The struggles of New Jersey’s economy during the COVID-19 pandemic and social distancing shutdown has been well-documented, but the worst may be yet to come, according to a new Wells Fargo economic report.
The report, issued earlier this week by the Wells Fargo Securities Economics Group, warns that commuters to New York and Shore tourist destinations could continue to be dramatically affected into the summer months, and lost tax revenue could exacerbate the state’s long-term fiscal issues.
For example, the report noted the sharp rise in jobless claims in March and April, adding, “Unfortunately, this is just a preview of what lies ahead.”
Senior economist Mark Vitner and economist Charlie Dougherty, part of the 15-person team, are listed as the authors.
New Jersey’s commuting relationship with New York City in the north and Philadelphia in the south was also described as problematic, even as distancing measures are (potentially) lessened.
“As social distancing guidelines are unlikely to be significantly relaxed for quite some time, many workers may find gaining access to New York City or Philadelphia more challenging as the economy begins to gradually reopen,” the report said. “Especially at risk are the North Jersey communities which owe their appeal to efficient transportation links to New York City.”
Likewise, the report warned that Shore tourism could be down sharply.
“Many out-of-state residents flood the South Jersey shore region in the summer,” it said. “Even if the spread of the virus subsides this summer, we would expect to see fewer tourists.”
That could compound struggles that already include the COVID-related closures of casinos and hospitality businesses such as hotels and restaurants, all major employers in the Atlantic City metro area, among others.
The report also pointed out that diminished retail sales and visitor spending could have a serious effect on tax revenue, exacerbating what it called “the state’s already-poor fiscal situation.”
Even the health care industry — which has responded so bravely to the crisis — is not immune, Wells Fargo said. The reduction in nonemergency services is leading to lost revenue and even job cuts in parts of the sector such as medical and dental practices. Already under financial pressure, hospitals have seen increased stress due to the emphasis on treating COVID-19, as well.
At least one sector won’t be quite so hard-hit, the report suggested, a sliver of what passes for good news.
“The state’s trade, transportation and warehousing sector may see relatively fewer job cuts in coming months,” the report said. “To be sure, the global recession and ensuing downshift in international trade will weigh heavily on the many wholesale trade, transportation and logistics firms in the state. … On the other hand, nationwide stay-at-home orders have led to a surge in online shopping.”
But, in the end, the report pointed out that the hard-hit state may take longer to fully reopen than others, estimating the process would not start until late May or early June.
“We expect economic weakness to linger a little longer in New Jersey than the nation as a whole, and are looking for real GDP to decline in each of the first three quarters of 2020,” the report concluded. “We expect the bulk of the decline in the second quarter … when the majority of the impact from shutdowns will become apparent. … We expect the unemployment rate to jump to the mid-teens, but to begin to decline later this year, remaining elevated well into 2021.”
Wells Fargo, based in California, has a major presence in New Jersey.