In early February, economists forecasted a “sunny” year.
Low unemployment and a strong state economy would make for a positive 2020 with only declining oil and gas prices and a tight labor market posing any threat.
But “forecasting is a treacherous business,” said economist Tom Tunstall on Wednesday during a livestreamed dialogue among experts at the University of Texas at San Antonio about the pandemic’s impact on San Antonio’s economy.
While the pandemic was unforeseen, now its impact on the economy is not readily predictable either, according to Tunstall, senior director of research at UTSA’s Institute for Economic Development.
The evolving nature of the pandemic makes it difficult to forecast the impact beyond the end of the month, he said, and the experience of past recessions barely applies in the current situation.
“One of the things that’s clear is that, in many ways, this recession is going to have a substantially greater impact on the economy than the Great Recession,” a time when unemployment peaked at around 10 percent, Tunstall said.
Current jobless claims have reached 17 percent and climbing, he said, and a sudden drop in the gross domestic product (GDP), might make for a slow recovery in the coming months.
As the number of positive coronavirus cases levels off, the curve begins to flatten, and some areas of the country attempt to reopen their economies, medical experts have warned this fall and winter could bring a resurgence in the virus. That creates more unknowns, Tunstall said.
“If we do see a second wave, if things really start spiking up, then all bets are off and we’ll just have to assess the situation at that time,” he said. “Unfortunately, right now we really have more questions than we have answers.”
The panelists on Wednesday, however, made a few predictions about what they see for the future of San Antonio, post-COVID-19.
“Tourism is absolutely going to take a big hit, and we’re going to have fewer restaurants,” said Mike Villarreal, director of the UTSA Urban Education Institute. “What’s unique about this experience, though, is that it’s not like the Great Recession, where we had a part of our economy dysfunction and that sort of organically spread out. This is a purposeful shutting down of business.”
For that reason, Villarreal believes there will be a sharp rebound in the economy. “However, it’s going to take time,” he said, and that almost ensures sales taxes at the state and local level will decline and budgets will be cut.
“During the Great Recession, we had a budget cut of about $31 billion in State [gross revenue], and that was translated into a 14 percent cut approximately in public education and about a 7 percent cut in higher [education],” Villareal said, noting that Tunstall predicts those numbers could double following the pandemic.
The impact on the local housing market is hard to predict, said Pamela Smith, professor of accounting in the UTSA College of Business. But rising unemployment and business closures foretell decreases in homebuying.
“With people suffering from these economic setbacks, it’s a matter of – is there really going to be demand?” she said. “And if demand to purchase drops, then that may lead in the future to lower housing prices.”
But Smith also believes the crisis will lead to adaptation and new opportunities. “When this started, people were panicked,” she said, referring to the run on stores and stay-home mandates. “This has pushed us out of our comfort zone. When you’re pushed out of your comfort zone, you become very innovative. People who never thought they were entrepreneurs are now entrepreneurs.”
The forced closing of restaurants, stores, and other public spaces nationwide, which has no precedent in previous recessions, may lead to permanent closures. But previous economic downturns have forced businesses to “think outside the box” and to work “better and smarter,” said Richard Sifuentes, director of the UTSA Small Business Development Center (SBDC).
The SBDC recently launched a program, the Covid-19 Business Recovery Accelerator, to counsel small businesses affected by the pandemic. In addition to providing them with planning and marketing advice, the program will offer help with emergency loan applications.
Sifuentes said the crisis could also yield new and lasting ways of doing business, he said, with some of the temporary measures that small businesses have made to survive leading to permanent services or products.
While the pandemic has highlighted some weaknesses in the U.S. economy, its health care and education systems, Villareal said, “I think when we look back, we will have an opportunity to say we’ve learned from these problems, and we devised solutions, and we are stronger and more adaptive, and more resilient.”
Tunstall said San Antonio may have an advantage in that the economy is more overall diversified than ever and is less dependent on any one industry, especially oil and gas.
“That diversification makes a huge difference, and so I think all of us are trying to remain optimistic,” he said. “It’s going to be a tough ride for the next few months, but hopefully we’ll see rebounded oil prices and economic recovery sooner rather than later.”
Jenna Saucedo-Herrera, president and CEO of the San Antonio Economic Development Foundation (SAEDF), also said diversity in the local economy is what will enable San Antonio to bounce back.
“But it won’t be easy,” she said. “Every economy around the world is dealing with what this recovery can look like.”
In addition to fielding business impact surveys and using responses from local business owners to address their needs, SAEDF is also partnering with other organizations to develop an economic recovery dashboard. That tool would be used to track trends in key areas.
“Ideally the measures that we’re putting in place today and what we have been doing over the last several weeks will prepare us to recover quickly,” Saucedo-Herrera said.