‘A sudden and dramatic downturn’: Nevada County economy will be hurt for long time following coronavirus slowdown, expert says
SUPPORTING SMALL BUSINESS
Nevada City Chamber of Commerce
Grass Valley Chamber of Commerce
Grass Valley Downtown Association
Sierra Business Council
Nevada County Economic Resource Council
There are many unknowns swirling with the pandemic in which the nation currently finds itself.
Many don’t know when exactly residents will re-enter “normal” life nor how quickly that will occur, how our social norms will change, nor how government will reassess the importance of things like child care or health care.
But in terms of the overall economic impact, economists like Gary Zimmerman believe things will get worse before they get better.
Zimmerman, a Nevada City resident and former economist for the San Francisco Federal Reserve as well as a visiting professor at Vienna University of Economics and Business, believes the country entered a recession in March, and a stronger downturn is looming.
“I think the one thing you can say is it will be bad,” said Zimmerman. “This is such a sudden and dramatic downturn in the economy.”
While it’s unknown how many businesses will go under from the almost unprecedented economic slowdown, Zimmerman said of the about 26 million newly unemployed, about half worked for small businesses. The service sector particularly — including restaurants, bars, fitness centers, gyms, salons and barbers — are about to take a large hit, he said.
Data from 2016 shows that behind health care, government and retail, the biggest employers in Nevada County include the construction and service sectors.
Small businesses in Nevada County, which employ a disproportionate number of people, also proportionally generate the second-most tax returns in the state in comparison with small businesses from other counties, according to a report from SmartAsset.
Broadly, rural businesses will be hardest hit, particularly those that maintain a storefront, like bars, restaurants and retail shops, according to Sierra Business Council Vice President Kristin York. At this point, those that have found a way to stay “semi-open” are just trying to prevent permanent closure.
“Even the restaurants doing take out — they’re just trying to stop the bleeding,” said York. “It’s going to take a while for things to get back to normal.”
Local business organizations like the Grass Valley Downtown Association, the Grass Valley and Nevada City chambers of commerce, the Nevada County Economic Resource Council and the Sierra Business Council have been working with businesses to help them acquire federal loans and to provide support, however possible.
According to Downtown Association Executive Director Marni Marshall, the local groups have been setting up webinars and meetings for small businesses to help them acquire loans, and to help shift them to online resources and establish connections on the internet.
“We’ve been dealing with a ton of employers throughout this process,” said ERC Executive Director Tim Corkins. “We’ve been full speed.”
The Nevada County Board of Supervisors recently created a relief fund with up to a $100,000 challenge grant, meant to supply emergency funding for nonprofits and small businesses
But even with assistance, there will still be challenges.
As local economies likely begin to carefully and slowly reopen in the next couple weeks or months, returning to economically stable times will likely be difficult, said Corkins.
“We have an older population, they’re going to be very cautious,” he said. “The big question right here is, ‘When can we start opening back up?’”
MORE BAD NEWS
Survey data gathered between late March and early April from Main Street America — a network of about 300,000 small businesses from across the country — held some depressing news: of the approximately 30 million small businesses, about 7.5 million of them are at risk of going under within five months and 3.5 million risk the same fate in just two months.
Since early March, over half of the businesses surveyed saw their revenue decrease by more than 75%.
According to statistics from the think tank Data for Progress, the burden of the economic crisis will fall mostly on the young. Of those who have lost their jobs as of April 9, the majority — 52% — are under the age of 45. According to reporting by The Atlantic, Millennials are now facing a once-in-a-lifetime downturn — for the second time in their lives, and as such will be less likely to afford a home, acquire wealth and are more likely to be obstructed from entering the middle class.
Numbers aside, moving out of this situation, according to economist Gary Zimmerman, is no easy task, as he says the economy is now deeply intertwined with public health. That is, localities and states must be cautious about opening back up for fear of causing more spikes in coronavirus cases and deaths from the virus. There is no binary approach between opening up the economy and protecting public health; the two overlap, he said.
The idea undergirding that thought process “ignores the fact that this is really serious and you can’t have people working in close quarters and out shopping in close quarters,” said Zimmerman. In other words: “That’s a dangerous assumption in a world where people die.”
a way out of this?
According to Zimmerman, there’s very little that can save the economy at this point. Consumer spending, business investment and foreign investment have all withered due to the virus.
The only interventions can come from Keynesian economics, including a monetary policy where interest rates are low and a federal government that spends as much as possible.
“At this juncture, it really is the central banks and government sector around the world that are trying to step up,” he said. “That’s the only way to help keep things going.”
Zimmerman recalled that around 2008, someone suggested the free market alone help the country return to normal conditions. A colleague of Zimmerman’s said the country had tried that. The result: ‘It’s called the Great Depression,’ his peer said.
Government spending, that is quickly injecting money into peoples’ pockets, is the best fight against a deeper recession and depression.
“That keeps money in the hands of the public and they will spend it,” said Zimmerman. “They don’t have a lot of alternatives at this point.”
Unfortunately, due to the 2018 tax cuts for the wealthiest Americans, a $3 trillion government deficit is likely collateral damage this year, said Zimmerman.
Sierra Business Council’s Kristin York had another suggestion for Congress’ spending: carve out loans specifically for businesses with less than 50 or 25 employees, as businesses with 500 employees are quite unusual in rural regions, like Nevada County.
York also suggested that small businesses negotiate in earnest with their landlords, lowering rent in the short term and having businesses return that money and additional income from sales in the long term.
Many businesses need this assistance, according to the Main Street America survey, as 65% of businesses surveyed said they needed “penalty-free extensions on their expenses.”
On Friday, the Nevada City Chamber of Commerce issued a list of suggestions for how small businesses can negotiate rent with their landlord.
In general, York said businesses have a better chance of survival if they make the necessary cutbacks.
“There’s actually hope for most of them,” she said, “as long as they cut their expenses right away.”
Correction: a previous issue of this story misstated with which university Gary Zimmerman is affiliated. The Union regrets the error.
To contact Staff Writer Sam Corey email email@example.com or call 530-477-4219.
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