In June, Stanislaus State’s first of two San Joaquin Valley Business Forecasts correctly predicted that economic recovery would begin during the second half of 2020 — so long as everyone adhered to COVID-19 precautions and protocols. Now, the region’s continued resurgence depends on the public’s willingness to wear masks, social distance and help curb the virus’ spread, says the report’s lead author in the most recent forecast released this month.
“We predicted that recovery would start in the second half and it did, but it actually occurred at a slower pace than we originally anticipated,” Foster Farms Endowed Professor of Business Economics Gökçe Soydemir said. “During late August and early September, we saw the economy start to slow down and that’s because of relaxed adherence to wearing masks and other necessary precautions.”
Even so, Soydemir believes the community has learned from the most recent surge in coronavirus numbers locally. As more people adhere to guidelines in order to avoid another shutdown and the first batches of vaccines are administered to those most in need, he believes the Valley’s economy will likely stabilize in spring of 2021.
“If people are reluctant to wear a mask and get vaccinated when they can, the recovery is going to take longer,” he said. “We all need to do our part.”
The most recent forecast details what June’s report did and did not accurately predict. For example, the last forecast accurately captured the scope of recovery in sectors like construction, which was not entirely shutdown due to the pandemic, but was a bit optimistic when predicting how well retail workers would rebound in the second half of 2020.
Soydemir accurately projected in June that local leisure and hospitality services would take a hit, but the December report shows that this sector saw a decline of 20.87% — more than was predicted. Of all sectors, education and health services along with financial activities employment were impacted the least, with declines of 1.82% and 1.10%, respectively.
“We were pretty good at predicting some of it, but with some of the other sectors we weren’t as accurate. But, the direction of change is more important than its magnitude,” Soydemir said. “The categories like retail, leisure and hospitality services sustained a lot more damage than we actually predicted, and it’s recovering at a much slower pace now that restaurants are being closed again.”
Home values also continued increasing during 2020 despite the pandemic, thanks largely in part to relief efforts by the Federal Reserve. This, coupled with aid included in the CARES Act, led to a stagnant foreclosure pattern on homes.
The region’s economic recovery would have been even slower had the government not stepped in with aid like mortgage moratoriums, stimulus checks and more, Soydemir said. With Congress nearing a deal for more recovery efforts, including more stimulus checks, he predicts that the economy’s recovery will be amplified in the first quarter of 2021 as vaccines roll out. However, it would have happened much faster if legislative leaders had agreed on a second stimulus package earlier, he said. He also believes recurring stimulus payments would be more beneficial.
“That aid played a tremendous role in helping,” Soydemir said. “If Congress had agreed in some sense over the summer, that would have helped in terms of creating a faster recovery. The $600 they’re talking about sending to everyone isn’t much…what’s a one-time payment going to do? It has to be an ongoing basis.”
Soydemir’s biannual Business Forecast provides projections for the Valley’s labor market, regional housing conditions, prices and inflation, banks and other depository institutions and capital markets. Soydemir and his team use a unique forecasting model that produces lower and upper statistical confidence bands, with results that are expected to fall within this range. To view the report in full, visit csustan.edu/sjvbf.