The latest monthly Economic and Revenue Update from the state forecast council shows tax collections coming in pretty much as expected.
Major General Fund-State (GF-S) revenue collections for the February 11 – March 10, 2020 collection period came in $9.6 million (0.6%) higher than the February forecast. Revenue Act collections came in $8.3 million (0.6%) below the forecast while all other tracked collections came in $17.8 million (8.5%) above the forecast.
And yet, last month was a different economic era.
As a result of the spread of the coronavirus (COVID-19), the outlook for the U.S. economy is considerably more uncertain than usual. Some of the data referenced in this update were reported prior to the more widespread identification of COVID-19 cases in the U.S. and should be considered in that light. For example, this month’s very strong U.S. employment data were collected during the week of February 12th.
As always, there’s a lot of good information in the update. Uncertainty, though, is the key takeaway. From Oregon’s chief economist, some perspective on the challenges faced by forecasters:
Given the scale of the events, economic forecasters are increasing assuming a recession in the baseline. However it is still too soon to know the full extent of the economic damage as solid data remains weeks away. It is likely that until the public health situation improves, or at least the fears subside as health policy plans are announced, the economic damage will continue to mount…
Overall, economists struggle in times of such dramatic changes because we lack good, timely data. We probably won’t see the start of the impacts in standard economic data until the March retail sales report (released in April), the April employment report (released in May) and 2020q2 GDP (released in July).
As Congress and the White House consider a pandemic-related stimulus, the U.S. Chamber of Commerce has made its wishes known.
The nation’s largest business organization is asking government leaders to act rapidly to help companies have access to cash and avert a “potentially devastating” hit to the economy as the coronavirus pandemic forces closures and quarantines worldwide.
In a letter to President Donald Trump and congressional leaders, the U.S. Chamber of Commerce called for legislation including a three-month cancellation of the taxes companies pay to support Social Security, Medicare and unemployment insurance.
They also recommended an easing of restrictions on loans for businesses that employ less than 500 workers and an expanded system of loans and loan guarantees for larger companies.
That “hit to the economy” can be mitigated, but it’s already taking a toll. UCLA economists say the nation is already in recession. Goldman Sachs anticipates .GDP will shrink 5% in the second quarter, but rebound to 3% and 4% growth in the third and fourth quarters, respectively. In our state, the effects on restaurants, hotels, and other industries are clear. The City of Seattle is looking at a revenue loss of $100 million or more .
The state’s budget situation remains precarious, as we wrote yesterday. The coming months will provide more information. The Seattle Times editorial board writes that the public health efforts must be accompanied by a commitment to easing the financial hardship on those most affected by the downturn and a recommitment to economic growth.
Financial aid is needed for those harmed by the economic sacrifice. Targeted support is particularly needed for workers and small businesses that don’t have resources to weather this storm….
Expectations of relief should be tempered because it’s impossible to offset all impacts of what will be a national crisis.
Regional and state leaders should also be planning how to resume growth and avoid long-term harm from the Seattle area being the U.S. outbreak’s epicenter.
The editorial closes with optimism.
But the Puget Sound region, the state and the nation are strong and resilient. They can and must continue finding ways to blunt the immediate economic pain, get through the illness and prepare for a return to health and prosperity.