March 19, 2020

Report: COVID-19's sobering economic fallout just starting

A new study released this week by the Seattle Metropolitan Chamber of Commerce shows the economy is just beginning to experience the effects of the COVID-19 outbreak.

The study by Community Attributes says the immediate focus of all businesses in Washington state should be to help slow the spread of the virus.

“Economic recovery projections depend on predictability coupled with virus control — the sooner we can get past the peak, the better,” it said.

Some of the key observations of the study are:

• The local economy is already experiencing an economic shock that will take many months to recover from.

• In the near-term, COVID-19 will severely impact nearly 40% of all the jobs in King, Pierce and Snohomish counties. This includes either wage reductions or temporary layoffs. Most of these jobs will return, but not all the businesses will survive.

• Lower-income households and hourly wage earners will be hurt disproportionately.

• Every industry is seeing some impact and while a few industries may see temporary increased demand — such as household supplies and food providers — and some industries can rely on teleworking, everyone will experience some level of economic impact through the balance of 2020.

• Policymakers need to urgently pursue proposals that can mitigate further deterioration and stimulate a return to growth.

The study said Washington state is largely dependent upon revenue from sales and gross receipt taxes, which made up 71% of the total tax revenue last year. That places Washington eighth in the nation in reliance on sales and gross tax receipts.

It predicted tax revenues will drop significantly due to curtailed consumer and business spending, closures of restaurants and bars, canceled events, and weakened demand in the tourism industry.

How bad is it? The report cited Downtown Seattle Association numbers that showed retail sales down 20%-50% for small businesses prior to Gov. Inslee calling for all restaurants and bars to cease normal operations. The report said while some restaurants have converted to drive-thru and delivery, many will not reopen.

The report said the virus may likely push the U.S. and the world into a recession. It offered these steps to counter that:

• Loosen lending and monetary policy.

• Provide rent and debt service relief.

• Provide financial support for employees.

• Continue government spending on capital investments.

• Find new funding sources and revenue management approaches for government.