Reports of painful but gradual progress in the fight to tamp down and conquer the coronavirus have many people thinking — what’s left of the economy? Can we get it back? How, and how quickly? We talked to some local economists about the process of recovery from this most unusual natural disaster amid indications that the pandemic is at least nearing a plateau. China and South Korea appear to have tentatively emerged from the crisis, so is it appropriate yet to wonder how and when we might get back to where we were?
Three economics professors from CSU Bakersfield gave us their take and one, Mark Evans, says we shouldn’t count on an overnight bounce-back.
“I think it’s going to be a slow recovery,” Evans said. “I just don’t see any possibility of a deep, V-shaped recovery because I think everybody’s balance sheet is going to be destroyed at the household level, and at the business level, as well as at the state and local government level. So, I think, when we finally come out of it, it’s going to feel kind of like that 2008 Great Recession.”
Evans said businesses large and small should do their best to hang on to their employees, even those they’ve been forced to lay off, because the cost of training new employees, and bringing them up to speed, can be enormous.
“It’s tough because you’re trying to maintain your workforce,” Evans said. But if employers are “helping with unemployment insurance and that sort of thing, (you) can retain your workforce. Possibly, if you’re thinking about shutting your doors or if it’s laying half of your people off, if it’s possible in some way to share the work, so that all of them are working half the time, but you’re at least retaining your workforce.”
Economics professor Aaron Hegde says the COVID-19 crisis may have hastened a trend that was hurting many small businesses anyway — online shopping.
“Convenience is something that I think is a result of this … pandemic,” Hegde said. “Because people get very comfortable with getting food deliveries home, getting groceries at home, so I think that’s where you’ll see some of the changes. Some of the local retailers that depend on foot traffic may not have that. It’s just exposed our economy to a lot of this kind of discrepancy that we’ve already had. We’ve already as a society been shifting more online.”
What can a small business do about it? CSUB’s Richard Gearhart says they should take advantage of emergency bail-out programs the government is offering.
“What I would do is make use of the two federal programs that were just implemented — the Payment Protection Plan and then the Emergency Loan Relief Act,” Gearhart said. “Apply for the Payment Protection Plan first, because if you get an Emergency Loan Act first, that can conceivably reduce how much you get from the Payment Protection Act. Be realistic in your expectations — don’t just shoot for the $10 million maximum. Because there’s going to be a lot of people applying for this. And the more people that apply for the maximum, the less there is available for everyone in the pool. “
Mark Evans endorsed that idea.
“I would make sure I’m aware of every program the federal government and the state government have put into place,” he said. “And I’d be aggressive in terms of researching what those possibilities are and following through with them.”
Local government can’t print money or assume limitless debt like the federal government can, but there is a role for city and county leaders. The Bakersfield City Council, for example, voted Wednesday to defer certain taxes and fees for businesses.
“I would go a little bit further,” Gearhart said. “I’d maybe implement, when this is over, sales tax holidays at the local level. I know that’s gonna mean a hit in immediate tax revenue. But if you can get people shopping, if you can get people willing to go back out, that’s gonna help a lot of the small businesses stay afloat when this thing eventually ends.”
One thing the three professors agree on — predicting the direction of the economy, whether micro or macro, is a bit of a guessing game.
“I think the only people that are more wrong than economists and forecasters,” Hegde said, “are the (TV) weather people.”
We shouldn’t be listening for a starter’s gun to let us know when we can rush out and restart the economy. More likely the signal will be a gradual roll-back of social distancing and other restrictions. All we can do is hope it’s sooner rather than later so that consumers and small businesses aren’t permanently damaged. The best thing we can all do right now is listen to the guidance we’ve been hearing for weeks — stay home, but if you must go out, keep your distance. That advice will both preserve our individual health and our collective economic recovery.
Americans might be hoping to see as steep a climb back to economic vitality as the jagged drop of the past two months, which now has us tottering on the edge of recession, and consumer spending will be vital. Economists tell us that 70 percent of America’s economy is based on consumer spending, which translates to about $15 trillion.
HELP FOR SMALL BUSINESS
PAYMENT PROTECTION PLAN (PPP): $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis.
ECONOMIC INJURY DISASTER LOAN (EIDL): Forgivable loans of up to $10,000.
For a list of SBA lenders, visit www.sba.gov