Coronavirus drag on Illinois' economic output forecast at $76 billion
COVID-19-driven economic turmoil could cost Illinois $76 billion in economic output, a report from a University of Illinois task force said.
“The economic disruption associated with the COVID-19 pandemic came on suddenly and is quite severe,” reads the report from the Economic and Fiscal Health Impact Group that’s part of the Task Force on the Impact of COVID-19 Pandemic put together by the University of Illinois’ Institute of Government and Public Affairs.
The data projects $28.5 billion in lost income to Illinois citizens and businesses. Individual and corporate income taxes along with sales taxes are the state’s top three general fund revenue streams. The losses translate into a forecasted $76 billion blow to economic output, which is the value of goods and services produced, over the course of one year, the report said.
The report projects the potential loss of more than 550,000 jobs on the Illinois economy by March 2021 with the biggest hits to the resources, services, trade, construction, transportation, communication and public utility sectors.
Jobs that may be affected for less than a year were counted as a fraction of a whole so that a job lost for three months represented the loss of one-fourth of a job for the year. Somewhere between 1 million and 1.5 million Illinois jobs may be affected overall.
The group cautions that much remains unknown about the full economic toll as economic data lags by weeks and months and the recovery is dependent on unknown factors such as the course the COVID-19 disease takes with a potential resurgence of cases and public comfort levels.
Comparisons to past recessions including the 2007-2009 Great Recession are difficult because of the swift and severe nature of the current one. Early indications suggest a deep blow and complicated recovery.
“The recession brought on by the COVID-19 pandemic and associated policy responses has been deeper than any recession in modern history, and also developed with unprecedented speed,” said report co-author Kenneth Kriz, director of the Institute for Illinois Public Finance at the University of Illinois at Springfield. “While many economists feel that the economy is at or near the worst that it will get, there is a strong divergence of opinion regarding how long the recession will last and the speed of the recovery.”
In the past, Illinois has generally lagged the nation in feeling a recession’s impact. The state’s employment did not start to decline until more than five months into the Great Recession, but that is not the case with the current downturn.
Recovery prospects are difficult to gage. “One of the most important factors that will drive the shape of the recovery is the degree to which employees are going to feel comfortable returning to the workplace and how households view the risk of attending sporting events, cultural activities and leisure facilities,” the report said. “These were not risks faced by households in the recovery from previous recessions.”
Other factors are in play that challenge recovery. Whether restaurants can afford to re-open at limited capacity is in question while supply chain disruptions could persist. In recent weeks, the closing of several meat processing facilities has slowed or stopped the delivery of livestock from farms, creating a significant bottleneck in the supply chain.
Illinois Gov. J.B. Pritzker shut down non-essential businesses, banned public gatherings, and issued a stay-at-home order in mid-March. The state moves into the third phase of a five reopening plan at the end of the week with some non-essential businesses, salons, and out-door dining at restaurants allowed to resume. Social distancing and limited capacity is expected. Chicago is slightly behind with openings occurring June 3. Large gatherings such as conventions are not allowed until the final phase when new cases are held at bay or a vaccine or successful treatments are in place.
“Illinois policymakers should keep in mind that the economy is highly interconnected as successful businesses need functioning suppliers and willing customers,” several authors of the piece wrote. “Re-opening the economy will require careful thought to make sure that interconnected businesses can work smoothly and safely with their partners.”