Studying post COVID-19 economic impacts

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Economic Outlook May 2020

So, we are moving towards reopening the country and the state. What has happened to our economy and how do we know when it’s back on track? We are glad you asked! Here, we hope to provide some guideposts to help you navigate the ocean of economic data. There are three variables that we are following:  Consumption, personal income, and unemployment. In a nutshell: Economic activity has slowed to a crawl. However, it is expected to recover modestly before year’s end. In terms of local governments, Hillsborough County is currently in a strong financial position. However, local governments expect to make difficult financial decisions in the next five years. Lastly, the courts and school districts may need financial assistance to recoup losses and prepare to resume operations.

Personal consumption (e.g., cars, gas, groceries, homes) is the most dominant component of economic activity (~70%)[i].  As of February 2020, economic activity was growing at a record-breaking 128 months straight. As a result of the measures to combat the spread of COVID-19, consumers lost jobs and income. Thus, they reduced their spending. As shown in Figure 1, U.S. personal income and consumption were both down sharply in March. Hence, the national economy contracted nearly 5%[ii](See Figure 2). Economists expect a sharper decline (16-30%) and record-breaking unemployment in the second quarter. [iii][iv][v]  Starting in July, however, we should see modest growth in personal income, consumption, and reductions in unemployment.

Figure 1.

Real Disposable Personal Income and Real Consumer Spending

Figure 2.

Real GDP: Percentage change from preceding quarter

Locally, the Tampa Bay Partnership[vi] expects 11% overall losses in each of these three categories: Jobs, personal income, and economic activity. Expected sectoral losses range from 15% (educational services and non-profit services) to a severe 96% reduction in air travel. On the plus side, the Partnership expects prepared foods/groceries (5%) and hospitals (15%) to see increased business. In terms of travel and tourism, one key determinant for recovery is the opening of theme parks and other attractions. Alas, as of the time of this publication, no opening date has been announced for the Walt Disney Parks in the United States.

As discussed in the recent Hillsborough County Board of County Commissioner’s budget workshop[vii], the approved budget will be unaffected. However, county agencies that depend on sales taxes and other fees may have to trim budgets and staff. For example, Visit Tampa Bay just reduced costs by 59%!  Presently, it is not known how much assistance schools and courts may need to recoup losses and resume operations. In terms of the next five years, the countywide general fund is expected to weather the storm largely unscathed through September 2025. Other parts of the budget that depend more heavily on sales taxes and other fees are expected to see large deficits.  Depending on how and when the economy starts to recover, the unincorporated area general fund may see significant revenue shortfalls through September 2025. Of course, in the unlikely event that property values were to stay flat or decrease in this next five years, this will significantly impact future budgets.[viii]

To conclude, the speed and strength of the economic recovery will depend primarily on how and when we can effectively restore consumer confidence, rehire the recently unemployed, and restore incomes.  In the most optimistic and likely scenario, the economy should see a modest recovery as soon as late summer/early fall.


[i] Shares of gross domestic product: Personal consumption expenditures (DPCERE1Q156NBEA).  Economic Research. Federal Reserve Bank of St. Louis.  Accessed May 4, 2020.

[ii] Gross Domestic Product, 1st Quarter 2020 (Advance Estimate).  Accessed May 4, 2020

[iii] Atlanta Fed GDP Now Estimate for 2020:Q2.  Federal Reserve Bank of Atlanta.

[iv] US Economy Could Contract 30% in Second Quarter, Warns Trump Economic Advisor Kevin Hassett

Matt_Belvedere –

[v] 30 Million Americans Have Filed Initial Unemployment Claims Since Mid-March

Anneken Tappe –

[vi] Tampa Bay Partnership.  Covid-19 Community Report: Issue 7.

[vii] Tom Fesler.  Assistant County Administrator.  Covid-19 Revenue Impacts and Other Risk Factors.  Budget Workshop.  Board of County Commissioners of Hillsborough County.  April 28, 2020.

[viii] Kevin Brickey.  Management and Budget Director.  Updated Pro Forma Budget Countywide General Fund and Unincorporated Area General Fund FY20 through FY 25.  Budget Workshop.  Board of County Commissioners of Hillsborough County.  April 28, 2020.

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