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State economist sees recession here and elsewhere as COVID-19 fight continues

DARRIN WEBB

Analysis of pandemic flu scenario puts Mississippi economic loss at $4.9 billion

 

By TED CARTER

Other than saying a national recession is a certainty as the coronavirus shutdown grows, Mississippi’s state economist Darrin Webb is not publicly projecting where the state’s economy will drop to in the days ahead.

For now, Webb’s forecast is for the nationwide recession to be “significant” but shorter than that brought by the banking and real estate collapses of 2008-2009. A recession is typically designated as two consecutive quarters of economic decline and rising unemployment.

“We are still working on the specifics,” Webb said in an email on Monday.

“There remains a great deal we do not know in this rapidly changing event,” he added.

Webb said his current thinking is for the nation to have three quarters of recession starting in the second quarter.

The starting point for projections on the economics of the covid-19 likely will be a June 2019 study ordered by former Gov. Phil Bryant. The study put the damage to Mississippi’s $96 billion economy from an influenza pandemic at $4.9 billion.

The analysis, conducted by a pandemic influenza steering committee chaired by the state epidemiologist, projected workforce absenteeism caused by the pandemic at 40 percent for up to eight weeks during the peak and at lower levels throughout.

At some point, the study says, the state’s scope of response could require activation of the state’s Emergency Response Center. Ultimately, though, effectively countering the epidemic could become too costly to sustain with existing funds, the study concluded.

The influenza steering committee’s work established a framework for management of statewide operations in response to “Pandemic Influenza” with appropriately scaled and structured responses, the study’s authors said.

In a March 18 tweet, Webb said the United States is going into a recession, “but will not be fully seen in the data until second quarter.”

Webb’s early scenario is that the national economy will begin a gradual recovery in the first quarter of next year. Mississippi, he said, will follow a similar pattern but growth rates will be below those of the nation, just as in the last recession.

The new recession, he said, will be “significant, but not like 2008.”

Webb called the economic decline a “prescriptive recession” created by forcing business closures as a way to counter the spread of the deadly virus.

Webb’s forecast for a steep second quarter recession nationwide extending through the rest of the year “is basically my exact same view,” said Dr. Edward “Ward” Sayre, professor of economics at the University of Southern Mississippi in Hattiesburg.

This one will be shorter but far deeper than the one in 2008, Sayre said.

The professor said the projection of a $4.9 billion hit to Mississippi’s economy “is probably decently within range.”

Such a huge hit, Sayre said, could bring double-digit unemployment to Mississippi for the next 18 months.

Many businesses won’t survive, he predicted.

Large deep-pocked corporations, especially those getting federal help, will be OK, he said, but added others with fewer resources “just won’t be able to weather it. They will shut down and just won’t be able to come back.”

Sayre said he would not be surprised to see a 25 percent drop in the national economy as the prescriptive recession unfolds.

One reason for the expected quarter drop in GDP, he said, is that 80 percent of the nation’s workers are in the service sector, the one hardest hit by the social distancing mandates across the country. “It’s going to be steeper than anything we’ve seen,” Sayre said.

A big concern, he said, “is what happens to peoples’ minds.”

Will the economic shock they endured cause Americans to keep their money in their pockets rather than returning to shops, restaurants, movies and the like? Sayre said he is worried it will.

But sports should see a more enthusiastic return, according to Sayre, who sees huge pent-up demand for live sports.  “It will be highest demand ever,” he predicted.

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About Ted Carter