The COVID-19 pandemic will take a fast bite of more than $3 billion out of West Michigan’s economic output, driving the region into recession along with the rest of the country.
That’s the latest estimate from economist Paul Isely, associate dean and a professor of economics at the Grand Valley State University Seidman College of Business. More than 40 percent of the projected loss in economic activity from the pandemic and the state’s stay-at-home order will come in manufacturing and another 26 percent in the entertainment, food services and retail sectors, Isely said.
“Right now, this recession looks like it will be a little bigger than the 2008-09 recession,” he said.
Citing expectations that the pandemic and number of COVID-19 cases will peak in Michigan in early to mid-May, Isely said a broad-based “restart of any economic activity” won’t occur until June.
“But, it’s still looking like there’s a possibility of a fast tail on this, meaning manufacturing will be able to ramp up relatively fast — in one to three months — once we get into late May or June,” he said. “That means this recession, unlike the last three recessions, has the possibility of us recuperating many of those job losses in a relatively short period of time in the course of the year.”
Nationally, an economic report from PNC Bank economists that came out Friday afternoon said the U.S. labor market “is at the start of its worst contraction since the Great Recession, and perhaps the Great Depression.” Job losses for March “were far higher than expected,” at 701,000, and job losses for April “will be far higher, likely setting a record.”
PNC economists called details in the March jobs report “horrific.”
“The unemployment rate jumped precipitously and is headed much higher. Stimulus will help, but can only do so much if consumers can’t buy and workers can’t get to their jobs,” PNC economists wrote in the report. “If restrictions on movement are lifted soon and normal life can gradually resume over the next couple of months, the permanent damage to the economy may be limited. But the longer the labor market contraction persists, the more the underlying damage, and the slower the recovery and the greater the hit to long-run growth.”
The March job losses pushed the national unemployment rate to 4.4 percent from 3.3 percent and
In a Friday report, Comerica Inc. economists said “even those bad numbers” in the March jobs report “do not fully reflect the current situation.”
“We expect April data to show historic deterioration in the U.S. economy due to both the direct effects of the coronavirus globally, and due to the social mitigation efforts in place to fight it,” Comerica economists wrote.
Comerica noted that U.S. light vehicle sales “fell hard” last month to an annualized rate of 10.1 million units, a deep decline from an annualized rate of 18 million units in February.
As of Sunday, Michigan has 15,718 confirmed cases of COVID-19, an increase of 1,493 cases from Saturday, and 617 deaths, up 77 from the day before.