South Jersey Economic Review: COVID-19 could contract GDP by up to $5.1B in 2020

In 2019, the economy in South Jersey had its best year since 1984, according to the South Jersey Economic Review, an analysis produced by the William J. Hughes Center for Public Policy at Stockton University. However, the COVID-19 pandemic has created extra challenges for it to quickly recover in 2020.

The analysis projected the impact that the coronavirus would have on the region’s hospitality, tourism and gaming industries in 2020, and based on different scenarios, GDP could contract between 12% and 28%, or $2.1 billion to $5.1 billion. For comparison, during the recession of 2009, it contracted 9.6%.

“The regional economy’s reliance upon the leisure and hospitality sector again looms large,” Oliver Cooke, editor of the Review and associate professor of economics at Stockton, said. “We play and vacation together. And, personal, intimate, high-quality service (whether provided at a poker or restaurant table) arguably lies at the heart of the hospitality business.”

There are multiple scenarios for 2020, based on three factors:

  1. The percentage of economic output lost in the regional economy between mid-March and the end of May (10-week period that roughly coincides with the start of the lockdown and the beginning of the summer shore season);
  2. The speed at which the economy returns to “normal”, which dictates the number of summer shore season weeks that will be adversely affected by the lockdown;
  3. The percentage of economic outpost lost post a return to normalcy, referred to as the “COVID-19 drag.” The drag captures long-term adverse economic effects likely to happen from the pandemic, including enhanced fear of public spaces.

“While the speed of the return to normalcy will dictate the number of lost summer 2020 shore weeks, my own sense is that the COVID-drag will eventually play the more important role in determining the trajectory of the regional economy over the remainder of 2020 (and beyond),” Cooke said. “While we will eventually begin to work and play again, it strains credulity to believe that we will all do so at the same levels we previously did—at least for the better part of what remains of 2020.”

Other highlights from the analysis include:

  • South Jersey Regional Economy 2019: Total employment in the three metropolitan areas that comprise the broader economy (Atlantic City-Hammonton, Ocean City and Vineland-Bridgeton) increased by 7,300 last year;
  • Minimum Wage Hike Impact: Last year’s legislation allowed for more workers to enter the labor force and employers more willing to hire them at higher wages. However, workers rejected jobs in the industries not affected by the increase (retail, restaurants, bars) in favor of the higher paying jobs.
  • Gaming in 2019: Two new casinos opened in Atlantic City and legal sports betting launched.

“The decision to include our 2019 analysis was driven by a belief that the region’s stakeholders would still benefit from having a comprehensive sense of where the regional economy stood prior to the onset of the COVID-19 crisis,” Cooke said.

Read more from ROI-NJ on coronavirus: