It’s no secret that the coronavirus pandemic is affecting the economy nationwide, but here in the Valley the ramifications could be felt on a different level.
Dr. Gokce Soydemir, Foster Farms Endowed Professor of Business Economics at Stanislaus State, forecasted in the fall of 2019 that the San Joaquin Valley’s economy would continue to slow in 2020 — and that was before the global pandemic hit. Now, as stores and restaurants close around the nation, world and in Turlock, the event is causing a recession that will impact nearly every citizen as jobs are lost and bills are left unpaid.
“These (pandemics) obviously are extremely rare. In fact, in finance literature they’re called black swans…swans are usually white, but once in a while a black swan comes up and it’s a surprise. That’s what’s happening,” Soydemir said. “We’re updating our forecast to take that into account. The GDP negative growth is going to be more pronounced than it was before and the forecasts for the nation for the first and second quarter are anywhere from a 15 percent drop to a 30 percent drop.”
According to Soydemir, a 15 percent drop in the nation’s GDP would equal a 30 percent decline here in the Valley.
“The impact would be more pronounced,” he said.
Just over 70 percent of the San Joaquin Valley workforce is made up of unskilled workers, Soydemir added, like those employed in the retail and service sectors who are now possibly without jobs or have seen their hours drastically cut. The expectation of this recession is that it will be “V-shaped” or “U-shaped,” representing a swift decline in GDP followed by a quick acceleration once things get better. Soydemir predicts this could happen by early in the fourth quarter of the year, should social distancing methods be taken seriously and current vaccine trials end up successful. The rise will occur quickly nationwide, but in the Valley where labor markets are not as fully-developed, recovery will be slower.
In comparison, the Great Recession of 2008 featured an “L-shaped” curve, that saw little GDP growth sustained over a long period of time. However, unlike the Great Recession, impacts will be felt in every sector.
“The negative impact will be across the board…even the education and health sectors will be negatively impacted,” Soydemir said.
While farmers in the Valley have been deemed “essential” and continue to work through the pandemic, their markets will eventually feel the economic strain as well. One of the largest import items in the Port of Stockton is liquid fertilizer and the interruption in international economic activity will surely affect this product and others utilized by the agricultural sector.
“There are going to be, at the minimum, workers that are working in the essential areas to keep the goods flowing from the Valley, so there are some areas where the impact is greater and other areas where the impact will be a little slower,” Soydemir said. “But, across the board, every sector, every category of employment will be affected by this.”
Soydemir acknowledged that while the community at large is worried about the economy, if the correct measures are taken and followed by the public, the recession caused by the coronavirus pandemic will be over sooner, rather than later. Looking at China as an example, the pandemic lasted about three and a half months there and their economy is already starting to open back up. Even though China is expecting a 42 percent decline in their GDP, they are on their way to recovery by ridding themselves of the virus.
“Worry is inevitable, but fortunately the government is stepping in and providing some relief so that should help,” Soydemir said. “It’s important to note that, for example in the Great Depression in the 1930s, one of the reasons why the depression lasted longer than it should have is because at that time, central banks did not intervene…that was a lesson learned in history, and now the Federal Reserve and the government are acting quickly to not make that mistake again and minimize the impact.”
On Friday, the House of Representatives passed a $2 trillion coronavirus stimulus package that will help battle the economic chaos caused by COVID-19. The bill will provide one-time direct payments to Americans up to $1,200 each and additional funding for each child, grants for small businesses which do not require repayment, expand unemployment benefits by up to $600 per week and increase the duration recipients are eligible to receive it, support unemployment benefits for those with reduced hours and provide billions of dollars to develop and purchase personal protective equipment for medical personnel.
District 10 Rep. Josh Harder voted in favor of the package and earlier in the month his Paid Sick Leave Credit Act was signed into by the President. The bill allocates tax credits to employers that provide paid sick leave to employees affected by the pandemic. On Friday, he said the stimulus package is vital to aiding the economy.
“This bill is an important step forward in helping our families, our small business owners and our first responders deal with the pandemic. It’ll provide quick financial support, protect people who lose their jobs, give grants to small businesses to keep our economy afloat and get much-needed resources to our heroes on the frontlines — our medical personnel and first responders,” Harder said. “But there’s still a lot left to do. In the next bill, we need to focus on expanding paid leave, do more to protect first responders and medical personnel, and expand health care services in areas like the Central Valley.”
Soydemir recommends that community members don’t spend their stimulus checks on bills, many of which can currently be deferred, and instead utilize the cash on necessities like groceries. Locals may also want to consider using their newfound money to support local businesses by ordering takeout or online retail products.
As for the economy opening back up by Easter, as the President has suggested, Soydemir deemed it unlikely and cautioned against it. He used Hong Kong as an example of what the U.S. could become if businesses open up too early, where the pandemic was thought to be over but resurfaced again. Now, Hong Kong is back to square one.
“It needs to be a well thought out decision…we want to make sure the peak is contained and the pandemic is entirely over before opening up the economy because lives come first and without the people there won’t be economy,” he said. “If you open the economy too early and the virus comes back, then all these efforts will be gone, it will be wasted and we’ll find ourselves in a more dire situation than we are now.
“People are itching to get back to work, people are itching to get out there and resume their normal lives so I think the recovery will be very quick.”