Taner Osman of the University of California Riverside School of Business, Center for Economic Forecasting & Development, didn’t sugarcoat it.
“There’s no way to sugar coat it, it looks like we’re in for a bleak winter,” Osman said. “Every day as we see the number of cases tick up and as we see the number of restrictions on consumer activity in response to the growing spread of the coronavirus, this is a headwind for the economy, but ultimately the COVID-19 economy has been an economy of winners and losers.
“As I mentioned, we cannot expect a full recovery of the labor market until 2023 for us to return to that trend.
“The good news is we are recovering from the depths of the recession that we experienced in April although that recovery is slowing in California. Recovery is underway as well, but in California, the economy hasn’t fared quite as well as it has in the rest of the U.S.,” he said.
At the heart of the issues, Osman said, during the Temecula Valley Chamber of Commerce’s annual Southwest Regional Economic Forecast via teleconference Tuesday, Nov. 17, was COVID-19.
“I think the sort of overarching theme of my talk or my presentation is that we’ve come a long way since April, but there is still quite a long way to go until we are out of the woods,” Osman said. “Right now, everything with respect to the economy is being dominated by what is happening with respect to the coronavirus. As anybody who’s been following the news, will see we have had a drastic, dramatic surge in cases over the last two to four weeks.
“There were a whole raft of new measures that were put in place around the United States to contain the spread of the virus. As many of you will have seen in California in particular, we entered a new sort of phase with respect to the state’s efforts to contain the virus. All of these restrictions do stymie consumer activities. In addition to this sort of public health crisis, these efforts to try and contain and solve this public health crisis is creating a drag on the economic recovery,” he said.
Osman said, nationally the unemployment rate has been dropping and hovers around 7%, which is an improvement from being in the teens a few months ago. The biggest impact of job loss was affecting middle and lower wage jobs, he said.
“One of the striking features of the damage that has been sustained in a labor market is the extent to which it has affected different incomes,” Osman said.
He said jobs and workers earning $60,000 a year have actually seen job growth compared to where the market stood in January.
“But if we look at this sort of lower lowest income threshold, we see that one in five jobs for those people earning $27,000 a year nationally has been lost,” Osman said. “So this is an economic fallout, which has disproportionately affected lower income people and people of color.”
Osman said there has been encouraging news regarding the housing market.
“We’ve seen a pretty phenomenal recovery in August and September, and as home sales have continued,” he said. “We’ve also seen an increase in housing prices as well. And I don’t think too many people were forecasting that early this year, but the strength of the housing market, I think, has been primarily driven by three factors.”
One he said was pent up demand, another was low interest rates and the third was at how minimally the economic downturn has affected higher income workers.
“Inevitably, all roads are leading to the coronavirus. This was not a structural recession. This was not a recession which was driven by a debt incurred by consumers. This was not a recession that was incurred by an unwise decision made by banks. This was a recession which was grounded in this global pandemic,” Osman said. “A lot of the recovery, a lot of the strength that we’ve seen to this point, especially with respect to the consumer has been driven by Congress with respect to stimulus payments and enhanced unemployment benefits. As these stimulus measures have worn off, what we’ve seen is the economic slide. Open question as we head into 2021 is the extent to which Congress is going to act again and your guess is as good as mine. I have no idea what Congress is going to do from one day to the next.”
He discussed how the economy is faring regionally.
“It’s been especially disruptive for the Inland Empire, because the Inland Empire was on a great growth trajectory,” Osman said. “Since the great recession, the Inland Empire has been one of the strongest growing parts of the state.
“We see a similar picture to what we observed in the U.S. and California. We saw this snapback, you saw this contraction of the labor market in April and May, and we’ve seen a snapback which has been slowing ever since, although the recovery has recovered around half of the jobs that were lost in the Inland Empire.
“Remember that in California, the number of jobs has fallen by over 9%. In the Inland Empire the number of jobs as of today is still about 8% lower, which is better than the state performance,” he said.
Osman said there were 124,000 fewer jobs than there were before the pandemic, which again, he said has affected lower income workers.
“Nearly one in three, a third of the lower wage residents in the Inland Empire have lost their jobs,” he said. “That said, within the Inland Empire, the higher wage earners have outperformed both the California and the national economy. So again, we do have this sort of bifurcated recovery, whereby job loss is really impacting some members of the community harder than others.”
Osman said taxable sales fell off the cliff during the pandemic, as it did with the rest of the state and nation. The sectors of business affected most were fuel and service stations, followed by restaurants and hotels.
He said the loss of taxable revenue would have implications on public budgets.
“You cannot lose this amount of sales tax revenue and not have repercussions,” he said. “And throughout the state we have seen early retirements and cuts in certain services from the state level all the way down to the local level.
In addition to the keynote by Osman, city managers from Lake Elsinore, Menifee, Murrieta, Wildomar and Temecula presented video updates on how each city has progressed over the past year.