Coronavirus and the economy: A Drew University expert takes out his crystal ball

Drew University economics professor Marc Tomljanovich
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By Jamie Lynn Connors

The coronavirus is wreaking havoc on healthcare systems across the country. What is the prognosis for the nation’s economic health?

These questions are addressed in Ask the Experts: Coronavirus and the Economy, a webinar hosted by Drew University economist Marc Tomljanovich .

It’s one of a series of talks about the coronavirus and the economy by Drew faculty, presented as a public service by the school. You can find the series here.

Tomljanovich is an economics and business professor, executive director of business programs and director of the Wall Street Program at Drew in Madison. He graduated from Northwestern University with degrees in economics and political science, and Cornell University with a PhD in economics.

At the start of his straightforward talk, he tackles the most asked question: Can we really predict the effects of novel coronavirus?

Sadly, no.

The macroeconomist, by training, explains this exogenous shock is unpredictable and ever-changing. He often compares the negative financial aspects of the virus to the 2008 economic crisis.

According to Tomljanovich, consumption, which comprised 68 percent of the U.S. Gross Domestic Product in 2018, will be the most affected. Due to people staying home and only purchasing essential goods (not factoring in the occasional boredom-induced online shopping spree), there will be extreme spillover effects from collective inaction.

Business investments for this and the next quarter probably will “fall off a cliff,” he says. Along with investments, net exports and U.S. multinational corporations will decrease drastically.

On top of these consequences, he adds, the most at-risk industries are leisure and hospitality, temporary health services, transportation and travel.

With these dramatic drop offs, Tomjanovich believes the unemployment rate will also increase.

When he recorded his talk in March, U.S. weekly unemployment claims jumped by 281,000 workers.

Figures released last week showed more than 10 million Americans applied for unemployment during the month.

During the worst week of the 2008 crisis there were 665,000 workers in a single week filing unemployment claims.

While the economy is at risk, Tomjanovich claims it isn’t (yet) fatal. But, he cautions, its fate is highly dependent on how soon businesses and citizens can return to normalcy.

“We know things are going to get a lot worse,” Tomljanovich concludes. “We just don’t know how much worse.”

Correspondent Jamie Lynn Connors is a member of the Drew University Class of ’23.

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3 COMMENTS

  1. Interesting comments, Linda.
    There are so many aspects of this that have not been evaluated or even considered. Most businesses will no longer function in the same way. The job market will change in a number of ways. Will our existing methods of taxing and penalties remain relevant?

  2. Interesting comments, Linda. There are so many aspects of this that have not been evaluated or even considered. Most businesses will no longer function in the same way. The job market will change in a number of ways. Will our existing methods of taxing and penalties remain relevant?

  3. I would have asked the experts about the lower payroll tax collection for Social Security. Less income earned means there’ll be less payroll tax revenue collected by the program.
    What about Trump’s desire to waive the payroll tax entirely through the end of the year, or even permanently suspend it?
    Will the deaths of so many social security recipients offset the lowered payroll tax collection?
    Time will tell.

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