Economist: Arizona’s Post-Covid Recovery Will Be ‘Incredibly Fast’
“There’s going to be a hell of a party in the next couple of years,” and Arizona might be having the best celebration of all when it comes to the economy following the Covid-19 pandemic, economist Christopher Thornberg said during his keynote address at the Alliance Bank of Arizona economic forum on Tuesday.
Despite the tragic circumstances of the coronavirus, the virus-induced recession has ended, and “V” shaped recovery is already taking place, he said. Even the surge of cases over the winter only slowed the national economy slightly.
“The post-Covid recovery is going to be incredibly fast,” contends Thornberg, who is the founding partner of Beacon Economics and director for the Center for Economic Forecasting and Development at the University of California, Riverside.
Not all industries and workers were treated the same by the pandemic-related closures. While earned income for those working actually grew during the pandemic, the people most likely to remain out of work are the people who were working low-skill, low-wage jobs.
Thornberg had criticism for government stimulus plans, including the first version of the Paycheck Protection Program, which he said was heavily skewed toward companies that received large loans that likely could have survived without the money. The top 1% of loans given out by size accounted for more than one-quarter of the money in the program, he said, and the top 5% of loans by size accounted for more than half.
Just this week, President Biden made tweaks to the PPP program to focus dollars toward small companies with less than 20 employees and those businesses that were overlooked when the program was rushed through Congress in 2020.
Direct stimulus payments also were ineffective because a large portion of the people who received the money either saved it or used it to pay off existing debt, Thornberg said. For the most part, Thornberg said the sharp decrease in spending was because of health mandates and consumers’ fear, not because they did not have the money.
Nearly 30% of businesses in Arizona that were open in January 2020 still remained closed as of December and many will never reopen, he said during his speech. Arizona was near the middle of the pack when compared to the rest of the country. In Alaska more than 39% of businesses were closed and in Utah nearly 19% were closed.
However, Thornberg said there was a 17.2% increase in business applications from 2019 to 2020 in Arizona, showing that there is a pipeline of new businesses that can replace some of those lost.
The government would be better off to let the economy recover on its own and instead focus its efforts on vaccination and controlling the virus, which has killed more than 501,000 Americans, he said.
“We need to back off,” he said. “Focus on the virus and stop worrying about the economy.”
In the greater Phoenix area, full job recovery is expected by the third quarter of 2021, Greater Phoenix Economic Council President and CEO Chris Camacho said.
“We entered the Covid-19 pandemic with a running start,” he said, of the growth Phoenix was experiencing before the pandemic began, both in migration of people and companies.
So far in the 2021 fiscal year, 21 new companies have located in greater Phoenix, Camacho said. There are 291 companies that GPEC calls “active prospects” considering the Phoenix area. Of those, 46 are from California and 39 are international. Those prospects represent more than 24 million square feet of commercial real estate space if they chose to buy or lease in the Valley.