Prairie State Wire

 Almost a fourth of Illinois’ workers may become the first financial casualties of the COVID-19 pandemic.

The effects mostly hit non-essential industries that involve a lot of contact with other people. The projected 1.5 million Illinois residents who could be affected make up 24% of the workforce, the Chicago Tribune reported. They generate $100 billion annually in economic activity.

Illinois received more than 950,000 initial unemployment claims from March 1 through May 2. The number of new filings in the week ending May 2 was 74,746. That dropped from 81,596 new claims the week ending April 25, which was the first time claims fell below 100,000 since Gov. J. B. Pritzker issued his stay at home order.

Service industry workers like restaurant employees have joined the ranks of the unemployed as the state will lose a big part of its economy.

In normal times the hotel, entertainment, arts, recreation, food and lodging industries produce 4.2% of Illinois’ economic output. The Bureau of Economic Analysis calculated that they generated approximately $103 million per day on average in 2019.

These workers, already vulnerable to financial strains, could ill afford the closures caused by the pandemic. They have lower incomes and usually constrained budgets. As unemployment rises, families will struggle to cover bills and will watch their debt rise. That makes it more likely they’ll default on loans.

Economists predict that the gross domestic product (GDP) will drop between 24% and 50%, the Tribune said. Unemployment could rise to about 30%, which means the Illinois economy could lose anywhere between $54 billion and $113 billion. The state’s current GDP is $902 billion.

These forecasts anticipate economic recovery starting in the third quarter. If the crisis goes beyond June, it could get worse. If the economic downturn and isolation measures last until March 2021, it could cost the Illinois economy between $216 billion and $451 billion.

The effect on residents would include unemployment for many. The longer people are at home, the more likely that the negative effects will spread to the financial and manufacturing sectors and other non-service sectors.

These more vulnerable industries employ 24% of the Illinois workforce, or nearly 1.5 million state residents, the Tribune reported. An extended crisis puts them at risk of reduced hours or unemployment.

The at-risk industries generate more than 11% of the state’s GDP. That is more than $100 billion in economic activity each year.

It’s tough to gauge the effects COVID-19 will have on the health care industry. Former medical professionals have answered the call to rejoin the workforce in a battle against the coronavirus. But many specialists aren’t working with elective procedures postponed. Elective procedures generate most of a hospital’s revenue. Time will tell how COVID-19 affects the $65 billion health care industry.

Economists made their projections based on how the Chinese GDP shrunk by 40% in the last three months. The consensus on Wall Street sounds grim with a shrinkage of the GDP between 24% and 30%. James Bullard, Federal Reserve Bank of St. Louis president, projects an even worse drop off. His forecast projects a GDP decline by 50% with unemployment rates moving to 30%, the Tribune reported.

The last, and only time, that the United States recorded a double-digit percentage drop in real GDP was during the Great Depression. From August 1929 to March 1933, economic output declined by 26.3%.

The Great Recession from 2007 to 2009 that followed the collapse of the U.S. housing bubble and the global financial crisis caused the Illinois economy to contract by 5.25% in 18 months. A decline like that today would cause a $47.4 billion economic contraction in the state, the Tribune reported.