A few months after researchers predicted a boon for San Fernando Valley companies among roaring economy, a new study finds the coronavirus pandemic might have lasting impacts on the economy — perhaps the deepest downturn since the post-World War II era.
Economists with California Lutheran University forecast are predicting a “slow and painful” recovery, according to a report issued Tuesday, April 14.
“The San Fernando Valley has the much stronger economy, stronger than the state, stronger than the metropolitan L.A. economy,” said Matthew Fienup, the executive director of the Center for Economic Research and Forecasting at California Lutheran University. “In that sense, we expect the strong economy will absorb unexpected shocks better than the weak ones.”
The shelter-in-place orders, however, are “having very dramatic impacts across the state of California and unlike the Great Recessions the impacts are not going to be spread evenly across the sectors, economy and income groups,” Fienup said, adding that hourly workers and low-income families are going to be disproportionately impacted by the economic downturn.
The high cost of living will “dramatically” impact San Fernando Valley families, he said.
Meanwhile, economists predict thr national gross domestic product will contract by around 20%. Putting that into perspective, from the peak of economic activity in 2007 to the trough of the Great Recession in 2009, the U.S. gross domestic product contracted by only 4%, according to the report.
“We predict that this will be followed by a second, smaller decline in output in the third quarter, this time caused by a wave of small-business failures which result from government-mandated closures,” the report said.
Economists forecast that most shelter-in-place orders will extend into May and will “not be lifted in time to prevent these business failures,” the report said.
Gov. Gavin Newsom said Tuesday he was looking into lifting stat-at-home orders, a move that might become possible if coronavirus cases flatten and start to drop in the upcoming weeks.
Newson wouldn’t provide a specific timeline but said he will release more details in the first week of May if personal protective equipment is available and hospitals are ready to handle the potential uptick in coronavirus cases.
The announcement comes as Los Angeles County health officials reported 40 more deaths linked to the coronavirus on Tuesday, with mortality rate rising up to 3.6% and bringing the county’s total to 10,047 positive cases of COVID-19.
The importance of quickly lifting social distancing and stay-home orders should not be underestimated, the report said.
Of 600,000 small businesses surveyed by the J.P. Morgan Chase Institute in 2016 fewer than half of small businesses hold cash buffers large enough to endure a 30-day shutdown.
Even with the $350 billion small business lending program authorized by Congress, large numbers of small businesses may begin shutting down beginning in May, the report said.
“Delays in implementing loans to small businesses indicate to us that even a rapid end to shelter-in-place orders may not be enough to enable our optimistic scenario,” the report said.
Policymakers will face a complex task of balancing the livelihood of people vulnerable to the virus against the livelihood of economically vulnerable people.
The $2 trillion economic stabilization package agreed to by Congress in March places a large emphasis on providing fiscal stimulus to individuals and households, particularly those who have been laid off or furloughed as a result of government-mandated business closures. But the effect of cutting a government check to families will be limited as long as many of the businesses where people spend money are shuttered.
“Putting money into people’s hands will also not prevent the widespread collapse of small businesses that will happen if shelter-in-place orders are still active in six-eight weeks. After that, workers will not have jobs to return to once the spread of the disease has slowed,” the report said.
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Coronavirus will have harsh, lasting impact on San Fernando Valley economy, researchers say - LA Daily News
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