A Point Loma Nazarene University economist believes the economy will rebound, though slowly because of the “deep hole we’re digging ourselves out of” from the pandemic lockdown.
The Peninsula Beacon held a Q&A with Dr. Lynn Reaser, the chief economist for the Fermanian Business and Economic Institute at PLNU. The institute engages in economic analysis, modeling, and forecasting for corporations, nonprofit organizations, and government agencies
Beacon: What kind of an economic recovery are we looking at? Long or short? What factors are at play?
Reaser: Gains and growth rate rates will look impressive. However, because we are digging out of such a deep hole, it is likely to take until the end of 2021 before employment returns to pre-Covid-19 levels. Three factors will determine what the recovery ultimately looks like The virus, will there be a second wave?; The science, how soon will we have a vaccine or, at least, widespread testing and tracing?; and consumer behavior, will consumers feel safe enough to shop, dine, and move about and will they have the buying power to fuel the economy?
Beacon: Is San Diego going to lag because, to a certain degree, it is tourist-dependent?
Reaser: In April, which is likely to mark the bottom of the downturn, San Diego’s total job market suffered a loss that was approximately equal to that experienced for both the state and nation as a whole. Although we have a somewhat larger dependence on tourism, there are significant offsets. The most important of those is our link to defense.
Beacon: What does San Diego's economy have working in favor of it? Against it?
Reaser: For: Our diversity, including technology, biotech, and defense.
Against: The importance of restaurants, hotels, cruise ships, and transportation, especially parts dependent on foreign travel.
Beacon: Do you anticipate these stricter health regulations will become permanent?
Reaser: After an effective vaccine becomes available, life is likely to look more like our pre-Covid-19 existence than its current mode.
Beacon: Unemployment is at levels not seen since the Great Depression a century ago. Are we looking at double-digit unemployment for a protracted period?
Reaser: Unemployment is likely to fall below double-digits by next year as companies reopen, call back workers, or hire additional employees. Not all of the same jobs will return, but others will be created and new firms will appear. A year from now with a vaccine could also change the economic landscape in a decidedly positive direction.
Beacon: Obviously this recession/depression is a great deal different than the one nearly a century ago. Talk about the differences between now and then.
Reaser: The current situation is very different from that of the 1930s. The economy was healthy before Covid-19 with no major imbalances, such as the financial excesses that preceded the Great Depression. This downturn was “engineered” as activity was shut down to contain the virus. And economic stimulus has been massive in the current situation versus the lack of response during the 1930s.
Fiscal stimulus has already exceeded $3 trillion, leveraged with another $3 trillion of support by the Federal Reserve.
Beacon: What are the sectors of the economy that will come back the quickest? Which sectors will have the most trouble coming back?
Reaser: Sectors rebounding the most quickly: Service businesses, doctors and dentist offices, hair salons, nail salons, gyms, and others with pent-up demand.
Most slowly: large entertainment venues, which will be the last to receive legal permission to reopen.
Recovery, but at a moderate pace: Restaurants due to more spacing.
Beacon: Seems like air travel being way down is going to have an effect on the economy. Would you agree?
Reaser: The reduction in leisure and business travel from outside the region (particularly other states and countries) has hurt hotels, restaurants, and entertainment. Some of this loss might be offset in the near-term by greater spending by local residents or people traveling here by car.
Beacon: If we get a second wave of coronavirus in the fall, could the economy be shut down again? What impact would that have?
Reaser: While the economy might not be legally shut down to the extent as before, people might still prefer to largely “shelter in place,” which could have similar effects.
Beacon: Let's look on the bright side. What good has come out of this? Zoom meetings, technology. Anything else?
Reaser: People are incredibly resilient. We have been able to adapt and most have been willing to sacrifice their routines for the common good. Companies and employees have adjusted to remote working and many businesses have found innovative ways to survive until we “get to the other side.”
The “other side” will come. Although the downturn was exceedingly deep and widespread, it appears to have already reached its climax in April, with bits of recovery taking place every day. This will mark a very dark spot in economic history, but it will not last forever.
For more information, visit pointloma.edu/FBEI.