Each week the GREATER MSP Intelligence Team will share our latest insights on the economic impact of COVID-19 on the Greater MSP region. We’re listening, monitoring, and tracking national and global analysis from leading experts and delivering insights about what it means to the Greater MSP regional economy.
This week we’re building on the insights from Audrey Lucas, Managing Partner of the Minneapolis office of McKinsey and Company. In her discussion with Peter this week, Audrey shared important learnings from McKinsey about the economic impact of COVID-19 and how we can be thinking about moving from crisis to recovery.
The daily economic toll of COVID-19 on the Greater MSP regional economy is significant.
Lockdowns have proven to be the most important, and difficult, decision to stopping the spread of COVID-19. But there are significant economic implications. As Audrey shared, the economic impact of the lockdowns in Minnesota and much of the U.S. and worldwide is more severe than anything that any of us have experienced before.
While we don’t yet have the full picture of the economic impact on our region, we are able to begin to estimate the daily impact under the current lockdown conditions. According to our team’s analysis of data from Moody’s Analytics, it is estimated that the Greater MSP region has experienced a 28.6% daily drop in economic output (GDP) since lockdown measures took effect. That amounts to about $217 million in output each day that is foregone due to mandated closures and stay at home orders.
To reach this estimate, Moody’s examined 20 industries and made assumptions about the drop in output based on lockdown mandates. For example, hard-hit industries like leisure & hospitality, which accounts for approximately 200,000 jobs in the Greater MSP region, is projected to lose 80% of its output under lockdown. More moderate-risk industries like manufacturing and construction are projected to lose about 40% of output during the lockdown. Professional services and headquarters operations, where the ability to shift to work from home was easier, is projected to see a 5% drop in output.
The Greater MSP regional impact under lockdown is on par with the U.S. as a whole.
While $217 million per day is a huge number, our analysis shows that the Greater MSP region’s share of GDP loss is on par (slightly lower, in fact) than the U.S. as a whole (28.9%). This is good news. It recognizes that our region’s diversified economy is helping us to weather the storm of COVID-19, and while losses will be felt by all, we have the ability to bounce back more quickly and with less shock than other regions that are more heavily dependent on hard-hit industries.
We recognize that not every county in our region is feeling the economic impact in the same way. Counties in the metro area range from a high of 34.7% daily output loss in Scott County to a low of 27% daily output loss in Hennepin County. While the share of total output lost is lowest in Hennepin County, the county represents half of the region’s total daily loss in output ($107.51 million).
With the state stay-at-home mandate extended to May 4th we can expect that the loss in GDP will be drastic for second quarter 2020, but according to Moody’s, the extent of loss of output will depend on how long it takes for the economy to re-open, which is still an unknown.
Moving from crisis to recovery is not linear.
As Audrey Lucas shared, the economic impact of COVID-19 is unprecedented and lockdown measures have been severe, but necessary. McKinsey’s guidance is that it is smart for employers and governments to start thinking now about how we can move from crisis to recovery as soon as it is responsible to do so. In fact, protecting health and protecting the economy are steps that do not follow a linear path – they are intertwined and happening now.
Our ability to protect our health in crisis is positioning the region for swifter economic recovery. Data from the Centers of Disease Control (CDC) show that Minnesota is consistently leading the nation in fewest COVID-19 cases per capita. Based on the learnings from McKinsey, we see this as evidence that our region and state is prepared and positioned for recovery in a matter of weeks, not months. Weeks vs. months matter when you consider the cumulating daily toll on our regional economy.