Coronavirus Update: Economic Impacts on Arizona

George Hammond, Ph.D. Director of the Economic and Business Research Center

The spread of COVID-19 has created adverse economic impacts for the nation and these impacts will grow in coming weeks and months. Arizona will not escape the damage. The national economy will be in recession very soon, if it is not already. Be prepared for a major drop in the second quarter. IHS Markit, a global consulting and forecasting firm, currently expects the recession to begin in the second quarter and last through the end of 2020, with recovery beginning in 2021.

In other words, they expect a U-shaped recovery. This view is driven by their thinking on the impact of the large household wealth decline currently being driven by the stock market. With a drop of the magnitude we have seen through March 16, they expect it will take time for stock prices and consumer and business confidence to recover. They also expect that the federal fiscal policy response will be too small for the scale of the problem we are facing. This is currently a controversial point with forecasters, with some betting on a much earlier and faster rebound.

The recovery, when it comes, should be solid.

Keep in mind that there remains a large amount of uncertainty about both the future progression and economic impact of the outbreak. The near-term outlook has been changing daily and will continue to evolve rapidly. Once we know the outbreak has been fully contained, we’ll know a lot more about the recovery. It is clear that there will be difficult days ahead, but they will not last forever. Growth will return and in Arizona that growth will be stronger than average. Stay tuned.

To read the full report on Arizona's Economy click here