Governors Lockdown a Quarter of the U.S. Economy as America Hurtles Towards Recession

Governors of New York and Illinois locked down their states to slow the spread of the coronavirus, following California in imposing crippling restrictions on a quarter of the U.S. economy.

Florida has also tightened controls on restaurants, bars and gyms, dealing another body blow to an economy that may have shed more than 2 million jobs this week.

"Recession is now unavoidable," analysts at ING Bank said in a research note on Friday. "Our current best guess is for the economy to contract by around 10 percent in the second quarter although even this figure is looking increasingly too optimistic."

The economic outlook darkened substantially on Thursday when California, with a gross domestic product of $3.1 trillion, asked all its residents to stay at home. New York and Illinois followed suit on Friday. If they were independent countries, the three states would be the world's fifth, 12th and 22nd largest economies respectively. Together, they account for more than a quarter of all economic output in the United States.

The combined impact on global GDP may be worse than a nationwide lockdown in any country, except the United States and China.

New York's Democratic Governor Andrew Cuomo said that the New York lockdown was an attempt to "close the valve," limiting further spread of the coronavirus. The lockdown order goes into effect Sunday, and gatherings of any size will be cancelled. Public transportation will still run for those attending work. Those over 70, or people who are immune-compromised, are ordered to stay indoors.

The state has overtaken Washington as the U.S. epicenter of the disease. As of Friday morning, New York had over 7,100 cases of the disease and 35 deaths.

"When I talk about the most drastic action we can take, this is the most drastic action we can take," Cuomo said.

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A view of Lexington Avenue at rush hour as the coronavirus continues to spread across the United States on March 20, 2020 in New York City. Cindy Ord/Getty

Illinois Governor J.B. Pritzker, also a Democrat, made a similar lockdown order Friday afternoon. The Illinois lockdown begins this Saturday at 5 p.m., and extends to April 7. Pritzker asked all Illinois residents to stay inside; essential businesses like grocery stores and pharmacies will remain open. Pritzker also halted all evictions during the coronavirus crisis, and said the state would work to make sure Illinois' homeless population will be sheltered during the crisis.

That same day, Florida's Republican Governor Ron DeSantis issued an order closing all dine-in restaurants, bars and gyms, though restaurants are still permitted to provide take-out or delivery. Earlier this week, DeSantis said restaurants could stay open, but only if they operated at 50 percent capacity.

Tourism is Florida's largest source of revenue, bringing in $40 billion yearly, and it's currently spring break season. Though how much money has been lost by Florida's tourism industry due to the coronavirus is yet unknown, hotel occupancy in Miami Beach is expected to be 34 percent less than last year between March 22-28, according to the Miami Herald.

The coronavirus has also led to mass layoffs in different industries. New York's famed Broadway theaters are closed down. Hangman, which was playing at the John Golden Theatre, is the first Broadway show to be closed permanently due to the lockdown, according to Deadline. It's not just entertainers; bartenders and restaurant workers have also been laid off due the closures.

"Not every job can be configured to be able to work remotely," ING said. "Consequently, we are seeing worker layoffs surge higher across the country."

ING estimates that weekly jobless claims due on Thursday would surge to a record 2 million, more than three times the peak reached after the financial crisis in March 2009.

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People walk while wearing protective face masks outside Irving Plaza as the coronavirus continues to spread across the United States on March 20, 2020 in New York City. Noam Galai/Getty

Goldman Sachs economist David Choi made a similarly gloomy forecast on Thursday.

"State-level anecdotes point to an unprecedented surge in layoffs this week," Choi said in a statement. "These anecdotes suggest that the next jobless claims report covering the week of March 15-21 will show that initial claims rose to roughly 2.25 million, the largest increase in initial jobless claims and the highest level on record."

"Anecdotes from a wide range of sectors also suggest an unprecedented decline in revenues across many industries. Consumer spending on sports and entertainment, hotels, restaurants, and public transportation in particular have already dropped dramatically," he added.

Levi King, the co-founder and executive chairman of Nav, wrote in an editorial for Newsweek that he expected the coronavirus to claim a number of small businesses.

"It's an exceedingly tough time to be an entrepreneur," King wrote. "And a similarity between 2008 and now is that there is no known end date. During the recession, prognosticators couldn't agree on how long it would drag on and how long the economy would suffer. Similarly, no one knows how long it will take for the virus to run its course, nor how deep and severe the consequences will be in terms of lives and economics."

The United States has 15,219 total cases and 201 deaths from the coronavirus as of Friday at 4 p.m., according to the Centers for Disease Control and Prevention. The disease has spread across all 50 states, as well as the District of Columbia, Puerto Rico, Guam and the U.S. Virgin Islands.

Globally, there have been more than 254,000 cases, including 10,400 deaths. More than 87,000 people have recovered from the coronavirus, according to Johns Hopkins University.

Map of U.S. coronavirus cases, March 20
This map shows the spread of COVID-19 cases across the U.S. as of March 20. The graph by Statista uses data from Johns Hopkins University.