Mississippi's economy could take up to a $6.6 billion hit this year as the coronavirus crisis continues to deepen, according to a report referenced in the state's pandemic plan.
The plan mentions a 2007 report by the nonprofit group Trust for America's Health that estimates a severe flu pandemic would likely cost the Magnolia State's economy about $3.5 billion to $4.9 billion — 6% of the its annual gross domestic product. After calculating for inflation, that figure today is as much as $6.61 billion.
State economist Darrin Webb wrote on Twitter this week that while there's "much we don't know," it's clear the country is headed into a recession. He declined an interview with the Clarion Ledger, saying officials "are trying to get a good estimate of the impact," but it remains a "moving target."
"This is a prescriptive recession, meaning it is necessary to stop the spread of the virus by shutting down significant portions of the economy," Webb wrote. He added the current thinking among experts is the country could begin emerging from recession in early 2021 — but with a slower recovery rate for Mississippi.
Few sectors of Mississippi's economy will be spared. Restaurants and bars have closed their doors, and few people are staying at hotels. Casinos have been forced closed and begun layoffs. Many retail outlets such as Walmart stores face reduced hours. Nissan and Toyota are planning to suspend work in the coming days, and many of the state's smaller manufacturers may soon be forced into layoffs. Others could receive a lifeline by helping produce medical supplies such as masks and ventilators to respond to the virus.
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How much will virus hurt state's budget?
The layoffs and closures already are leading to concerns about state government budget revenues, due to reduced sales and income taxes.
Mississippi's economy took longer than most to recover from the Great Recession, a factor that contributed to emergency budget cuts by state officials as recently as three years ago. Even before the coronavirus, the state's unemployment rate had crept back up slightly in recent months after reaching historic lows.
Lt. Gov. Delbert Hosemann said this week that he and House Speaker Philip Gunn plan to meet with Webb and Department of Revenue officials weekly to track how the crisis is impacting state income and expenses. State legislators — on at least a two-week hiatus from meeting at the Capitol — will face the difficult task of formulating a budget for next year when they return.
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"For states, cratering consumer and business activity will mean a hit for tax revenues at the very same moment they are spending money to deal with the public health crisis," said a recent analysis by Route Fifty, a publication for U.S. government leaders.
One bright spot, the article pointed out, is that states had enough time since the Great Recession to recover and stash extra revenues in case of a rainy day. And Mississippi's rainy day fund was recently topped off, at about $555 million.
But national budget experts warn rainy day funds won't be enough to cover costs associated with this crisis.
Michael Leachman, senior director of state fiscal research with the Center on Budget and Policy Priorities, called the speed of the nation's economic decline in recent days "deeply disturbing."
He said not only will state governments face declining tax revenues in coming months, they will also face increasing demand for government assistance, including unemployment benefits. He said if states choose to respond by cutting their budgets elsewhere, including laying off government employees, it could make the recession worse.
In response to these concerns, a new Center on Budget and Policy Priorities report urged the federal government to offer massive financial assistance to states. It said a recently-passed package by Congress that helps with paid sick leave, Medicaid funding, unemployment and food assistance for children is only a first step, and much more assistance will be required to keep states afloat.
The center's president, Bob Greenstein, noted on a call with reporters Thursday that this economic downturn "could easily be deeper and more serious than 2008 and 2009," without dramatic action from the feds.
"During the Great Recession, as deep as it was, most Americans continued to work, and continued to consume," Greenstein said, but that's not the case with the coronavirus crisis.
Layoffs likely across several industries
It's unclear how many layoffs have occurred already around Mississippi. A spokeswoman for the Mississippi Department of Employment Security did not respond to messages seeking information Wednesday and Thursday.
But various restaurant and bar workers have posted on social media they have either been laid off or had hours significantly reduced in recent days.
Casino layoffs have also begun, according to the Sun Herald. A letter from a top MGM Resorts International executive said layoffs and furloughs were underway this week. MGM is the parent company of Beau Rivage Resort & Casino in Biloxi.
The state's manufacturing sector is taking a beating, said John McKay, executive director of the Mississippi Manufacturers Association. Many companies faced problems weeks ago due to disrupted supply chains in Asia, he said. Now that the virus is spreading quickly around the U.S., the impacts are "bigger and bigger" each day.
RELATED: Mississippi's first coronavirus death reported in Hancock County
Some Mississippi manufacturers may shift gears to start producing medical equipment in coming weeks to help with shortages of ventilators, masks and other items, McKay said. President Donald Trump on Wednesday signed legislation that allows the federal government to ask certain factories to focus their efforts on helping stop the virus.
McKay said he expects several Mississippi manufacturers to help in the effort. One example is Taylor Power Systems, a generator manufacturer that has offered assistance powering mobile COVID-19 testing clinics around the state.
Many Mississippi factories have sought to remain open by working split schedules, so fewer people are on the floor at once, McKay said. They are also conducting more thorough cleaning of equipment and hand tools.
“In times of national crisis, our country and the state of Mississippi has always stepped up," he said. "And that’s the message I’ve received from members (of the association). They’re willing to assist, they just need some direction.”
Layoffs could be coming, however. McKay said small manufacturers — many with fewer than 20 employees — will be forced to cut staff within a few weeks due to plummeting demand.
"They run on such thin margins," he said. "They are not liquid, they don’t have cash. So in order to pay their payroll for the next one, two, three, four weeks, they literally do not have the margins of cash to pay employees, while at same time paying rent, or the mortgage and loans they have on the books.”
Even if they avoid being laid off, the pandemic is likely to force many employees around the state out of work, in all types of industries.
The 2007 Trust for America's Health report estimated a severe pandemic could result in about 864,000 Mississippi workers staying home for several weeks due to illness, because they fear infection at work, or need to care for a sick family member.
One bright spot may be in agriculture — the state's top industry. Farmers should be able to plant their crops soon without any major issues related to the coronavirus, Agriculture Commissioner Andy Gipson told the Clarion Ledger. Farmers have encountered issues obtaining their pesticide certifications due to the virus, but Gipson said he's confident his agency will find a solution quickly, perhaps through remote online classes.
And so far, Gipson said the state's meat processing plants — including its sprawling poultry industry — have been able to continue without interruption.
“What I’m hearing is, at this time, the plants are operating, they have staff, they’ve been very cautious with maintaining social distance," Gipson said. "There’s no evidence this disease is spread by any food product at all, it’s person to person."
Contact Luke Ramseth at 601-961-7050 or lramseth@gannett.com. Follow @lramseth on Twitter.
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'Deeply disturbing': Coronavirus impact on Mississippi's economy - Clarion Ledger
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