Seventy-seven thousand or more filing for unemployment. A near 9% unemployment rate. Retail sector jobs declining by 16%. Employment in the arts, entertainment and recreation tumbling by 20%. Consumer spending off by 5% or more.
That’s the doomsday scenario laid out for the Arkansas economy by University of Arkansas Little Rock economist Michael Pakko in the early wake of the COVID-19 (coronavirus) pandemic. Some of his peers say it could be worse.
“As the impact of the novel coronavirus disease 2019 (COVID-19) works its way through the economy, national economic forecasts are showing an increasingly grim outlook. In addition to disruption of world supply chains, the decline in consumer spending associated with social distancing is generating forecasts with significant reductions in aggregate demand that make a recession appear inevitable,” Pakko said.
For big and small businesses, these numbers quickly suggest recession levels, and if they’re worse and prolonged, the word “depression” will resurface in American economic circles.
Congress is pumping more stimulus and capital into U.S. commerce. That should help, according to many financial experts. Still, the timing and pace of those injections and, of course, the depth and breadth of the coronavirus spread will determine how successfully businesses navigate uncharted waters.
For Arkansas banks — most of which would be considered community banks — the necessity to help clients survive this dystopian economic scenario is crucial to the region’s survival.
“This could dwarf 9/11 and the financial crisis of 2008-2009 combined,” said one banker in a candid conversation.
Pakko threw out a potential recovery period in his analysis of the COVID-19 impact, but it’s just an educated guess.
“The presumed scenario where economic recovery begins by the end of 2020 might prove to be overly optimistic. The declines in consumer spending and income may reinforce one another to create an even more dramatic downturn,” he warned. “The outlook will undoubtedly change as the situation develops, particularly when it comes to the impact of fiscal and monetary policy responses. At present, however, it appears that a dramatic downturn in economic activity over the remainder of 2020 is unavoidable for the nation and Arkansas.”
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