WBJ panelists warn of long W-shaped economic recovery
Photo | Devina Bhalla
WBJ panelists (clockwise from lower left): Jeffrey Fuhrer, senior fellow at Harvard Kennedy School of Government; Julia Georgules, director of research at JLL; and Robert Baumann, professor and department chair of the economics department at College of the Holy Cross in Worcester; with moderator Peter Stanton, WBJ publisher
COVID-19 has chaotically and deeply affected the Central Massachusetts’ economy, according to a group of panelists on a WBJ webinar Tuesday entitled “Mid-year Economic Review.”
“This is not your run-of-the-mill downturn,” said Jeffrey Fuhrer, senior fellow at Harvard Kennedy School of Government in Cambridge.
Panelists Fuhrer, Julia Georgules, director of research at JLL, and Robert Baumann, professor and department chair of the economics department at College of the Holy Cross in Worcester, gave an overview of current economic conditions, signs of recovery, and future outlooks during a WBJ webcast.
This economic downturn is unique in its rapidity and depth.
“We have never seen this rapid a deterioration in spending and in unemployment,” said Fuhrer.
Before the mid-summer COVID surges, numbers had shown early signs of a moderate bounce back, said Fuhrer. However, the new COVID surges threaten any recovery that was in progress.
Economic recovery is dependent on the nation’s progress of restraining the effects of COVID and how well our population follows regulations with social distancing and masks, said Fuhrer.
In terms of forecasts, there is a lot of uncertainty especially compared to forecasts during normal recessions, said Fuhrer. The unknown of the virus translates into a lot of uncertainty about the economy.
Fuhrer believes recovery will look more like a W, with a partial recovery, then back down, and then recovery again.
Massachusetts’ strict COVID regulations have not allowed Massachusetts to see the same recovery other parts of the country have, but it is short term pain for the long-run advantage of keeping the virus in check, said Fuhrer.
Recovery in terms of the workplace is also different during this pandemic from normal recessions. The increase of work from home and social distancing has accelerated trends that JLL was already watching, said Georgules.
These trends include distributed work, or the idea urban centers need to expand to find talent in different places, urban vs. suburban, work from home, and space design.
Georgules said there will be suburban growth as companies need to make space for distancing and chase talent in different years. There is still value in cities and urban areas though, and cities play a major role but will have to continue wrestling with challenges of rapid urbanization.
Additionally, she believes the office is not dead.
“In the long term, we do believe that the workplace has an important place in our economy,” said Georgules.
Work on site has shown to be more productive, said Georgules, and most employees they have surveyed want to go back to work in order to be able to collaborate with others.
“A 10% increase in work from home will result in a 10% decline in office demand, but this will be offset by social distancing and the need for more space,” said Georgules.
Companies continue to set a variety of plans to bring workers back to the office. Some like Google will not be returning to the office until the second quarter of 2021. These plans are further complicated by working parents’ realities if schools are not in person.
“Certainly it's going to be a flexible outlook for the next few months,” said Georgules. “It’s about responsibly returning to work and thinking about what we need in the future.”
Worcester itself has a long way to go in its recovery path.
The leisure and hospitality industry in Worcester has been hurt the most, and the construction industry comes in second, said Baumann.
The pandemic has created high risks for the $132 million Polar Park baseball stadium construction project. Minor league teams are most profitable in the first few years after a stadium is built, and if attendance is not full, then the City of Worcester may not have the funds to pay the bonds it took out to build the stadium, said Baumann.
“If we’re not getting upfront benefits, [Worcester] is in danger of not being able to pay these loans unless we dip into the city budget,” said Baumann.
Polar Park is a potential risk, but Baumann said otherwise Worcester is in a good position.
By looking at localized Worcester County data, Baumann said the city of Worcester fared a bit worse compared to the rest of the county with a 17.6% unemployment rate for May 2020 versus a 3.5% rate from May 2019. Greater Worcester as a whole had a 3.2% and 14.6% unemployment rate for May 2019 and 2020 respectively.
“What you're seeing is falling employment, rising unemployment, average hourly earnings ticking up a little bit,” said Baumann, “This shows that people who are losing their jobs are on the lower income part of the spectrum.”
This pandemic has disportionately affected lower-income workers, but unfortunately that is common in most recessions and periods of economic turmoil, said Baumann.
These downturns starkly show, and widen, the racial inequality in this country’s economy, said Fuhrer. The data showing the economic inequality precedes the crisis, but the inequality is being exacerbated by COVID-19.
“These disparities are not about income differences. It is about changes in policy that go back to the Civil War that were designed to exclude Black and brown people from the benefits that white people gained,” said Fuhrer.
Equal opportunity is not the reality for Americans, said Fuhrer. Whether it be geography as economic destiny or the quality of jobs, there are many factors keeping Black and brown people subjugated financially.
“Poverty is undesirable everywhere, but long-run systemic and institutional racism has hurt people of color much more,” said Fuhrer.
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