While the coronavirus pandemic has posed a rocky 2020 for the regional economy, the road to recovery has started, and the outlook is a bit more optimistic for 2021, said Adam Jones, a regional economist with UNCW.
Jones and other speakers took part in the annual Economic Outlook Conference on Thursday, which was hosted virtually this year by the University of North Carolina Wilmington's Swain Center because of the pandemic.
Overall, the regional, national and global economy has been hard hit by the crisis and are all recovering differently.
“We all know that 2020 has been a strange year, but it's been a different year for each one of us … and our businesses,” Jones said of the regional economy.
At the start of the year, things overall were looking good: the unemployment rate for the Wilmington area was at 3.8% in January; the GDP nationally was growing at around a [2.1%] rate as of the fourth quarter of 2019; and there was very low uncertainty, he said.
But as the region moved more into 2020, and the coronavirus hit the nation and started to impact the regional economy in the spring, the outlook became very uncertain.
Durable goods purchases on a national level spiked in March, but mainly due to consumer spending habits ahead of the economic shutdown. The rate of durable goods purchases later dropped nationally by 23% in the month of April and nondurable goods dropped by 10%.
The regional economy started to lose its jobs at a very fast rate in April, as did the nation. This particular crisis nationally, in terms of job losses, has been significant.
“You can see what looks like a little blip in 2008. That little blip in 2008 was 650,000 people losing their jobs per week. And then along comes a pandemic and the numbers just go through the roof," Jones said. "Unemployment, or layoffs, rose at a rate of 10 times our prior peak. We’re talking millions of people a week losing their jobs; 6.9 million at the peak. This is a very, very quick and abrupt close of the economy."
On a state level, the pattern of job losses comparatively between 2008 and 2020 are similar, Jones said Thursday.
Jobs were disproportionally affected by the closures on a regional level.
The Wilmington area's leisure and hospitality industry has suffered the most. Right now, Jones said, the leisure and hospitality industry is still down by about 7,100 jobs as of August, even after at least partitional reopening.
“So leisure and hospitality has taken the brunt of this pandemic. Some of the other industries have held up relatively well. They tend to be where folks can work from home and can socially distance. But not all industries have come through this as well as some others,” he said.
Jones said, however, that the virus and the responding policies are unique, as opposed to traditional factors impacting the economy, he said.
“The other piece that I think that maybe makes us a little bit more optimistic, is that the policymakers were quick to respond,” Jones said, noting the unprecedented amount of fiscal and monetary support for the economy, such as federal stimulus package, the $3 trillion CARES Act, and the Paycheck Protection Program.
“So, to put that in perspective, that's about three times the amount of stimulus that was put forth in the financial crisis of 2008," he said. "This is a massive, massive response by the federal government. And this isn't even yet thinking about the Federal Reserve and their response."
GDP has recovered relatively quickly so far, and unemployment rates are falling across the country.
“In fact, we are recovering at a rate faster than the Federal Reserve thought we would. But this isn’t uniform across all the industries,” Jones said.
Personal income nationally in April rose by a record amount, by approximately 12%, because of the stimulus, and at the same time expenditures and consumption were dropping because there wasn’t much to spend money on with businesses closed, he said. That meant savings also jumped across the nation at a high rate.
For the region, that means some households are in a good position to fuel the growth as the local economy reopens, Jones said.
The savings, however, in lower-income households were not as strong as those households used their stimulus checks to get through the pandemic.
Much of Thursday's outlook presentation was based on national data because local level data isn't available on a timely basis, Jones said following the conference Thursday. However, through regional mobility data based on cell phone location, Jones said, the region could assume that trends are similar between national and regional levels.
In that data, regionally there is a clear pattern of weekend travel, as the weekend travel statistics are almost back to normal pre-pandemic travel, he said. Travel was slightly above normal for movement than average on Labor Day weekend.
But during the week mobility is still down about 40%, which means people are still working from home and not getting around much on weekdays, Jones said.
Going forward, Jones said that the economy will continue to recover; however, the pace of growth is going to taper off somewhat.
“We've seen large gains already simply from allowing businesses the reopening, but also a lot of businesses that are really struggling, and some of them aren't going to make it," Jones said. "Well, if they don't make it then new business has to start to replace them and hire people and that's going to take time. So that last little bit is going to take us a while to work our way through.”
For some regional firms that have opened and have witnessed a boom in business, that consumer spending may slow down as the economy opens up even more.
Businesses benefiting from the current spending habits should think about what happens as the economy opens further, as greater spending options become available, Jones said. Firms should start thinking about how to respond to create opportunities.
“So our forecast is that 2021 will be a much better year. Certainly, I hope it can’t get any worse than 2020. But we are optimistic," Jones said. "I think that growth in the Wilmington region is probably going to come a little bit later than it will in the nation only because we are such a seasonal service industry here. I think the nation will get rolling more in the early half [of 2021] and we are going to have to wait for a little bit more warmer weather as we get closer to the summer.
"So we will lag by a couple of months. But the opportunity is there."