Originally published in TheStatehouseFile.com
Economists at Indiana University’s Kelley School of Business are projecting that Indiana’s economy won’t fully recover from the COVID-19 pandemic until 2022, especially as the number of new cases are expected to rise over the coming weeks.
Though the state’s economy has recovered somewhat from the initial slump early in the pandemic when all but the most essential businesses closed, the economic forecast issued this week by the school says that the progress will slow at the end of this year and into early 2021.
The report comes as Indiana and the nation are experiencing a new wave of COVID-19. The Indiana’s Department of Health reported 5,708 new cases on Friday and since the beginning of the pandemic in March, 236,565 Hoosiers have been diagnosed with the virus.
The death toll is steadily rising, too. The health department reported that another 50 people have died of COVID-19 for a total of 4,612. Officials believe another 250 people died of the disease based on their symptoms but were never tested.
Kelley experts expect that the earliest point when economic output will reach its previous peak won’t come until the middle of next year. They do not expect unemployment to return to its low of 3.5 percent until 2022.
They also said that consumer spending has the potential to return to its peak, but the focus will be on goods rather than services. Construction will continue in the housing sector, but businesses and corporations won’t be as likely to invest in new facilities.
Experts have compared the impact of the pandemic to the Great Recession of 2008-2009. During the third quarter in 2020, output was down 3.5 percent from the fourth quarter in 2019 and unemployment has surpassed that of the last recession. Employment remains down by 10.1 million jobs compared to 8.7 million in 2009 and the damage to the labor force is expected to be long term or even permanent.
Indiana is in a position to outperform peer states and the entire country once the pandemic is over, said Kyle Anderson, clinical assistant professor of business economics and faculty chair of Kelley’s Evening MBA Program.
Ryan Brewer, associate professor of finance at Indiana University-Purdue University Columbus and co-author of the panel’s Indiana forecast, said that he believes the improved understanding of the novel coronavirus and how to approach treatment will help to lessen the economic impact.
Not all areas of the economy were affected equally. Manufacturing, leisure and hospitality, and health care have been hit the hardest.
The forecast also projects that short and longer-term interest will remain low through 2021, corporate earnings will rebound from 2020 levels and China will be the only country that will show positive growth this year.
Also, though the global economy is expected to shrink by 4.4% because of the pandemic, a resurgence of the virus and tightened government restriction could lead to a global recession.
Thomas Samuel is a reporter for TheStatehouseFile.com, a news website powered by Franklin College journalism students.