Sonoma County Economic Development Board looking for ways to respond to economic uncertainty
The tourism, travel and restaurant sectors are projected to be the hardest hit industries in Sonoma County when it comes to COVID-19-related economic impacts, and recovery may be a sluggish process. In response, the Sonoma County Economic Development Board (EDB) is working with a task force to create a mitigation plan and best practices for local industries and businesses for when it’s time to reopen.
The economic development board is also partnering with economist Robert Eyler, a professor and director for the Center for Regional Economic Analysis at Sonoma State University, to work on economic studies to better inform the recovery process.
During a webinar presented by the EDB on May 7, Sonoma County Economic Development Board Executive Director Sheba Person-Whitley discussed the board’s response to the coming economic impacts and Eyler provided an in-depth presentation on the current economic outlook for the county.
Responding to a crisis
“We understand that there is a great deal of anxiety and uncertainty, frustration and pain being felt throughout our community and we want to work with you to bring you relevant, timely content,” Person-Whitley said. “The past several days, our team has been working diligently with a wide variety of industry leaders and stakeholders. Part of that work involved pulling together a task force to think about how we can mitigate and ensure a safe environment for our staff as they come back into the workplace, as well as our consumers.”
Results of that effort will be guidelines for best management and practices developed by industry leaders and posted to the EDB website and social media.
Person-Whitley said that businesses should start preparing to be ready to open as Gov. Gavin Newsom looks towards the phase two of reopening.
“We want to make sure all of our businesses are able to pre-position, secure things like personal protective equipment and think through how they will mitigate (risks) and that way they will be poised and ready once that reopening happens,” she said.
In the coming weeks both Sonoma County and the state are going to start seeing a lot of the initial economic damage from COVID-19, a decrease in the consumption of services like travel, and an impact on local and county government, according to Eyler.
A big item of discussion during Thursday’s meeting, was gross domestic product (GDP), a monetary measure of the market value of goods and services produced in a certain period. For instance, the GDP numbers of the United States for April has shown a negative change of 8.4%, which is expected to undergo another dramatic drop in the second quarter, according to Eyler.
Consumption is the biggest part of what makes up a GDP, usually about 70%, and is broken down into two categories, goods and services.
In response to the coronavirus pandemic, goods are not decreasing as much due to the increased consumption of grocery store goods. Eyler cited the mass panic buying of things like toilet paper and hand sanitizer. Consumption includes things like travel, hotels, restaurants and wineries and Eyler said the decrease in services “is going to be much more dramatic” than the decrease in the consumption of goods.
“Where are some factors of vulnerability? Travel and hotels is very obvious. If you talk to your local hotelier, especially ones that are locally owned, they are going to tell you that it is absolutely nasty and it’s probably going to be a little nasty over the next couple of months at the minimum because we have not got complete release to move around freely,” Eyler said.
In an April 22 article, Circe Sher of Hotel Healdsburg and Piazza Hospitality told Sonoma West Publishers, “It’s been really hard to do this, and I am thinking a lot about our team of employees, many of them have been with us for over 15 years.”
He said airports big and small will also take a hit — the Charles M. Schulz Airport saw half of its normal traffic in March, and agriculture and wineries will have a mixed bag of impacts.
Eyler said farmers are going to be vulnerable to economic impacts since there is a kink in the food supply chain of restaurants not ordering as much product as before.
“We bought more groceries, but restaurants have been closed in such a way that that demand has been shut off,” he said.
He said while winery sales from tasting rooms will be impacted, there has been an increase in direct-to-consumer offerings and many local wineries are offering special shipment deals and curbside pick-up. Along with offering virtual wine tasting sessions, Lynmar Estate in Russian River Valley, is offering online wine sales and Mutt Lynch Winery in Windsor is providing curbside pickup and local delivery in Sonoma County of purchased wine.
In terms of impacts to the county and municipalities, Eyler said, “Government is definitely at risk from the county down to our cities. There is a lot of risk in terms of budgets contracting,” which could affect services offered. “Don’t expect government to be suddenly flush with cash at the county and local level just because the federal government is saying they are going to provide money. There are a lot of expenses going on every single day without the tax revenue coming in.”
How might individual cities fair? Eyler said tourism-centric towns like the city of Healdsburg, the town of Sonoma and unincorporated coastal areas will see the highest economic risk due to a major decrease in tourism. Larger cities like Windsor and Santa Rosa may have more economic balance, but more workers are at risk due to the shut down of retail, hotels and restaurants.
For smaller cities like Sebastopol and Cloverdale, Eyler said the risk will be there for smaller retailers and businesses.
A larger look at impacts
“The damage is going to look pretty nasty over the next couple of quarters,” he said.
“One of the things economists have been very vocal on is looking at the movement of new claims for unemployment insurance … We want to watch those new claimants, because that tells us, we think, what the net change should be in unemployment, which we can then map over to a change in GDP, income at home and all other parts of the economy.”
He said usually during recession you see gradual changes in the spike, but this time, the spike is dramatic.
Initial claims for unemployment insurance in the last six weeks were at 30 million for the United States and 3.8 million for the state.
“It usually is a much more gradual movement, meaning that some industries lose jobs, others lose jobs and the condition of the economy worsens, in this case the spike is so dramatic that we are expecting a very dramatic change in our economy,” Eyler said.
He explained that in looking at continued claims data, you can get an idea of how long unemployment is expected to last and when the turn in the economic recession could happen.
“You can see the three recessions in contrast, that continued claims lag a little bit, unemployment then lags a little bit in terms of when you turn the corner, but the continued claims do tell a story along with new claims about where we may be headed. We’ll be watching both those pieces of data to hopefully predict when we’ll get the peak of unemployment and we are going to see some really wild numbers folks, so put on your seatbelts for the next couple of quarters,” he said, noting that it could take up to two years to see the turn in the tide of the economy.
Elyer alluded that it may be a long road to recovery and said, while Sonoma County knows how to react to disasters like these well, this is a whole different kind of disaster.
“A lot of this (recovery assistance) is going to come from fiscal policy,” he said.
These policies are monetary (the movement of interest rates and cash availability in banks, credit unions) and fiscal policies (Congress passing laws to allow for more money to move from the treasury out on the street to residents and businesses).
“So far we’ve had three policies that have come together more quickly than any other economic time with respect to a downturn and the government reaction,” he said.