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May 27, 2020
FOR IMMEDIATE RELEASE

Contact: Jamey Dunn-Thomason
               jdunn3@uillinois.edu
               (217) 300-8409

 

IGPA task force reports on the impact of the COVID-19 pandemic on the state's economy

URBANA — The University of Illinois System’s Institute of Government and Public Affairs (IGPA) today released a report focused on the impact of the COVID-19 pandemic on the state’s economy.

At the request of U of I System President Tim Killeen, IGPA assembled more than four dozen interdisciplinary faculty experts from the three system universities to serve on IGPA’s Task Force on the Impact of the COVID-19 pandemic.

The task force includes three working groups, examining Economic and Fiscal Impact, Community and Family Resilience and the Healthcare Workforce. Each group is collaborating on a series of economic modeling activities, data analyses and syntheses of impact.

This new report from the Economic and Fiscal Impact Group found that the current recession differs from past ones in key ways. “Like the disease that caused it, the economic downturn is novel in many dimensions and creates massive uncertainties,” the report says.

Perhaps the biggest difference is the continued public health threat COVID-19 presents, which might cause Illinois residents to continue to limit their economic activity. “One of the most important factors that will drive the shape of the recovery is the degree to which employees are going to feel comfortable returning to the workplace and how households view the risk of attending sporting events, cultural activities and leisure facilities,” the report says. “These were not risks faced by households in the recovery from previous recessions, so they add an important layer of uncertainty to the current economic situation.”

The current recession rapidly took hold of the country, while past recessions have happened slowly, over months or years. Illinois has generally lagged the nation when it comes to feeling the impacts of a recession. The state’s employment did not start to decline until more than five months into the Great Recession, but that is not the case with the current downturn.

“The recession brought on by the COVID-19 pandemic and associated policy responses has been deeper than any recession in modern history, and also developed with unprecedented speed,” said report co-author Kenneth Kriz, an IGPA affiliate and director of the Institute for Illinois Public Finance at the University of Illinois at Springfield. “While many economists feel that the economy is at or near the worst that it will get, there is a strong divergence of opinion regarding how long the recession will last and the speed of the recovery.”

The report forecasts the loss of more than 550,000 jobs in the Illinois economy by March 2021. The biggest losses are expected to be in the Resources, Services, Trade and Construction sectors along with a broad sector that includes Transportation, Communication and Public Utilities.

The projection focused on jobs lost for the entire year. Jobs that may be affected for less than a year were counted as a fraction of a whole. For instance, a job lost for three months represents the loss of one-fourth of a job for the year. The report says it is likely that somewhere between 1 million and 1.5 million Illinois jobs may be affected overall.

Report co-author Geoffrey J.D. Hewings, an IGPA scholar emeritus and director emeritus of the Regional Economics Applications Laboratory at the University of Illinois at Urbana-Champaign, said new state unemployment numbers, released last week, track with the report’s projections.

“Illinois hit a 16.4% unemployment rate in April, translating to more than 1 million lost jobs,” Hewings said. “Job losses are heavily concentrated in the Leisure and Hospitality, Professional and Business Services and Trade, Transportation and Utilities sectors that are bearing the direct effects of the pandemic and related business closures. The direct job losses in these sectors will further increase unemployment in other sectors, as the individuals affected reduce their own spending.”

The report projects that for each job loss, another .38 jobs will be lost in connected industries. The authors note the unique challenges of attempting to partially reopen the economy when many sectors are dependent on one another for both supply and demand. Reduced child care capacity may also be a challenge for working parents trying to return to their jobs.

“Illinois policymakers should keep in mind that the economy is highly interconnected as successful businesses need functioning suppliers and willing customers,” said co-author David Merriman, an IGPA senior scholar and James J. Stukel Presidential Professor of Public Administration at the University of Illinois at Chicago. “Re-opening the economy will require careful thought to make sure that interconnected businesses can work smoothly and safely with their partners.”

This is the second report from the Economic and Fiscal Health Impact Group. The group’s first report focused on the pandemic’s effects on state and local finances. All the task force’s reports and other work can be found on its webpage.

 

About the Institute of Government and Public Affairs
IGPA seeks to improve public policy discussion through non-partisan, evidence-based research and public engagement in Illinois. Learn more at igpa.uillinois.edu and follow @IllinoisIGPA for the latest updates.

 
 
 
 
 

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