Join together to get through coronavirus downturn, say Sonoma County business leaders
Recovery from the current economic reversal and a return to normalcy is possible, if people and business are willing to work together and adjust, said a panel of five business leaders Thursday at the Business Journal’s Impact Sonoma virtual event.
Moderated by North Bay Business Journal Publisher Brad Bollinger, this session -- viewed by 300 registered guests -- began with a keynote by Sonoma State University Economist Robert Eyler, followed by a panel that included Sonoma County Economic Development Board Director Sheba Person-Whitney; Santa Rosa Metro Chamber CEO Peter Rumble; Keegan & Coppin, Inc. Operations Director and Senior Real Estate Advisor Brian Keegan, and Sonoma County Tourism Vice President of Marketing and Communication Todd O’Leary.
Economic recovery will be dependent on government help
“The economy will get better in 2021 but we all will have to make adjustments. The real question is can we sustain a recovery in 2021 by leveraging the socio-economic implications of November’s election results, along with the possibility of receiving another stimulus package in Q4 or early next year,” Eyler said.
“It all depends on the forms of government interventions, such as direct payments versus investments to spur development, the impact of regulations and how much will be spent or saved by households to sustain the business sector and maintain jobs,” Eyler said.
Eyler discussed the use of stimulus funds and how it may change with a second round of disbursements. With the first checks households saved approximately 37%, spent 28% and used about 33% to pay down debt, according to a New York Fed survey of consumer expectations.
This same source predicts that the intended use of potential second-round payments would average 43% for payments saved, plus 22% in unemployment insurance (UI) benefits; 23% spent including 26% from UI benefits and use an average of 30% to pay down debt combined with 48% of UI benefits.
People’s saving money does not affect the economy, only when it is invested or spent by households, he said.
The focus now is more about continued UI claims, which peaked in May but continue to slide down with the coming of fall and winter. Rising business losses could stagnate job growth, though he pointed to an optimistic forecast of real U.S. GDP growth of 3.1% in 2021, after falling 4.3% in 2020 — with continuing increases of 2.9% in 2022 and 2.3% in 2023, the year when the economy is expected to return to 2019 GDP levels.
The economist said the major concern continues to be what will happen over the next five years, assuming that we turn the corner and have a short-lived recession. `
The Commerce Department on Thursday reported that in the third quarter alone GDP grew by 33% as a quarter to quarter change, following a loss of two-thirds of the nation’s output earlier this year. Consumer spending jumped 40% based on receipts from restaurants, shopping malls and other retail outlets.
Some 12.58 million Americans were out of work as of September. The good news is that the rate of unemployment claims is trending down, with the latest report showing 751,000 claims, not 775,000 as expected. The main category to watch is the loss of permanent jobs and people exiting the workforce, which is getting larger, versus temporary layoffs and furloughs. Women accounted for a portion of this decline by having to leave jobs to take care of children not in school.
Data showing changes in employment figures from September 2019 to September 2020 from the California EDD show a decline in Sonoma County’s civilian labor force of 13,100 and a 25,200 drop in civilian employment. Jobs in the leisure hospitality and services sector were the most negatively impacted. These numbers reflect lost jobs, people who left the area to work elsewhere or those who retired.
At the same time, he said manufacturing is coming back, along with construction and the finance industry with the fires increasing demand for real estate.
According to Eyler, another category to watch is whether fiscal monetary policy will to lead to non-residential business investment (which has not happened yet) after four years of negative growth in pre-virus years.
He said the relocation of employees due to fires does not affect effect the economy in the short term, but this could lead to a mid- to long-term effect on demand for real estate. There is also the possibility of fewer people taking the risk to move to Sonoma County – but this has not happened as yet.
Eyler said a key business category to watch is construction, with the housing forecast from Zillow Research showing positive growth of 6.4% in Sonoma County, higher than San Francisco ((5.9%) and Solano (5.8%) but lower than Napa (7.3%), Marin (8.3%) and California as a whole (7.6%).