A tale of two recessions and recoveries – San Bernardino Sun


By Manfred W. Keil and Fernando A. Lozano | Inland Empire Economic Partnership

Abelardo Morel’s photograph “A Tale of Two Cities” confounds the reader by juxtaposing words written from left to right with words written from right to left. While the more positive messages from Dickens’ novel are written in the sinistrodextral such as “it was the season of hope,” the dextrosinistral messages contain more negative messages such as “a dirty procession of monks.” Just as Morel’s image fazes the reader by blending feelings of optimism and pessimism, the current economic data, with divergent paths across sectors, regions, and industries confounds economists and policy makers.

The binary of good and bad news is especially true in California. The latest California employment data for October show significant progress. Although the unemployment rate remains elevated, the latest figures reflect an economy that is advancing, on average, despite the ongoing challenges associated with containing the pandemic.

Here in the Inland Empire, the labor market improved and showed an impressive decline in the unemployment rate from 10.2% in September to 9.0%. The region has picked up steam again, which was of concern last month when the unemployment rate only showed marginal improvement. The current decline puts the unemployment rate into single digits for the first time since the start of the pandemic. It continues to be below the California unemployment rate. Note that the decline in the unemployment rate was generated despite a significant increase in the labor force: 3.9% more people are in the Inland Empire labor force than a month ago. There are now more people in the labor force than there were a year ago.

Overall, nonfarm employment in the Inland Empire grew more than twice as much as for August to September, and even higher than the strong showing from July to August. Leisure and hospitality has been hurt the most by the recession. It was encouraging to see that sector adding another 4,800 positions in October, although it is still significantly below its February peak.

Another face-to-face sector, Retail Trade, added 4,300 positions; and as we have become accustomed to, the logistics sector continues to be a superior job creating engine: 3,700 jobs were generated here. Another sector which has been heavily impacted by the coronavirus is Educational and Health Services. It reported job gains of 5,100, with the majority of the improvement coming from Health Care and Social Assistance.

Finally, it was good to see that the bloodletting from the Government sector stopped, at least temporarily. Here 4,000 jobs were added. We do not know to what extent these were permanent additions or election related; only time will tell how the rather positive state budget figures compare to those seen at the county and city level.

But what do these averages miss or is the situation really as good as it seems to get for everyone? The story of the national economy reminds us of the 6-foot-3 statistician who could not swim and drowned in a lake with an average depth of 4 feet. In other words, does everyone in the labor force benefit equally from the recent improvements?

The stock market has been booming and following the election of Joe Biden and the positive news regarding vaccines: the Dow Jones closed over 30,000 for the first time on November 24 and the Nasdaq composite also set a new record at above 12,000 points. Unfortunately, the optimism from Wall Street regarding the future does not translate to the current situation experienced by Main Street: more than 400,000 small business have closed since the pandemic started and many more will struggle to survive during the next few months until a vaccine is widely available.

It may very well be that the current rate of COVID-19 transmission spells doom for many entrepreneurs. This pandemic has been particularly harsh for women-owned and minority-owned businesses, and the Payroll Protection Program struggled to support these entrepreneurs. Yet, larger firms, especially those with expansive online operations, have been consolidating market power. Almost three quarters of all Americans expect to do their shopping online to avoid crowds.

The unequal recovery is reflected in labor markets as well.

Data from the Opportunity Insights team show that high earners experienced a V-shaped recession, but the lowest earners’ job losses was still large and for them the recession is lingering much longer (hence the characterization as a K-shaped recession). Sectors such as construction, finance, logistics, and manufacturing have mostly recovered, and are currently at more than 95% or more of their employment level from a year ago. In contrast, leisure and hospitality still has lost over 3 million jobs in the U.S., almost 20% of their employment from a year ago.



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