COVID-19 Economic Impact Estimates

by James A. Bacon

Thanks to its high share of federal government employment and a high percentage of jobs that can be performed remotely, Virginia is somewhat less vulnerable to job losses from COVID-19-related shutdowns of large sectors of the economy than other states, said Stephen Moret, CEO of the Virginia Economic Development Partnership (VED) in a Monday update to economic development partners.

“We expect a large increase in unemployment to happen quickly, led by the hospitality sector, with substantial job losses in retail as well,” he wrote. The short-term impact will vary substantially by industry sector:

  • Minor impacts for ~48% of total employment in Virginia (federal government, healthcare, K12 education, utilities, data centers, and agriculture);
  • Moderate impacts for sectors representing ~35% of total employment (professional services firms, IT firms, manufacturers, higher ed, real estate, construction);
  • Severe impacts for sectors representing ~17% of total employment (hospitality, retail (with a few exceptions, e.g., grocers), and small businesses generally (especially those in the non-traded sector), and movie production.

Any prognostication must be tempered by big unknowns, he said: (1) the size and speed of federal stimulus to offset social distancing impacts, and (2) the timeline for social-distancing measures to remain in place.

Meanwhile, Secretary of Finance Aubrey Layne said yesterday that the commonwealth is likely to lose $1 billion in revenue in each year of the next biennial budget, reports the Richmond Times-Dispatch.

Layne based his estimate on a pessimistic scenario considered and rejected by the Governor’s Advisory Council on Revenue Estimates in the fall when state revenue growth appeared to be robust.

The pessimistic alternative would reduce state revenues by about $1 billion in the first year and $2 billion in the second, compared with the standard economic outlook adopted by the advisory group of business leaders and legislators.

The finance secretary hopes to limit the revenue loss to $1 billion a year, as the state attempts to recover from the economic damage it expects the coronavirus crisis to inflict in the coming months.

Sen. Janet Howell, D-Fairfax, chairwoman of the Finance and Appropriations Committee, said Virginia is in a better position than some states because it has close to $2 billion in combined reserves.

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12 responses to “COVID-19 Economic Impact Estimates

  1. Texas Lt Gub’na says those 70 and older should sacrifice themselves for the economy. He’s 69. Guess that means he gets a ventilator.

  2. Just returned from having a new set of tires installed. The owner of the well-known Northside shop said his work has really slowed down, and people are clearly delaying if they can. I was the only person in the waiting room that two hours (social distance easy.) His folks will go out to houses to get and return cars, and he has signs up assuring people that the insides are sanitized once work is done. Fear has taken hold and his volume is way down. The estimates of economic impact are probably missing the malaise that will effect even those businesses struggling to stay open and providing crucial services. Then there is the depression on discretionary spending that always goes with a 30% drop in portfolio values, even if the reality is you haven’t lost a dime until you sell.

    My hopes for a turnaround have gone from Memorial Day to the Fourth and now to Labor Day. Hope I’m the pessimist to our Fearless Leader tweeting out his wishful thinking optimism about Easter. Before all condemn him, I think Layne is also engaging in wishful thinking.

    • “The estimates of economic impact are probably missing the malaise that will effect even those businesses struggling to stay open and providing crucial services.”

      Steve, just to clarify, the estimates we shared represent anticipated short-term employment impacts. Economic or fiscal impacts will be somewhat different, as you correctly note.

  3. By coincidence, I’m headed in to get tires also. Will report back.

    The Church did it’s food pantry yesterday and clients basically had to stay in their cars until their number was called then they’d go check in and pick up their food and leave, then the next client would leave their car and come get food. In the past, some clients carpooled.. but now one person can pick up their own and others (who are registered clients) food.

    I note that National Parks are closing because of crowds and tourist towns with second homes are telling those who don’t live there year around to stay away.

    We typically walk in a local National Battlefield Park and I’ve never seen it so crowded and I fear the Park Service will close it… will check on in a bit.

    • Very easy to see how even there, people can keep a reasonable distance (except perhaps with their own family, who are after all in proximity anyway.) If people are not actually congregating, using the equipment etc, I’d hate to see that outdoor opportunity disappear.

    • Well, we went and got tires…and walked a mall while we waited. The Mall itself was open with one or two “walkers” not all the stores were closed but most all.. A couple of eyeglass places were open. The Post Office was and so was a couple of sports specialty shops and center aisle vendors.

      Red Cross was open and mostly full of blood-givers. Costco was busy but not overwhelmed like it was the other day. Still saw some folks hoarding.

      Walmart was calm compared to the other day. They were still out of paper goods like TP and paper towels. Very weird. Some shelves were empty or decimated, other had product. Meat was there but limited. Produce mostly available. The parking lot at Kmart was fairly full but parking was available.

      The traffic getting off of I-95 at 4:15 pm was very, very light. I suspect that much of the govt in NoVa is shut down.

  4. I’m on the Eastern Shore of Maryland where there have been 15 cases of COVID-19 to date. The relatively large but not very populous county where I am staying had one case. The governor of Maryland has ordered all non-essential businesses to close. Yesterday I called a small businessman who I normally pay for a service in Mid-April. I offered to pay early thinking he might benefit from the cash flow. I expected to ask me to read him my credit card info over the phone. I was surprised when he told me that I could pay by phone or bring a check to the shop. I decided to stop by the shop. While precautions are being taken (no hand shaking, no coming within 10 feet of one another) the shop is operating. While I don’t know the exact definition of “essential service” being used in Maryland it would be quite quite a stretch to see this shop as performing an essential service by any reasonable definition of “essential”.

    Vehicles can be seen in the shop’s parking lot. People can be seen going in and out. There is no question about the business of the shop. It’s been there for years. Maryland state and local police drive on the road by the shop regularly. Nobody cares that it’s open. Good.

  5. “Any prognostication must be tempered by big unknowns, he said: (1) the size and speed of federal stimulus to offset social distancing impacts, and (2) the timeline for social-distancing measures to remain in place.”

    “Meanwhile, Secretary of Finance Aubrey Layne said yesterday that the commonwealth is likely to lose $1 billion in revenue in each year of the next biennial budget, …”

    How can these two comments possibly be squared? Moret admits “big unknowns” while Layne puts a dollar number on the shortfall over the next two years.

    My understanding is that Layne is using a pre-virus pessimistic scenario. How useful is that given that the virus is here?

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