The COVID-19 pandemic damaged the U.S. economy but it also demonstrated the economy’s resilience.
Speakers at the annual economic forecast events hosted by the Central Maryland Chamber (CMC) and Howard County Chamber of Commerce (HCCC) in November agreed that Maryland and the nation face challenges ahead but noted opportunities for a strong rebound.
Anirban Basu, chairman and CEO of Sage Policy Group, a Baltimore-based economic and policy consulting firm, labeled the second quarter of 2020 “the worst quarter of our economic lives.”
The U.S. economy shrunk 31.4 percent during that quarter but raced back with a gain of more than 33.1 percent on an annualized basis the following quarter.
“It’s hard for me to express how good the U.S. economy would have been in 2020 but for COVID-19,” Basu said.
Employment also took a hit in March and April, resetting to zero the 22 million jobs that had been added to the economy in the previous 113 months.
Curtis Dubay, lead economist for the U.S. Chamber of Commerce, said, “We are likely to stay in the current condition until we get a widely available therapeutic or widely dispersed vaccine.”
Retail sales have set record highs for a number of months, Dubay said, attributed to federal stimulus efforts intended to prop up the economy in the short term.
“It shows that retail establishments made the changes necessary to operate in a pandemic environment and I don’t see any reason why this wouldn’t continue,” he said. “The parts of the economy that can open and operate are doing well but that may fall again as the virus surges and we get some more closing of the economy.”
According to Basu, Maryland’s finances have held up reasonably well, but at a cost.
“Higher wage workers have held onto their jobs, while those who lost jobs were in entry level or near-entry level jobs,” he explained, cushioning income tax collections.
Retail sales tax and corporate tax collections have also held up well, but Maryland lost 5.9 percent of its employment base between September 2019 and September 2020.
While most of those jobs were in the leisure and hospitality category, “Ironically, a lot of jobs were lost in health services,” Basu observed, a result of many people foregoing elective procedures and routine wellness visits and also avoiding home-based health service.
More job losses will likely ensue now that Governor Larry Hogan has announced more restrictions to address a spike in COVID-19 cases.
“There’s no victory here, those decisions are going to cost somebody something, including potentially their job or their life,” Basu said. “It’s tough to be a governor right now.”
At the local level, the Howard County Economic Development Authority (HCEDA) has responded to the pandemic with business grants.
“We are in the process of deploying more than $5 million in business assistance to storefront retail, restaurants, hotels, farms and childcare,” said Larry Twele, HCEDA’s CEO. “We will be continuing that assistance for the rest of the year.”
Likewise, the Anne Arundel Economic Development Corp. (AAEDC) just launched an online portal that combines $5 million in state funding and $5 million in AAEDC funding for a program that will provide $10,000 grants to restaurants.
“If we participate in teleworking right, we can reshape the economic footprints in our communities,” said Ben Birge, AAEDC’s president and CEO, shifting traffic away from businesses surrounding places of employment to businesses closer to where remote workers live.
“I think 2022 is likely when we’re going to see [conditions] remotely close to normal, and I predict teleworking on a large scale will continue into the spring, maybe the summer,” said David Iannucci, president and CEO of the Prince George’s County Economic Development Corp.
As for predictions that 20 percent of the nation’s malls may not survive and jurisdictions may face a glut of vacant retail and office space, “creative adaptive reuse will be the key [to opportunity],” Twele said.
He and his colleagues suggested that these spaces could become institutional or medical facilities or be converted to residential housing, senior adult living spaces, or even schools.
Economists are predicting moderate tax increases under a new presidential administration headed by Joe Biden.
While a 28 percent business tax rate might not be cataclysmic, “It’s going to lead to slightly slower growth and hurt some industries disproportionally, especially those that operate internationally,” Dubay said.
He expects a push for a value added tax and taxes on energy and carbon emissions.
“My prediction is that we’ll have a winter recession as we continue to shut down the economy, driven by supply side shocks,” Basu said. “But when the vaccine comes, watch out, this economy will go on a tear through the back half of 2021.”
By George Berkheimer | Senior Writer | The Business Monthly | December 2020 Issue