Local Financial Experts Give Pandemic Insight, 2021 Projections

TUSCALOOSA, AL. — A panel of macroeconomics experts hosted by the Chamber of Commerce of West Alabama on Wednesday agreed that low-skill jobs and those in the service industry continue to be the most adversely impacted by the ongoing coronavirus pandemic, with one speculating pre-COVID levels of economic growth may not be seen again until well into 2022.

One of the panelists, Anoop Mishra, serves as vice president and regional executive for the Federal Reserve Bank of Atlanta, and explained the concept of the "less-than" economy that has manifested itself in a number of different ways after the onset of the pandemic.

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"We have seen a huge surge in demand for goods but professional services have languished a bit," he said, before explaining the nuances of the pandemic.

For example, Mishra pointed to restaurants being impacted differently during the initial economic shutdown stages of the pandemic, with drive-through or delivery-based businesses having the advantage over restaurants who had previously been dine-in only.

The panel provided the "State of the Economy" to many from the area business community on Wednesday via video conference, addressing different big-picture economic issues related to the coronavirus pandemic and what could be expected in the months and years to come.

Fran Smitherman, who works as senior vice president and director of equity research for Regions Bank Investment Management, provided some optimism to begin the discussion, focusing on the stock market.

As a presidential transition is expected in January following the election of Democrat Joe Biden, Smitherman said stocks have historically performed better under Democratic presidents. However, the market reacted differently following elections for congressional seats.

"Stocks hate uncertainty and the fact we did not see the 'Blue Wave' that was expected led to the calming of some investor's nerves," she said, referring to speculation earlier in the election season that Democrats would take control of the Senate and more seats in the Democratic-controlled House of Representatives.

John Norris V, managing director for wealth and investments with Oakworth Capital Bank, rounded out the panel and echoed Smitherman's comments on the impact had on the economy by politics.

"The biggest impediment to U.S. economic growth is going to be our politicians," he said. "When you take a look at what’s happened this year, it was all due to political decisions. Politicians shut down our economies and in some states they are shutting them down again."

Norris said the country now understands the economic repercussions of widespread lockdowns in the early stages of the pandemic and said the country was able to get back much of its economic activity. However, he asked if it would be possible for the United States to handle a similar situation again, as cases and hospitalizations surge across the country, prompting many at the local and state levels to begin reconsidering or implementing lockdown measures.

"The more states shut down to stave off the virus, the weaker our economy is going to be in 2021," he said.

In comparing the current economic crisis to the Great Recession of 2008, Mishra said the country's economic fundamentals were sound leading up to the pandemic, making this a public health crisis with economic impacts. This has resulted in some unexpected sectors being hit hard, such as education and health care.

But he said it was low-skill jobs, often paying less than $15 an hour, that have been the most adversely affected.

"Low-skill workers in this recession have been disproportionately impacted and it's not even close," he said, before pointing out that the 2008 Recession was felt most by high-skilled and middle-skilled workers. The service industry sector has seen one of the sharpest downturns, he said, particularly women and minorities, who have more representation in the sector.

Some anomalies have also been seen in tourism, with "fly-to" tourism suffering while "drive-to" tourism has done well. Another interesting aspect of the pandemic, Mishra said, can be seen in banking.

"If you are in a high-income bracket, you haven’t been as negatively affected," he said. "But the options on which you can spend it have diminished. We’ve seen deposits at banks go up as people are not spending money at the same rate."

He also said consumer confidence has seen a slight decline in the last two months as coronavirus cases rise, with the effectiveness of a vaccine weighing heavily on the public's mind.

"We don’t see the economic growth conditions returning to pre-COVID growth levels until the second half of 2022," he said.

In discussing the Federal Reserve, Marisha said it it likely that interest rates will remain low, despite the Fed typically raising interest rates when the economy has shown signs of inflationary pressure to prevent the economy from overheating. He then said the plan for now is a departure from the Fed's previous strategy, as it will keep interest rates low and let the economy run hot for an extended period of time.

He went on to say the Federal Reserve anticipates a low-rate environment not for just a few months or until the economy rebounds, but at least the next 2-3 years, explaining that even if the economy bounces back, there could be some real implications for consumer and business confidence, in addition to longterm investment because rates will stay lower for a longer period of time.

Norris pointed to signs of interest rates remaining low as one of two reasons the economic outlook for 2021 has improved from previous forecasts a few months ago. The other will be low energy prices.

"We could see a very prosperous 2021, but the enemy is us," he said. "The enemy is politicians."

While the pandemic has forced many business owners and companies to make adjustments to their approach, Smitherman said the public is learning how to navigate the environment and the country is sure to recover.

"We have seen black swan events and we have recovered from them before," she said. "So stay focused on the longterm."

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