PROVIDENCE – The Massachusetts economy is being pushed towards a recession by the COVID-19 pandemic, according to the MassBenchmarks editorial board.
The board on Tuesday predicted “notable job loss” because of the changes related to disruptions to daily life, including mandated closures of schools and dine-in restaurants.
The changes are also expected to impact other businesses that rely on discretionary consumer and business spending. Hourly workers are expected to be disproportionately impacted in these industries, as reduced demand will lead to reduced wages or layoffs.
“While it is too early to identify the full range of the impacts that the pandemic will cause, the recent performance of global equity and bond markets suggests that the economic consequences are likely to be very large and widespread,” the board noted.
MassBenchmarks, however, did say that a global recession is a “virtual certainty,” the depth of which is defined by the evolution of the coronavirus and how long it will impact daily life.
Impacts are expected to be felt on both the supply and demand side of the economy, the board said. It also concluded that small businesses that rely on steady cash flow are likely to go out of business, while temporarily shuttered businesses are likely to layoff workers.
The economic situation, MassBenchmarks said, was made worse by disruptions in the energy and financial sectors, including a price war in the oil market and volatility in a bear market in the financial market.
The board recommended targeted approaches to stabilize the economy. This included free and broad testing for COVID-19, medical co-pay assistance, support for states unemployment compensation, housing stability support, expanded food assistance, a stimulus for impacted households, and planning for infrastructure projects to put workers back into the workforce following the crisis.
“State and local governments will be on the front lines of this crisis and face resource constraints as a result of balanced budget requirements. Federal support will be required. In today’s interest rate environment, the federal government is well positioned to provide it given the necessary will.,” concluded the board.
MassBenchmarks is published by the University of Massachusetts Donahue Institute in cooperation with the Federal Reserve Bank of Boston.
Chris Bergenheim is the PBN web editor. You may reach him at Bergenheim@PBN.com.
