The economic outlook for 2021 is heavily dependent upon the success of the COVID-19 vaccine. That was the opening message from economist Robert Eyler, speaking at the 21st Annual Economic Forecast Conference on Thursday morning. He told the conference attendees, who watched on video meeting platform Zoom, that his forecasts are betting on the vaccine’s success.
“If the vaccines wane, in terms of getting out there and changing caseloads and not allowing social policies to change, then we’re going to have this linger to the entire year,” he said.
If the vaccines don’t work or the world sees a COVID-20 or 21, then he expects that the business community and equity markets and the world markets will suffer a little bit.
But he said the good news is that right now they are expecting good things based on the expectation the vaccine will work. However, he said both the recession and the recovery have hurt specific parts of the economy and socio-economic areas.
He noted that those in higher-wage jobs have sustained the downturn better than lower-wage or entry-level industries. Sectors like hotels, restaurants, and places like fitness and hair salons have been hit hard.
“That means that is going to choke off opportunities for high school graduates and also college graduates, initially,” he said. “That’s something to watch for in terms of a lingering effect on unemployment, specifically in regards to our younger workers..”
In Butte County, the leisure and hospitality sector has lost about 15.2 percent of its jobs while other services like fitness and hair salons have been seen about 9.1 percent job loss. Those sectors actually outperformed the rest of the state, he noted. In fact, he said that while rural areas didn’t have as big of an issue unemployment-wise as the state overall, the recovery has been slower.
Eyler said that economists don’t see a double-dip recession just yet, but jobs will return slowly. He said they expect the fourth quarter of the Gross Domestic Product of 2020 to see a growth of about four to eight percent, “depending on who you ask.”
But he said the key is where the first and second quarters of 2021 go, which is impacted by the vaccine’s success. He said that by 2023, the U.S. economy will still be shy of its pre-COVID level and probably won’t return to that level until 2024.
As it relates to the job market, Eyler said that economists are concerned with whether those who have temporarily lost their jobs can get them back. If they don’t and those become permanent job losses, that will elongate the recession. However, he said right now it looks like a normal recession and the nation is in recovery.
Much like the state, Butte County’s higher-wage jobs have sustained the downturn better than lower-wage or entry-level industries. Butte has seen an increase of 5.4 percent in high wage workers, while middle-wage jobs have decreased by 6.5 percent while the lower-wage earners have lost about 38.1 percent of the jobs pre-COVID. While Eyler noted that some of that job loss was due to a lack of demand, it’s also a reflection of business losses.
According to Eyler, as of Dec. 30, 2020, Butte County suffered a 39.1 percent decrease in the number of small businesses that were open compared to Jan. 1, 2020.
A chart he presented also showed that Tehama County saw a 40.7 percent drop while Shasta County saw a drop in 47.9 percent.
“This is a problem,” he said. “If businesses are not open, and thus are not hiring people this is one of the reasons we’ve seen such large unemployment numbers linger about, for the time being.”
He said if the data is true, it suggests that structural changes are coming in some industries.
“Meaning we will not see employers come back in the same capacity,” he said, adding that there are two caveats to the data.
The data relies on big data, social media, partnerships with VISA to see if transactions are occurring, and advertising on platforms like Yelp. He said the second caveat is that it’s unclear if businesses are closed permanently or not.
That’s unclear but he says that data indicates that there is a problem.
“If you walk around Chico, Redding,” he said. “It’s going to look a lot like this.”