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Coronavirus

Coronavirus: Here’s what declining airline revenues could mean for state economies

While we wait for news on a financial assistance deal for the airlines I decided to model what the latest estimate from IATA Economics and others–a roughly 20% revenue decline for the year–would look like for states and metros with significant concentrations of jobs and economic activity in the airline industry. As you might guess, it’s not pretty.

The Scheduled Passenger Air Transportation industry (just passengers, no freight, for this exercise) contributes $124 billion to U.S. GDP and employs nearly 450,000 workers, according to Emsi, a labor market analytics firm. Average earnings per worker ($113,000) are very high, which means these jobs are critical drivers of other jobs in the labor market (i.e. a large multiplier effect). That’s great for the purpose of economic development in good times but can be catastrophic when that industry hits a down cycle. Current times certainly qualify.

Using Emsi’s model of the national economy, an estimated 20% decline in sales would result in losses of about 96,000 jobs and $10.7 billion in earnings in the Scheduled Passenger Air Transportation industry. Total losses to the U.S. economy would be nearly 928,000 jobs, $58 billion in earnings, and $12 billion in federal, state, and local tax revenue.

Here’s how the estimated 20% sales decrease could impact states with significantly larger concentrations of jobs in the industry compared to the U.S. economy as a whole:

Approximately two-thirds of job losses in the industry would happen in those fourteen states.

Metropolitan areas with major hubs, such as Atlanta or Chicago, would absorb most of those employment and earnings losses, of course, and the impacts would be dramatic. Projected employment declines in the New York, Chicago, Dallas, and Atlanta metropolitan areas would top 30,000, each. State and local tax revenue decreases would range from about $257 million in the Atlanta metro area to $479 million in New York. Places like Miami, Denver, Seattle, Minneapolis, and Charlotte would also be hit hard.

There are apparently several scenarios being discussed right now in terms of a rescue strategy for the airlines, and I’m sure the industry experts will continue to adjust their forecasts as new information is available. I’ll update this post as I see new estimates released. Also, please get in touch if you would like results (or other scenarios) for states or metropolitan areas I did not mention here.

Categories
Coronavirus

Coronavirus: Restaurant closures could cost Nashville 12,000 jobs

This is going to be a moving target, but we are starting to get an idea of how to quantify some of the impacts of the coronavirus on Nashville’s restaurant industry. Preliminary estimates show that Davidson County’s restaurant industry could lose more than 9,000 jobs and $245 million in earnings resulting from the coronavirus shutdown. The total economic impact could reach 12,000 jobs and $420 million in earnings across the Nashville economy, if a recent industry forecast proves accurate.

The National Restaurant Association sent a letter to President Trump and members of Congress on March 18 estimating that a three-month closure of restaurants due to the coronavirus could result in a twenty-five percent decrease in industry sales and a total economic impact of $675 billion, including up to seven million jobs lost.

Restaurants contribute about $1.5 billion and nearly 36,000 jobs to the Nashville economy, according to Emsi, a labor market analytics firm. Let’s assume the economists at the National Restaurant Association are on target and we can apply their national forecast to the local industry in Nashville with a reasonable degree of accuracy. Based on my analysis using Emsi’s data, here’s what a 25% decrease in sales at restaurants in Davidson County would look like:

  • $732 million decrease in sales
  • $245 million decrease in earnings
  • 9,100 jobs lost

Total impacts on the local economy:

  • $420 million decrease in earnings
  • $62 million decrease in state and local taxes
  • 12,000 jobs lost

I don’t think the National Restaurant Association’s analysis includes bars. A similar decrease of 25% would result in losses at local bars of about $40 million in sales, 700 jobs, and $22 million in earnings. The total impact of restaurant and bar closures on the Davidson County economy would be about 12,900 jobs, $451 million in earnings, and more than $64 million in state and local taxes.