The new coronavirus’ impact on the South Jersey economy could be more than $5 billion, and the regional recovery may take even longer than the 2008-09 recession’s.
The regional gross domestic product could shrink anywhere from $2.1 billion to $5.1 billion and be influenced by a number of factors, including the length of the economic shutdown and how quickly business returns to normal, according to the most recent South Jersey Economic Review produced by the William J. Hughes Center for Public Policy at Stockton University.
The 12% to 28% estimated economic contraction is considerably larger than the $2 billion regional decline experienced during the fiscal crisis more than 10 years ago, which still has a lingering effect on the area.
“While the state of the pandemic lockdown remains fluid, it is clear it will generate a 2020 regional recession larger than the Great Recession’s (9.6%),” the review stated. “In fact, the COVID-19 2020 contraction may well be much larger owing to the outsized role that tourism and hospitality play in the regional economy and the public health challenges the pandemic seems likely to present going forward.”
The rather bleak estimates for a post-COVID-19 South Jersey economy stand in contrast to the strong growth the region experienced last year.
Based on current data from the U.S. Bureau of Labor Statistics, 2019 “marked the southern New Jersey regional economy’s best performance since 1984,” the review stated. Total employment in the three metropolitan areas that comprise the broader regional economy — Atlantic City-Hammonton, Ocean City and Vineland-Bridgeton — increased by 7,300 last year.
Atlantic City casinos reported more than $3 billion in total gaming revenue in 2019, the first time the industry eclipsed such a benchmark since 2012. The city’s gaming industry has reported revenue increases for four consecutive years.
Gov. Phil Murphy ordered the indefinite closure of Atlantic City’s nine casinos on March 16, in addition to restaurants and bars throughout the state, to slow the spread of COVID-19. All nonessential businesses were ordered closed four days after. Murphy later authorized local municipalities to restrict short-term rentals, an option many South Jersey shore towns took advantage of.
The American Gaming Association estimated that a two-month shutdown of Atlantic City’s gaming industry would result in $1.1 billion of lost economic activity. That figure encompassed all direct and indirect economic activity associated with the casino industry, including gaming revenue, food and beverage and hotel, but also the impact on suppliers, vendors and workers.
“The regional economy’s reliance upon the leisure and hospitality sector again looms large,” said Oliver Cooke, editor of the Review and associate professor of economics at Stockton. “We play and vacation together. And, personal, intimate, high-quality service (whether provided at a poker or restaurant table) arguably lies at the heart of the hospitality business.”
The length of the economic lockdown and the lasting effects COVID-19 has on consumer habits — such as an aversion to public spaces, including restaurants, casinos, convention halls, entertainment venues, beaches, shopping districts, classrooms and commercial aircraft cabins — will influence just how large of an impact the pandemic has on South Jersey, both immediately and in the near future.
“While the speed of the return to normalcy will dictate the number of lost summer 2020 shore weeks, my own sense is that the COVID-drag will eventually play the more important role in determining the trajectory of the regional economy over the remainder of 2020 (and beyond),” Cooke said. “While we will eventually begin to work and play again, it strains credulity to believe that we will all do so at the same levels we previously did — at least for the better part of what remains of 2020.”
According to the analysis, the leisure and hospitality sector — which includes gaming, lodging, restaurants and bars, and other recreational activities — accounts for 15%, or roughly $2.8 billion of the regional economy, while the retail trade sector accounts for nearly $1.4 billion, or 8%.
The largest portion of the regional economic output (22% for the entire area, 35% in Ocean City) is the real estate, rental and leasing industry, which accounts for $4 billion.
“The longer it takes for the economy to reestablish some semblance of normalcy, the shorter the 2020 summer shore season will be and thus the greater the impact on the regional economy’s real estate industry,” Cooke said.