A new report from IHS Markit released on Monday said 10 states will see employment contraction of 16 percent or higher through early 2021 and that a return to pre-pandemic employment levels in those locales is not expected until early 2024.
“Every state will experience significant employment and GDP declines this year, given the sudden and deep economic shocks associated with the virus escalation, containment efforts and associated effects,” Karl Kuykendall, associate director of regional economics at IHS Markit, said. “Nevertheless, the extent of those declines can have a great deal of regional variation, with states most dependent on tourism and manufacturing seeing the deepest near-term declines, while states poised to see the least devastating losses are generally more rural and less densely populated.”
Kuykendall noted that the leisure and hospitality sector is a driving force behind the outsized losses in Florida, Hawaii and Nevada, while the Midwest–with IHS citing Indiana and Wisconsin among the 10 worst hit–has been hit especially hard by the decline in the factory sector created by virus concerns and plummeting demand. Other states seen significantly suffering include Massachusetts, Rhode Island, Pennsylvania, Arizona and Colorado. The Plains states are poised to hold up best.
The gradual reopening of the economy will pave the way for an initial recovery in the second half of this year, IHS said. However, a return to “normal” conditions will be slow, with the “ever-present virus risk continuing to curtail previous spending patterns.” As such, it will take years to recoup the dramatic job losses this year, the report said.
“A return to pre-pandemic employment levels is not expected until early 2024 at the national level, with the South returning sooner and the Northeast and Midwest lagging,” Kuykendall added.
At the same time, a research noted from Hercules Investments said companies could rehire fewer employees or at a slower pace than investors currently expect. This is driven by factors such as companies borrowing money to finance ongoing operations, which will restrain the pace of recovery and hiring, and the trends of digitization, automation and direct-to-consumer business hurt sections of the workforce that need jobs the most, Hercules said.
The tariff war between the U.S. and China that seems to be escalating yet again will also lead to greater geopolitical instability and economic uncertainty, as could the U.S. presidential election, Hercules added.