With Coronavirus, Expect DC Area's Economy to Have Uneven Recovery

  • March 20th 2020

by Nena Perry-Brown

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Ben's Chili Bowl. Photo by Ted Eytan.

Although the DC area tends to be more insulated from economic downturns than other areas, the downturn triggered by the coronavirus pandemic will hit the area in a similar way to the rest of the country.

This is one of the first points made in a recently-released report from the Stephen S. Fuller Institute offering some predictions of how the DC-area economy may fare through this downswing.

If the pandemic continues to disrupt business through May, consulting firm IHS Markit expects the economy to contract by 0.2% nationwide this year. In the DC area, the economy would increase by 0.1% this year. The national gross domestic product will drop by 5.4% during the second quarter of 2020, then gradually tick upward to return to growth in the first quarter of 2021. For the DC area, the gross regional product (GRP) will drop by 3.8% in the second quarter.

While people working from home will help keep productivity in the DC area from dropping as low as the rest of the country, less money will be spent as measures continue to be implemented to "flatten the curve", or stem the spread of the disease.

The surge in shopping for groceries and household items in February and March will have evened out within a year, and the biggest blow to the economy will be the 2-3 months where spending on entertainment, services, shopping, and eating out will slow to a crawl. This drop in revenue will account for 65-75% of the difference between the actual GRP and the GRP forecasted before the pandemic.

If the curve-flattening measures only continue through May, the report assumes that customers will return to the streets and pent-up demand will drive GRP in the third quarter, although this still won't compensate for lost revenue. 

"When service businesses can resume normal operations, local consumers will return incrementally but business and leisure travel will likely stay below its pre-pandemic levels for another 1-2 quarters," the report explains.

For the hotel and tourism industries in particular, the downturn will result in a 12-month revenue loss of $630 million and $600 million, respectively. The overall hit to the service economy will affect 23% of the region's workforce, or 760,000 people, and even if just 15% of these individuals are laid off, the unemployment rate will more than double.

Moreover, if businesses remain closed into June and beyond, the economic effects will be much more exaggerated and prolonged as time goes on, as areawide loss of income suppresses consumerism. 

This article originally published at https://dc.urbanturf.com/articles/blog/with-coronavirus-expect-dc-areas-uninsulated-economy-to-have-uneven-recover/16620.

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