As Wuhan virus jangles nerves, state braces for economic fallout

With oil futures dropping sharply due to the global effect of China’s coronavirus scare, Connecticut and the nation face the possibility of the most significant economic shock since the 2008 financial panic.

The Wall Street Journal reported the Organization of the Petroleum Exporting Countries will meet Tuesday to weigh any adjustments to production, one of several economic telltales that markets will watch closely this week, including the Iowa presidential caucuses Tuesday, Friday’s job report, and the United Kingdom’s ongoing negotiations over its exit from the European Union.

But the coronavirus response is a concern for many. China has imposed quarantines, airlines have stopped service to the nation, while multinational corporations scramble to assess the impact on their operations.

Over the weekend, the Centers for Disease Control & Prevention posted guidelines for public health officials and physicians handling any suspected coronavirus cases. A CDC official said during a Monday conference call it was in “constant contact” with states over the weekend on measures to quarantine any people with possible symptoms. CDC did not issue broader advice immediately for how employers and public venues can prepare in the event of any wider spread. The scare has coincided with a deadly flu season that has led to heightened vigilance.

“We expect to see more cases of person-to-person spread ... given the explosive nature of this outbreak in China,” said Dr. Nancy Messonnier, director of CDC’s National Center for Immunization and Respiratory Diseases, speaking Monday on a conference call. “The goal here is to slow the entry of this virus into the United States . ... We do have time to prepare — and we are preparing as if this were the next pandemic.”

Messonnier said that any widespread transmission in the United States is considered a low risk at present, given the travel restrictions and quarantines, while acknowledging that misinformation is being shared on social media that is jangling nerves. The state Department of Public Health has created a web page at https://portal.ct.gov/dph with updates on the federal and state responses.

Connecticut’s economy suffered in the 2008 financial crisis sparked by the subprime mortgage market’s collapse that spilled over into the broader economy. From just over 1.7 million jobs in August 2008, Connecticut would lose more than 100,000 jobs over the span of just 18 months. The state took more than nine years to reach the 1.7 million mark again, topping the figure only last September.

Former Gov. Dannel P. Malloy implemented several measures in the wake of the Great Recession, including a Small Business Express loan program for companies unable to tap credit from banks. Last week, Gov. Ned Lamont announced a new structure for Small Business Express, which going forward will guarantee loans issued by commercial banks rather than extend direct financing from the state’s coffers.

“The current business cycle is the longest in postwar history at 10-years plus, so the risk of a downturn is becoming more apparent,” said Donald Klepper-Smith, an expert on the Connecticut economy with DataCore Partners in New Haven. “A recession can be precipitated not only by a policy error, but an exogenous shock. An abrupt rise is oil prices in the past is one example of how commerce and consumption get disrupted. Can this new virus upend the current expansion? In my opinion, yes it can.”

Associated Press A pedestrian wears a surgical-style face mask, a precaution often taken against the spread of the flu or other illnesses, in Alhambra, Calif., on Friday. With the Wall Street Journal reporting that Saudi Arabia is considering a major cut in oil production as a result of the China coronavirus’ spead, the U.S. is bracing for an economic shock.