Following earlier dire projections regarding the impact of the COVID-19 economic shutdown, Economist Pat Barkey, Bureau of Business and Economic Research, has revised those projections to being even more alarming.
Cautioning that their research is based on very incomplete data and upon a highly volatile situation, Barkey increased the number of job losses in Montana from his earlier estimate of 50,000 to 75,000. Income losses for Montanans, on whole, will be more in the neighborhood of $7 billion in 2020, rather than his earlier projection of $4 billion. And, fully recovering from this catastrophe could take until 2024 rather than 2022, as was earlier projected.
During a Montana Chamber of Commerce presentation, Barkey likened the state’s economy to “getting hit by a truck.” He said, the situation is beyond the Great Recession of the 2008, “I think it’s getting close to the magnitude of the Great Depression in 1929.” He said that the second quarterly contraction will be about seven percent, which extrapolates to a contraction of 30 percent, year over year.
As the year goes on, Barkey said that they expect “things to level off and improve,” but that won’t happen as early as they first projected.
Almost every industry in Montana is being impacted, most especially tourism and health care. But, also likely to contribute to the state’s economic pain will be declines in the oil industry and in agriculture. Nationally, transportation services dropped 92 percent and health care services declines 94 percent. The declines have been slightly less in Montana.
As people practice social distancing they have ceased purchasing as much. Consumer spending for “on premises” dining and clothing has dropped 45 percent.
Tourism is going to be especially “challenging” this year. “In the medium term the fundamentals are still good,” said Barkey, but, most of the decisions that will impact tourism this year have already been made. “Decision about coming to Montana are being made right now and they are not being made in our favor,” he said. Some businesses in the tourist industry do not plan to open this year.
Tourism business owners are promoting locally and hoping that regional travel will help compensate for losses.
“The state legislature will have a tough time of it,” said Barkey. Losing $7 billion in income means about a $200 million loss in income tax revenues. The state also will face losses in other tax revenue streams — fuel taxes, gambling taxes, natural resource taxes
Asked about what will happen in the fall and whether the virus will return, Barkey said that it could but he believes the management of it will be different. “Infections and deaths are not impacting the economy,” he said, “What is really going on is our reaction to it. . . to pull back on discretionary spending, staying at home, essential and non-essential businesses, regulations. . . . “that is what has really hammered the economy.”
“Some increase in infection is quite possible” he said, but there will probably be a, “more managed approach to infections and their spread, one which keeps the economy much more functional in the fall and statewide.