Local Economies Most Vulnerable to Coronavirus-Driven Recession Identified in New Analysis

Antonia Garcia cleans slot machines inside the Planet Hollywood hotel-casino after all casinos in the state were ordered to shut down due to the coronavirus Wednesday, March 18, 2020, in Las Vegas.

Antonia Garcia cleans slot machines inside the Planet Hollywood hotel-casino after all casinos in the state were ordered to shut down due to the coronavirus Wednesday, March 18, 2020, in Las Vegas. AP Photo/David Becker

 

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“There are some places that will be more exposed,” says a researcher who worked on the project.

Tourism and leisure destinations, along with towns that are hubs for oil and gas production, are among the places in the U.S. that would be most vulnerable economically as the coronavirus outbreak drags the nation’s economy towards a recession.

That’s according to an analysis that researchers at The Brookings Institution published this week. "This is a very total event. At the same time, it won't affect everywhere the same way,” said Mark Muro, a senior fellow at the Brookings Metropolitan Policy Program.

“There are some places that will be more exposed,” he added.

Muro and others looked at the share of people in different metro areas who work in industries that a recent Moody’s Analytics report identified as especially at risk due to the virus. These are sectors poised to see slack demand, layoffs and shutdowns.

The industries include mining and oil and gas, transportation, travel arrangements, leisure and hospitality, and employment services. There were about 24 million jobs in these fields last year. Of these, 16 million were in leisure and hospitality, according to the Brookings research.

The analysis finds that the top five places with the highest shares of workers in the vulnerable industry groups are areas in and around cities like, Midland, Texas (42.5%), Kahului, Hawaii (40.4%), Atlantic City, New Jersey (34.2%), Las Vegas (33.8%) and Odessa, Texas (33.3%).

Metro areas covering Ocean City, New Jersey, Myrtle Beach, South Carolina, and Orlando, Florida were within the top 15.

These and other findings in the analysis offer insights that could help to guide the sorts of aid packages policy makers are now working on.

Muro emphasized that hospitality, tourism and leisure not only have a sizable jobs footprint in the U.S. economy, but also that many workers in these fields, compared to other professions, tend to rely more on tips, have lower wages, and lack benefits like paid sick leave.

“Thinking about this particular sort of worker is an important piece of this and then thinking about the geography of such workers,” he said.

There is also cause for concern in places like Midland, where oil and gas production is a central part of the economy and makes up a large share of the local jobs. 

“There's a good number of oil gas communities, often cyclical anyway, that are going to get hammered,” Muro said.

Oil markets have crashed in recent weeks. Demand has plunged amid the coronavirus crisis and as Saudi Arabia and Russia have kept crude supplies up as they engage in a “price war.”

Muro suggested that the erosion of local tax bases could be a useful indicator for policy makers trying to decide where to target assistance in the coming weeks and months.

He also noted that whereas the response to the last recession focused heavily on sectors like banking, financial services and manufacturing, the current slump may require relief that is geared more towards helping lower wage service workers.

The analysis warns, however, that if the disease outbreak does cause a significant nationwide recession, "very few places or industries will emerge unscathed." The full Brookings analysis can be found here.

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Bill Lucia is a Senior Reporter for Route Fifty and is based in Olympia, Washington.

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