Now that many companies have settled into a new normal, mainly working from home or not working at all, the question on everyone’s mind is how long will the Connecticut economy be under literal and figurative quarantine, and what will be the long-term impact.
Surprisingly, there is optimism among some local economists, bankers and economic-development experts who say that Connecticut’s economy will recover relatively quickly — in a matter of months — once the state’s “Stay Home, Stay Safe” mandate is lifted.
They are cautiously optimistic that the various state and federal stimulus packages, along with a healthy banking sector coming into the crisis, will help blunt the long-term economic impact of the coronavirus shutdown.
I’m not totally buying it.
Frankly, I don’t think there is any realistic way to forecast how quickly the economy will bounce back, simply because the modern world hasn’t experienced anything like this, where entire industries are shut down, or nearly shut down, for several months or longer.
I applaud the steps state and federal governments have taken to inject much-needed capital into the economy — for businesses and individuals — but I’m not sure it will be enough to stem the economic tidal wave that has hit companies of all sizes, particularly small employers.
Of course, a lot will depend on how long COVID-19 remains a public-health threat in the state, but it seems to me, the earliest things will start to get back to “normal” is June 1, and that could be optimistic.
There’s some meaningful data out there to back up my concerns.
For example, according to Cambridge-based data-science firm StratoDem Analytics, Connecticut’s economy is projected to contract by $15 billion during the second quarter due to coronavirus disruption.
Hartford County’s economy is projected to experience an 18.3% contraction in the second quarter, equivalent to a $3.9-billion economic loss, StratoDem Analytics data shows.
Only Fairfield County, the epicenter of the state’s pandemic, is expected to fare worse with a $5.3 billion, or 24.2% GDP contraction.
“Overall, Connecticut will likely be one of the harder-hit states in this recession, across the board,” said James Chung, a partner at StratoDem Analytics. “Not as hard hit as Michigan or northern Indiana, given their greater level of dependence on cyclical manufacturing, and not as hard hit as tourism-dominated counties, but this recession is going to be deeply painful for a lot of households and organizations across all of Connecticut.”
Meantime, a recent online survey conducted by the Department of Economic and Community Development and AdvanceCT found that nearly 60% of Connecticut businesses have reduced their capacity or closed due to the ongoing pandemic, and about 82% expect to see a revenue decrease.
None of that data points to a quick recovery.
What also concerns me is that Connecticut entered 2020 in a weaker economic position than the rest of the country, having shed 3,300 jobs in 2019, while personal income grew at a slower pace (3.2%) than all but two states.
I don’t mean to be a pessimist, but it’s important that businesses accurately project where Connecticut’s economy is headed.
My best recommendation is to plan and forecast conservatively and aggressively go after state and federal stimulus dollars.
Small businesses that get a piece of the action may have the best shot of surviving during these uncertain times.
