Quick Recovery Projected for Santa Cruz in 2H 2020

Chris Thornberg / Beacon Economics at the MBEP Economic Summit

This is a repost of MBEP’s Economic Summit

It's hard to be optimistic about the economy in the midst of a global pandemic, but one of the country's most respected economists says any economic downturn as a result of COVID-19 may not be as deep or sustained as some would believe.

That's because the U.S. economy is stronger and more resilient than it's been in several decades, says Dr. Christopher Thornberg, founding partner of independent research and consulting firm Beacon Economics, LLC, and director of the UC Riverside School of Business Center for Economic Forecasting and Development, who shared his insights on the "Economic Impact of the Coronavirus" during MBEP's 6th Annual Regional Economic Summit last week.

It's easy to get swept away by headlines and forecasts, but Thornberg believes that while the U.S. economy will be negatively impacted by COVID-19, it's turnaround will also likely be fairly quick.

"This economy is as healthy an economy as we've had in 30 years, not just for high-income households but for all households, and a labor market with more job openings than people looking for work," he said. "This is an economy that can take a hit and still move forward."

More regionally, tourism's central role in the local economies of Monterey and Santa Cruz counties will certainly have a harsher impact than in the U.S. as a whole. May unemployment figures are projected to surpass 19 percent in both counties, and the loss of hotel tax revenues will cripple municipal budgets.

But the dark clouds have a silver lining: Unlike the last big recession, this one is likely to be brief, and the economy could bounce back quickly, says Thornberg. That's because the spending freeze and job losses are largely temporary conditions being driven by public health mandates. Eventually, most people will return to their jobs, resume dining out and return to their previous spending habits. A massive federal stimulus plan and a major expansion of unemployment programs are also affording some relief in the coming weeks. If the past has any lessons, Thornberg said it's that when people once again feel safe to venture out, people will go back out and live their lives.

What lies ahead is likely "an incredibly sharp and incredibly short recession," says Thornberg. '"No doubt, quarter two is going to be the worst quarter we've seen in the United States, but the third quarter will come roaring back, and there will be a lot of pent-up demand and a lot of savings."

"Not everything is going to heal overnight," said Thornberg, "but it's going to happen much faster than people expect."

Watch MBEP's 6th Annual Regional Economic Summit here.