 3 million workers in Michigan, 4 million in Illinois, 6.5 million in New York, and 104 million in the United States.

Potential Use of Paid Sick Leave

We also estimate the number of workers eligible for paid sick leave of more than two days for times they are unable to work due to the causes above. We consider both existing employer-paid leave policies, and the three different public acts incorporated in the HR 6201 that would provide support for employers paying for leave during the current declared health emergency. Of these, we project that between 875,000 and 1.3 million workers in Michigan, and between 29 and 49 million in the US, could receive paid sick leave during this period, pending adoption of the federal law (see table below).

Projection of Workers Losing Significant Income, March-April 2020; Paid Sick Leave Recipients

Revised: Tuesday, March 17, 2020
Sick leave eligibility presumes passage of three public acts included in House-passed HR 6201 and a modest escalation of outbreak scenario
Michigan Illinois New York United States
Workers Losing Income and Eligible for
Employer-Paid Sick Time
3,124,936 4,080,141 6,525,236 104,006,457
Possible take-up rate, March-April 2020 0.47 0.48 0.51 0.49
Possible employer-paid sick time recipients(a) 1,468,720 1,958,468 3,327,870 50,616,476
Memo: Estimated share of paid sick time compensated by the federal government under the “Tax Credits” Act, as credits against FICA tax.


not estimated


Workers Losing Income and Eligible for “Emergency” Sick Leave 2,499,949 3,264,113 5,220,188 83,205,165
Possible take-up rate, March-April 2020 0.35 0.35 0.35 0.35
Possible paid leave recipients(a) 874,982 1,142,439 1,827,066 29,121,808
Memo: Estimated share of paid sick time compensated by the federal government under the “Tax Credits” Act, as credits against FICA tax.


not estimated


Source: Anderson Economic Group LLC. ©2020
(a)Many workers will be eligible under more than one program; self-employed workers are eligible under “emergency” leave. See further limitations in text of analysis. Subject to frequent revision.

“This is not a worst-case scenario,” said Patrick L. Anderson, principal and CEO of Anderson Economic Group, “these estimates are conservative in that they do not presume the majority of workers will leave work for more than two days, for illness, family care, or disruption in their lives. The numbers could be much higher.”

Huge Gap in Income Not Covered by “Sick Leave” Even Under Pending Federal Law

“This analysis also reveals the huge gap between the total income due to the disruption in work caused by this health crisis, and the amount that could be offset by employer-paid sick leave. Even with the pending federal law, the total loss that will be suffered by small business owners, workers in the hospitality and travel industry, and self-employed persons will be enormous. For many of these individuals, the combination of forced business closures and unavoidable illnesses will be a double-whammy of loss. Some such businesses may never recover from this damage.”

Limitations in this Analysis

This is a summary of the current economic and public health situation, which changes daily. Should public health be more severely affected, or restrictions increase further, lost income will be larger than estimated here. Any supporting sick leave or other benefits depend on laws that are likely to change, as well as both employer and employee decisions that have not yet been made. For this reason, this analysis should be considered an illustration of likely events.

Anderson Economic Group will revise this assessment as more data becomes available. Our experts for this analysis, Patrick L. Anderson and Brian Peterson, are available for comment by contacting Lisa Wootton Booth, lwbooth@AndersonEconomicGroup.com. Please also contact Ms. Booth to be added to our distribution list for further updates as they become available.

Related AEG Media Coverage

3.26: Op-Ed from Patrick Anderson