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Swift, deep declines ahead for Mississippi economy but rebound seen for 2021

SPRING OUTLOOK IS FOR 30.4% DROP IN STATE GDP THIS QUARTER

By TED CARTER

The spring 2020 outlook for Mississippi’s economy is for a dire near-term future as the coronavirus pandemic continues its ghastly spread.

By the time Mississippi rings in the New Year, around 73,000 of its residents will have lost jobs, for a 6.3 percent increase in overall unemployment and a decline of 5.8 percent in real GDP for the year.

The genuine shock is in the forecast of a 30.4 percent decline in Mississippi’s GDP for the second quarter that began April 1.

The forecast is not entirely awful, however. The outlook is for economic growth to begin a rebound in the final two quarters of 2020 that would continue into 2021 and beyond. The downside is that the expected GDP growth of 3 percent next year would be half that of the national economy, says the spring 2020 Outlook report produced by the University Research Center of the Mississippi Institutions of Higher Learning.

Forecasts for declines in real GDP for Mississippi and the nation are close together, but the state’s 2021 recovery is projected to be far slower than the national rebound, according to the Outlook.

The 2020 forecast is for Mississippi’s GDP to fall off of 5.8 percent. The decline in national real GDP is forecast to fall 5.4 percent for the year.

But by the end of 2021 and presumed successful reopening of the national economy, the U.S. GDP is forecast to grow by $1.1 trillion for a 6.3 percent increase. Mississippi, on the other hand, can expect its GDP growth to be 3 percent, the Outlook says.

Comparisons of GDP declines in the state and nation during the Great Recession of 2008-209 to today’s forecasts show how extreme this year’s economic damage is expected to become.

With the collapse of the national real estate market and a banking crisis, the U.S. economy contracted 0.1 percent in 2008 and 2.5 percent in 2009, for a total decline of 2.7 percent. That percentage of GDP loss is slightly less than half of the decrease in the U.S. economy forecast for 2020.

As unnerving as the 2020 forecasts for the state and nation may be, they are hardly at depression levels, says Darrin Webb, Mississippi’s state economist.

“When you look at the projections for the national economy, we are nowhere near what was seen in the Depression,” Webb said in an email Tuesday.

 

 

Webb noted there is no official definition of a depression, unlike a recession that is generally found to occur after two quarters of GDP decline. Investopedia says depression is commonly defined as an extreme recession that lasts three or more years or which leads to a decline in real GDP of at least 10 percent.

Webb said he does not want to minimize the economic fallout from the cvoid-19 pandemic. “But I also don’t want people to have the impression that we are facing a depression-level future,” he said.

Nonetheless, the United States is in the largest economic contraction since the end of World War II, Webb noted.

It’s largely self-induced, the economist said.

In presenting the spring Outlook, state economists cite shelter-in-place measures and business closures to combat coronavirus spread. The restrictions, they say, are “wreaking havoc” on the economies of both the nation and state.

But the self-inflicted economic pain can be quickly reversed, according to Webb. “This matters,” he said, “because as the economy is restarted, many will go back to work. So, the staggeringly large initial unemployment claims will come back down rapidly.”

For Mississippi, real GDP is expected to increase in this year’s fourth quarter (3 percent) and continue through all of 2021.

“The depth of the recession will mean it still takes us time to get back to the pre-recession level of output,” Webb said. “For the nation, I think that is late 2021.  For Mississippi, it could be a good bit longer.”

Webb said he expects that despite the robust growth rates, lingering effects from this recession will remain. People are likely to be very cautious about travel and being in crowded situations, he noted.

“It took two and half years before air travel returned to ‘normal’ following the 9/11 terrorist attack,” Webb said. “This could easily follow a similar pattern.”

Jobs will return as the GDP rebounds but the return could be agonizingly slow. While Mississippi is projected to lose around 73,000 jobs in 2020, a decrease of

6.3 percent, this decline is considerably larger than the 4.5 percent decrease in employment in the recession year of 2009, the spring Outlook says. The Outlook says state payroll employment is expected to fall by about 20,000 jobs in 2021, a decline of 1.8 percent.

 

 

The roughly 93,000 total Mississippi jobs expected to be lost in 2020 and 2021 compare to the almost 62,000 jobs lost from 2008 to 2010. Job growth is forecast to resume in 2022 as employment in Mississippi is expected to add 45,000 jobs, a 4.2 percent increase, according to the Outlook.

However, the report noted, that even with addition of the new jobs in 2022, total employment that year will remain about 48,000 hires below the 2019 level.

By way of history, the Outlook report noted, Mississippi did not surpass its 2007 level of total annual employment until 2019.

Nationally, the economic rebound is forecast to be far swifter – and larger – than in the years following the Great Recession. The forecast for 6.3 percent GDP growth nationally in 2021 contrasts with the recovery following the Great Recession as real GDP increased 2.5 percent in 2010.

The largest annual increase in real U.S. GDP since the end of the Great Recession has been 2.9 percent, reached in 2015 and again

in 2018, according to the Outlook.

The rebound is expected to continue in

2022 as the U.S. economy is forecast to grow 4 percent. If the 2022 forecast is realized, it will mark the first time the U.S. economy has expanded by 3 percent or more in consecutive years since 2004 and 2005 when real GDP grew at annual rates of 3.8 percent and 3.5 percent, respectively, the Outlook says.

Webb said he thinks Mississippi’s economic picture would look far bleaker without the $1,200 federal stimulus checks to most adult residents and $600 weekly federal supplement added to state jobless benefits. “We estimate the state received $2.2 billion in stimulus checks and quite a bit more in the form of additional unemployment compensation,” the economist said. “I think these direct payments to individuals will help conditions from being far worse than they might otherwise be.”   

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About Ted Carter