The coronavirus is a threat to continued economic growth on Long Island and across the country, economists said.
Consumer spending accounts for nearly 70% of overall U.S. economic activity and fear about the virus is keeping people from making purchases at restaurants, shops, travel agencies and event spaces.
With fewer customers and less revenue, some businesses have laid off employees or cut their hours.
“There really are two crises here: the crisis of the virus and the crisis of fear of the virus – and the latter is really going to affect the economy,” said John A. Rizzo, chief economist for the Long Island Association business group and a Stony Brook University professor.
Rizzo and Richard Vogel, dean of Farmingdale State College’s business school, said the national and local economies likely slowed considerably in the past few weeks as the number of confirmed cases of coronavirus climbed and governments took emergency action.
But the economists said it was too soon to know whether the outbreak might lead to a recession, defined as two consecutive quarters of negative growth. The last recession, in 2007-09, was sparked by the financial crisis.
“We may have a shallow, brief recession for the first half of the year,” Rizzo said. “But once the virus is in the rearview mirror, in the second half of the year the economy will recover.”
He predicted spending by consumers and businesses will pick up because of the recent cut in interest rates, a reduction in gasoline prices and an infusion of federal spending.
Vogel, an expert on disaster economics, likened the virus’ economic impact to that of hurricanes, earthquakes and other natural disasters. “Most disasters are temporary disruptions to economic activity,” he said.
In December, Vogel and Rizzo predicted the Island’s economy would grow 1.5% to 2% in 2020. Now, 1% growth for the year would be optimistic given fallout from the coronavirus, they said.
On Main Street in Patchogue, small business owners said they hope their sales declines end in a couple of weeks, not a couple of months.
John Murray III, owner of The Hero Joint sandwich shop and Kilwins Patchogue, a seller of chocolates and ice cream, said last week’s sales were down 40% to 50% from the previous week. Ditto for his Kilwins Babylon store.
“I think this is going to go on for a while,” Murray said, adding the cancellation of performances at the nearby Patchogue Theatre and St. Patrick’s Day parades will further reduce sales.
Murray has 36 employees among his three stores; most work part time while going to school. He said he will decide this week whether to reduce employees’ work schedules.
“This isn’t like a storm where you lose two days” of sales, Murray said. “You don’t know how long this is going to last and it’s scary in that respect.”
Merchants in downtowns from Long Beach to Riverhead are seeing fewer purchasers and browsers.
Eric Alexander, founder of the LI Main Street Alliance, which represents downtowns undergoing revitalization, said 28 of the 30 retailers he has spoken with have less foot traffic.
“Restaurants are closing temporarily, and delis and other lunch places for office workers have less business because people are working from home,” he said.
Alexander, who also runs the planning group Vision Long Island, said the coronavirus could scuttle the plans of entrepreneurs to start businesses in the spring and summer. They may lack the money to delay opening until fear about the virus subsides.
Nationwide, 23% of small businesses have been negatively impacted by the coronavirus so far, according to a March 10-11 poll of 300 businesses with 120 or fewer employees by the advocacy group National Federation of Independent Business.
Among those affected small businesses, more than 40% said they had fewer sales and 39% had trouble getting products to sell because of the coronavirus.
Tourism and automobiles top the list of hard-hit industries, according to a forecast from S&P Global Market Intelligence.
At area airports, retailers have been forced to reduce employees’ work schedules, and in some cases, issue pink slips.
International Shoppes, which operates duty-free and cosmetics stores at six U.S. airports, cut the hours of all its 800 employees last week after the Trump administration suspended flights from most of Europe.
Earlier, the Valley Stream company had laid off a handful of employees and reduced the work hours of others at Kennedy Airport and Boston’s Logan International Airport because of flights being canceled to and from China.
“No traffic means we had to do more cost-cutting,” said Matthew Greenbaum, vice president of International Shoppes. “Everybody is now experiencing reduced work schedules companywide.”
LONG ISLAND’S ECONOMY
Total Gross Domestic Product: $162.4 billion
(about the same size as Hungary’s economy)
Nassau County: $81.19 billion
Suffolk County: $81.21 billion
SOURCES: U.S. Bureau of Economic Analysis, World Bank