Coronavirus CT: Economic Whiplash Swift And Unprecedented

This article originally appeared on the Monroe Patch

CONNECTICUT — Like many parts of the country, Connecticut is seeing drastic and sudden economic impacts amid concern over the coronavirus. At least one out of every 10 workers in the state is employed in industries such as food service, amusement and accommodations — industries suffering the worst of the economic whiplash so far, according to the Bureau of Labor Statistics

Statewide, unemployment filings reached 56,000 since March 13, about 3.3 percent of the state’s entire workforce. The Chowder Pot in Hartford announced 95 layoffs and 121 at Oxford announced it would close and layoff its staff of 41 employees. The state Department of Labor has ramped up its daily unemployment processing 20-fold to 10,000 per day, up from 500 in order to get people the benefits as quickly as possible.

“This is not gradual, it’s extremely quick," said Zachary Cohle, assistant professor of economics at Quinnipiac University. "We are seeing an economic transition in a span of a week.”

Earlier this week, Gov. Ned Lamont ordered restaurants and bars to serve only take-out or delivery customers. He also closed barbershops, hair salons and nail salons.

On Friday he ordered all non-essential workers to work from home if possible; the order goes into effect 8 p.m. March 23. Non-essential retail shops will have to close. Restaurants will still be able to serve take-out and delivery.

Cohle said that the coronavirus will bring a recession and that the United States may already be in one.

The food services and drinking industry employs around 113,000 people, which makes it the second-largest sector in Connecticut, after educational services, according to an Associated Press analysis of BLS data. The average annual wage in the industry is $21,500, and it pays around $613 million to employees each quarter.

The performing parts and spectator sports industry employs 48,000 people, amusement/gambling employs nearly 23,000 and the accommodation industry employees nearly 11,000 people.

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Connecticut’s tourism industry isn’t as large as other states, but several of the state’s other industries have already felt global effects from the coronavirus. The financial sector, which has a heavy concentration in Connecticut, is also sure to take a hit.

“If you are importing literally anything from far east Asia, you are going to be impacted,” Cohle said, adding that some supply impacts could be seen even before the coronavirus began spreading in the United States.

Goldman Sachs projected an astounding 24 percent GDP decline in the United states for the second quarter of 2020 after a six percent drop in the first quarter. Goldman Sachs recently updated its projections after places including California and New York State announced stay at home orders for all but essential workers.

Goldman Sachs projects a 12 percent increase in GDP for the third quarter and a 10 percent increase for the fourth quarter, which would end the year at a cumulative negative five percent growth. The U.S. had a 2.53 percent GDP drop in 2009 during the worst part of the Great Recession.

The key to seeing a quick recovery and reducing economic damage will be to help those who are hit hardest by the changes, including the unemployed and small businesses, Cohle said. Small businesses that are forced to shutter their doors would have a ripple effect as their suppliers lose essential customers.

Giving money directly to consumers and helping small businesses bridge the rough economic time are some of the best tools governments have to stabilize the economy, Cohle said.

“I’m optimistic though, it seems like the government at the federal level is doing things that are pragmatic,” he said.

U.S. Treasury Secretary Steven Mnuchin said the government is looking to send $1,200 checks to most adult Americans within three weeks. The U.S. Small Business Administration announced that businesses are eligible for up to $2 million in loans from the U.S. Small Business Administration if they were affected by the coronavirus fallout. President Donald Trump's administration's plan calls for $300 billion in relief for small businesses.

Lamont has also announced a number of measures to help businesses; his administration is working with state legislatures to come up with a business relief plan.

About half of workers in the U.S. are employed in a service industry and many of them are working for low wages, he said. They will be hit the hardest. They may be able to sustain their typical spending habits for a short time.

“Most people will live that way, but it’s not sustainable and you can only go into debt so far,” he said.