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good afternoon on behalf of the NC chamber welcome to ask the experts the kovat 19 economy slowed down or shut down I am Janelle Boyd with the NC chamber all attendees are muted to avoid any distractions during today's presentation if time permits we will answer as many questions as possible at the end of the presentation if you would like to submit a question during the meeting click to use the question-and-answer box please do not use the chat box you may upload the question do you most want answered by clicking on the thumbs up for that question the questions with the most votes will be answered first the recording of today's webinar will be made available to you via email within 24 hours of the webinar now I would like to introduce today's moderator dangler kerlick Dan Thank You Janel and welcome everybody to this call ANCOVA 19 economy slowed down or shut down my name is dan guerrilla sold them to the North Carolina Chamber and we're uh we've heard a lot about flattening the curve and all about the statistics on the healthcare side of keeping us almost safe as well as possible here in North Carolina and all around the United States or around the world today we're going to talk about the flip side of that coin about what is happening with the curve of damage that has already been a been felt by us all across all across the globe when we have three different perspectives from three different leaders of our community of who might have had the honor to meet I'm honored to emcee this today but first we'll hear from Tom Barkin he's depressed and CEO of the Federal Reserve Bank of Richmond that is a regional bank that oversees central bank operations of five states Virginia West Virginia Maryland North Carolina and South Carolina as well as the District of Columbia he comes from a long career a long and distinguished career the McKenzie consultant like major consulting firm men you've heard of and so he got brain some private business perspective tom has a keen interest I know from my time with the golden leaf foundation in the world especially in in the rural areas in his district and that's how I met him so we're glad to have time with us today I want to introduce all the panelists and then we'll go in order second is dr. Michael Walden a friend of mine from long standing he's the William Neal rich Reynolds distinguished professor at North Carolina State University he gets bossed around by two Dean's one in the North Carolina the College of Agriculture and life sciences and one in the full College of Management he is a widely quoted widely celebrated and is one of the best academic economists at translating the economy into things that ordinary people can understand it's a real skill set of his he's very gracious with this time is won numerous awards for public service for teaching in his research and certainly a last and certainly not least is Mark Ventnor he's the managing director and senior economist with Wells Fargo securities I down in Charlotte and winces with voices to North Carolina Chamber buy the business we wanted a private business leader there he's been with the bank since 1993 through 2020 and met him through John Sylvia a good friend of ours who was the former former chief economist with louis fargo there in charlotte and mark i lived well and had the the i don't know if it's the chance to work the misfortune to be in new york city on 9/11 back in 2001 that's i'm not long we've known each other so the first point we want to we're going to give each of the economists and business leaders about 10 minutes to talk i want to give them a guy to question which them being economists and business leaders will ignore and talk about what they wanted to talk about anyway but we'll start on mark so tom front from the feds bank and you're a member of the Federal Open Market Committee and you certainly had more than you could say grace over tell us a little bit from your purview about how the economic what the economic impacts been and what's the path that you see to get get us going forward when this is all cleared up and I remember from my economics 101 days that the that the GMP and we seen watched GDP that we've seen a lot of statistics and forecasts on from about every bank every forecaster how about is consist of consumption plus business investment plus government spending plus net exports and the problem is that consumption of seventy percent of it so there's only a limited amount if you increase the G the government spending we can do on the fiscal side to give us out but you've been working on the monetary side I know so I'll leave it to you mr. Barkin the floor is yours thanks Dan and great to see you again even if it's virtually so what's been the impact of this on the economy it's been staggering as you know it started with a shutdown of a large part of the personal service economy whether that be physical retail or restaurants or travel or arts and entertainment about 30 million people work in those sectors alone yesterday we saw the March statistics for retail sales and really this episode hit the last half not the entire month and even that half month impact alone was the biggest drop in retail sales in over 50 years just to give you some specific real-time numbers hotels are down 84 percent year-over-year and revenue per room versus a year ago box office receipts are basically zero at ESA three put through put the people who go through security lines 96 percent versus a year ago so this is having a staggering impact on that part for the business and the rest of the economy hasn't escaped it automotive demand has plunged which has shut down that critical manufacturing sector the struggles of the airlines have affected aerospace 25 our oil is decimating the drilling and exploration sector retail closures are damaging landlords and even hospitals are facing a revenue crunch as they forego their higher profit elective surgery in support of this health crisis cash flow and liquidity are challenges everywhere and this is come on so fast that the data we get is basically obsolete but one thing I do look at every week is initial unemployment claims for the last couple years they've averaged around two hundred thousand a week which is actually 50 year lows the record before a month ago was six hundred ninety five thousand nineteen eighty two over the last four weeks we've seen over twenty million right that's 20 million Americans have filed for unemployment in the last four weeks and more are still in the queue and that alone yeah sorry Tom I just put it on perspective for people that's out of a twenty two million out of a total labor number of employed labor force about 160 million that's about thirteen percent had filed for unemployment let alone those who have not found yeah so Dan obviously didn't just take economics in high school in college he's learned it since then too and that's exactly right and so it's not hard at all to imagine he to mid-teens unemployment remember the unemployment for April is really measured this week in the net of all that I just say in terms of how the economy is doing is you hear a lot of emotion from folks in these industries they're suffering so that the health of the rest of us won't and and I think that's a real challenge for us um now given the profound implications of all this on the economy you see work and third three different lanes and I should say the last crisis was a financial crisis I very much thought I wasn't there at the time I thought the Fed had the first chair in that crisis in this crisis Public Health has the first chair I'd say fiscal has the second chair and there's a lot the Fed and monetary policy can do but I really do think we're in the third chair here and let me just talk briefly about each of those on the public health dimension we are doing social distancing on a massive scale as well as investing significantly an increasing Hospital capacity there's obviously still more to do widespread testing whatever for tracking and tracing protocols we've decided to pursue and of course vaccines or treatments on the fiscal side there's been an unprecedented resize package I'll call it fiscal stabilization rather than stimulus because I really think it's been built to bridge people from where they were before and businesses from where they were before to hopefully the other side and so you see welcome increases in payments to low and moderate income individuals unemployment insurance expansion a small business loan program the PPP funding to some endangered industries like Airlines and hospitals you know I should say these are good concepts in this kind of situation but the core challenge the fiscal side has here is to delivering the money to the people who need it and I'm sure we'll get some questions on the PPP in the small business program I would just say I have some empathy the Small Business Administration I don't think was designed to deliver 320 billion dollars in a week or two um and even the individual cash you saw the first payments go out this week but just remind your roughly 50 percent went out this week that's the 50% of people who file electronically the other 50% don't file for their taxes with direct debit or direct deposit and so the Treasury Department has to track down their routing numbers to send them money directly or actually you know wheel out a printing press and start printing checks and like the SBA they weren't built to write that many checks in one week and so that'll take some number of weeks to get there too so I think the fiscal of money is significant and needed and the challenge here is just getting it in the right pockets at the right time on the monetary side again I'd say we're the third chair but given our independence and frankly given our experience in the last crisis I think we were able to move the fastest we had a an unscheduled meeting and moved rates to zero we've given strong guidance to banks that they should continue to be lending to good credits in need recognizing that we need to do that while preserving safety and soundness the banking system we've made significant interventions to try to backstop markets that had gotten volatile like the Treasury and the mortgage-backed markets the commercial paper the asset back markets and money market funds and then the legislation and the cares Act put 434 billion to backstop new lending programs last week we announced for new and secondary market investment great credits we announced a lending facility which will take PPP paper effectively off bank balance sheets and free up their capacity to do more and then we're working on and we'll announce the next couple weeks a short-term municipal tax anticipation facility and a Main Street lending program it would make four year loans with first year payments deferred to medium sizes business as Jay said last week oh and I want to emphasize these are lending programs not spending programs they're focused on supporting otherwise good credits through their time of need so then Dan you asked how do you best riah is out of this and I really do think the core challenge here is getting to the other side with a healthy population and a functioning economy that will require the shortest possible duration of a shutdown that's consistent with good health but importantly we're not going to be able to wait all the way to where we get a zero infection rate and so forties that I see too arriving at a reasonable post crisis philosophy the first discontinued operation of essential industries we do need our food manufacturer our package is delivered fire and safety cleaning supplies cash processed hospitals functioning supply chains operating electricity on and broadband available and there are many many workers in those industries and they need to stay healthy and of course motivated the second is we needed to return to operations um now this will likely be gradual I don't think there's just a you know a point-and-shoot version of it but I do think the experience of China and the experience in our essential industries should give us confidence this is doable as long as we adopt some proven protocols like appropriate structural distancing or cleaning procedures temperature testing gloves masks and the like the third is a return to consumer confidence and I think this is the hardest one because this has been a real shock um we will need consumers to spend again to get to the other side and perhaps a treatment or a vaccine will appear if so I think is pretty straightforward but if not businesses that require personal interaction are going to need to rethink their protocols they're going needed a story that'll convince consumers it's okay to shop or to travel or to go to a restaurant again um you know I'm reminded of 9/11 you mentioned that earlier um it was a real mess when we rolled out the TSA over the three months after 9/11 long lines lots of controversy over don't fly less and the like but I think when you got to January of 2002 you could convince yourself that you were getting on a plane with an extra layer of safety that you didn't have before and you were putting your family at risk if you did that I'd say supermarkets are doing something similar or today you're met with somebody in a mask who wipes down your grocery cart um at least my grocery store has one way aisles to make sure that you have social distance then um there's tape in the line so you don't stand too close to someone there's a sneeze guard at the cashier and I think you can walk into a grocery store and feel pretty confident that you're not putting your family at risk and I think all businesses that have personal interaction are gonna need to think about how do we communicate that define it and communicate it compellingly to our customers I noted the airlines have started mentioning middle seats empty I'll bet you restaurants will have more spacing a bit they'll be more automation in certain retail areas the fourth thing is we've just got to limit the damage and of course that's what a lot of this fiscal is intended to do but we want to return to a growing economy on the backside of this and a growing economy has a growing workforce and it has increasing productivity some of the stuff I just talked about like you know half the number of tables in a restaurant is a challenge to productivity not the other way around a lot of businesses should may well end up with a lot more debt on the back side of it you may have some startups go under all that will be an inhibitor of productivity and so we're gonna have to make sure we got incentives for the right kind of investment on the back end the other part of growth is growing the labor force and we've already seen in the numbers some lessening and labor force participation childcare is a challenge for many families and I wouldn't be surprised if some two career couples say have their doubts in childcare going forward and perhaps make sure someone makes choices to leave the workforce we may need to redeploy a lot of workers from let's call it baristas home health workers and if that's the case we need to think hard about how do we streamline and make accessible the right kind of education and training program for those folks so that's something I focus on as well um just to sum up I really I really am convinced this is a temporary not a permanent situation a lot is being done to try to bridge the gap and I just fundamentally believe in American science and that in its ability to develop a treatment or vaccine that will allow us to put this particular episode behind us and when we do there is a lot of fiscal and monetary stimulus that can kick in but the key to me to get the full impact of all that stimulus is our ability to accelerate as we make the turn and that's gonna require a story across health practices and business practices for how the American consumer which you rightly say is 70% of our economy can do what he or she wants without putting their families at risk thanks Dan thank you very much next I've changed my background to give a kind of more agriculture feel for agriculture economist Mike Walden coming up here Mike I wanted to ask you for your perspective on that same question of the what's the economic impact been and half how do we rise from t
is from the North Carolina perspective I know tomorrow morning the March numbers from North Carolina will be released by the North Carolina Department commerce again as Tom mentioned not showing the full effect because the survey is thinking the metal month but but it will provide us some a sense of the direction of the leading indicators of where the damage is then already here so Michael let's hear from you thanks Dan and I don't know if Lisa's listening I don't I don't see my slides till he so there we go boy just mentioned and I get it and place is going to advance them for me I have a few slides so go right to the next slide please here's what I want to talk about very briefly with each topic economy before the virus what I'm calling the mandated recession how bad the federal rescue when's the recovery what kind of recovery and long-run impacts next slide please I think one of the reasons why we're feeling so bad in the economy is we had a pretty good economy going into this we had a record length of economic growth since the last recession that is we set a record for sustained economic growth longest in our history ten years plus we had a GDP growth rate of around 2% which is many the economists think is about normal given the fact we've got a slow growth in our labor force rising real wages low unemployment on the 4% and low inflation when I when I took my first economics course about 50 years ago they told us we couldn't have low unemployment low inflation at the same time so the fact that we had that was was room for applause next slide please I call this the mandated recession because this is unlike any recession we've had this is my sixth recession I've lived through as a professional economist most recessions are caused well we had a few recessions caused by problems in the oil market in the 70s most recessions are caused by excessive exuberance which leads to people taking more risks people and businesses acquiring too much debt we clearly saw that with the Great Recession primarily that all that stuff happening in the housing market and when the housing prices stopped going up we had a collapse this recession was really a mandated recession the government has said in order to control this virus in order to limit deaths we're gonna have to shut down a substantial part of the economy so so that's why this is totally unlike any other recession and I keep telling people in my presentations look all the numbers we're going to hear this quarter certainly this month and next month are going to be really really bad we shouldn't be surprised one of the one of my quibble points with the media is every time we get a bad number out like today the media makes a big deal about it and I understand that but we should not be surprised when you can't have restaurants when you can't have retail when you can have interaction you're not going to have much of an economy so we're clearly in a recession now now we won't have an official recession called and incidentally that's called by no one the government it's called by a economic think tank the National Bureau of Economic Research but clearly we're in a recession next slide please it's going to be I think very very deep but it's gonna be short for example right now numbers I found 52% of non food retailers are now closed I saw a report this morning that suggests that layoffs and furloughs and reduced hours now spreading from the service sector into the tech sector higher paid jobs people are finding there's just not work there second quarter is going to be just horrific in terms of real GDP probably down between 20 and 30 percent in that core jobless rate it's going to clearly be in double digits and suddenly this is both nationally in North Carolina now I think things will improve in a third quarter improve in a sense it won't be as bad will either get a small dip maybe no change maybe if we're lucky a small increase and then I don't think we're going to see substantial growth until the fourth quarter but if you look at the magnitude of the numbers especially in terms of what we're going to lose this quarter it's going to take us a while to get back to the economy that we had before before this virus next slide please I want to give a little bit of a context here because they're gonna like comparisons made to the Spanish flu 1917-1918 killed 500,000 people in the u.s. actually didn't start in Spain there's a lot of evidence it actually started in the u.s. it was called Spanish flu because there were there were media blackouts among the World War 1 combatants Spain was not a combatant so when the virus popped up there the media we're gonna call this in Spanish anyway actually a more relevant comparison is something I lived through I was born in 1951 called the Asian flu of 1957-58 which killed a hundred and sixteen thousand Americans now interestingly we didn't have mandated shutdowns there although I will say I remember my father telling me a company he had went belly-up during that Spanish during that Asian clue but we didn't have mandated shutdowns but a lot of businesses closed simply because they didn't have workers they a lot of workers at work that were ill we did have a recession that followed that was recession and span 5758 and the worst part of the real gdp was down about 10% so hopefully we're not going to meet 116,000 deaths looks like we may if we're lucky we may get 50 60 maybe a high of 70,000 got to remember the the population was half what it is now in 1957 but I think this shows you the trade-off because we're going to have a much bigger drop in GDP but we're gonna have fewer deaths and that's really the trade-off that we're going through now how much economic cost that we want to bear in order to save lives and reduce the levels of levels of illness next slide please now as Tom I think alluded to and is certainly more qualified to speak to than I am the federal government have stepped up big time they SPECT up stepped up very quickly as compared to the Great Recession when they're you go back and Monday Morning Quarterback and say well the government was late getting to the stimulus package Federal Reserve was late in doing terms of what they did but I think the main reason why our power of federal government power in terms of fiscal monetary policy really stepped up fastest again we knew this was going to cause a recession when you tell bit workers you can't go to work you can't go out you gotta stay in your houses that's going to cause a recession and and the and the the help has been has been massive fiscal policy the to point to package rescue package we just had and was probably going to be more monetary policy lower interest rates for it really no lending program that's probably going to be more I think in the more that we get is probably gonna be some direct aid to state and local governments North Carolina has already expected to lose two billion dollars of revenue into the general fund the highway fund is being decimated the the urban transportation in North Carolina has already cut programs projects I should say that they had online for next year so I do think we're probably going to get some help from the federal government for state and local governments and they need that now I've been I've often been questioned and I'm probably come and and mark the same thing well what are the downsides of this what's the downside of all this farming and of course everything the federal government does on the fiscal side is for all of money it's not going to raise debt yes it is well it's not a bad thing well the question here is if your if your economy is burning down even though it is a mandated burn it's a controlled burn if you will does it makes sense to borrow against the future borrow some resources against the future in order to save businesses and save household I think it is but anyway that's I think the trade off now monetary policy traditionally the Federal Reserve has that ability to in the old days print money of course it's all digital now and the worry was if they did that the higher inflation we don't see inflation out there now and so I don't think that's that's an issue next slide please when's the recovery gonna happen where are the presents already eager does restart some of the economy I think he's today either I'm gonna watch TV today but he's maybe already outlined some some notions there if not soon we've had some protests people saying why we shutting down things I'm losing money etc this again is a question and in Tom Minh spoke to this very well balancing health and the economy the cost of containing the virus has obviously been curtailing the economy the benefit of can take for failing the economy has been that we've saved lives and obviously we have to balance those benefits and costs now there was a nice paper done and I highly recommend it to anyone there's a nice paper done all my slices nice paper done by the American Enterprise Institute recently that showed that the balancing of benefits and cost importantly depend on the infection rate the lower the infection rate is the quicker you can get the economy up and moving and the data I have seen on the infection rate shows that it's fallen by about two-thirds over the last month to six weeks so that's certainly good news but again that's what our decision-makers are going to have to take into into account next slide please what kind of recovery we reading it well economists have this this odd thing of naming recoveries by the alphabet we have the lwv a new recovery our recovery is one where we really need to never recover you you fall into recession you never get out of it Japan and the 90s was like that we hope that everything the federal government's doing we're going to avoid that the W recovery is one where you double dip you have a recession you have a recovery then you have another recession followed by another recovery we had that in the early 80s what we're worried about here I think is that the virus comes back in the fall which most the experts say it will if we've loosened up before then what we have to tighten up and therefore maybe have another dip in the economy so that's something to watch if that virus does reimburse everyone pokes through a B where we get a quick bounce-back president has talked about a quick bounce back and then but I think the more likely answer is we're going to have a you where we do gradually come back but if you if you follow that and look at some of the forecasts it's probably I think I already said this probably at least a year if not longer before we get back to any semblance of what we have what we have now in terms of North Carolina North Carolina is going to follow follow this pattern and one thing I'll say about North Carolina because I don't think our brand has been damaged by this fact I gave a talk the other day to our the North Carolina Economic Partnership these are the folks that recruit businesses for the state they can't no fall-off of interest in coming to an in coming to North Carolina if I was in New York City I probably wouldn't worry about my brand but I don't think this is going to adversely affect North Carolina I do want to highlight though two industries that I think are really struggling in North Carolina as well as in the nation one is the tourist industry I think it's going to take a people a while to get back to traveling for fun and of course North Carolina has a multi-billion dollar tourist industry so I think we need to watch that and then our agricultural industry it's not that we're not producing food but if you think about shutting down all the restaurants we have an economy now where about 40% of food is purchased in restaurants 60% of homes we pretty much taken about 40% and farmers and agribusiness firms just can't flip a switch and take all of that product they sold to restaurants and sell it to people in grocery stores there are different regulations there are different packaging etc different things that people buy at the grocery store than they buying restaurants so that's an issue and for example today in Raleigh at the north of the North Carolina farmers market we saw the house rate for the chicken producer bring a tractor to refrigerated tractor-trailer trucks to the farmers market and they're selling chicken at about 78 cents a pound and they have lines of cars all up and down i-40 by 4:40 so we do have an issue there with farmers fortunately in the the 4.2.2 trillion stimulus package or rescue package there was a there were of tens of billions of dollars for farmers but clearly we want to keep our eyes on that and I participated in the conference with the Commissioner of Agriculture in the farm B or the other day and they're well aware of this and communicating their concerns to the federal government next slide and I'm wrapping up here next slide so what are some of the potential changes and a post bios world tom mentioned changes in restaurants changed and businesses etc one I think that everyone's very interested in is now we have tell in everything people are telling working their Telus tholian or Pella medically doctoring question is is that going to continue or will people say hey I try to don't like it I want to go back to the old way my guess is we're gonna see a take-off Intelli everything so that has implications I think globalization is going to be revisited I think there are a lot of concerns particularly about China and what's being revealed recently about maybe how the virus emanated in China I think globalization is going to be revisited rethought supply chains Tom mentioned this are going to be revisited I think there's some opportunities particularly for North Carolina maybe to get into some new supply change with respect to producing medical clothing medical devices medicines farming food etc and then the last one I'll mention I find very intriguing Dan you know Dan Gerlach knows this very very well because he worked in this area for years both with governor easily and then at the the center he headed escaping me dan I'm sorry you're not there so as much the godly foundation shame on you for forgetting about too bad no no I knew you were there just escape the names game we could call it to the Gerlach Foundation anyway I think that people may be rethinking where they want to live right now last this century in fact the 21st century has been where cities have come back where I grew up in Cincinnati inner-city neighborhood was really rough that's now where all the Millennials want to live you see that in Raleigh we see that in enduro and see that all around the state I think there's going to be a thought by many that says you know what you know there are all these benefits to big cities but you know what if you're then we have another pandemic big much more greater likelihood you're going to get infected because you're so I think people are going to start rethinking some not all maybe there's a benefit to living in a small town maybe there's a benefit to live in an area especially if you can marry that up with telecommuting using telemedicine telling education and some of it et cetera so there may be an impact of this on the on the urban growth line and I'm done I'll be happy to participate in questions later thank you well thank you very much appreciate it Mike it was great to hear from you we're going to pivot down to mark bender and mark course i've got the san francisco background the daughter of wells fargo to back me now so on mark i just from the business community in the banking industry perspective what's your take on this of course you know we sense the chamber or a kind of a restiveness and in the business community about we understand some of the things that Tom Barkin and Mike wall talk about our necessary to reopen it but interesting what you're hearing from the business community side in addition the question said oh it's about about what they can do and how eager they are to help fix this you know whether it be broad scale testing or things like this to get us a MACT because we've taken a lot of measures and probably some of them were more in education another so we're going to pivot to you and thanks for being with us today sure I am and I have a lot of slides but I'm gonna I'm gonna take To
's advice and boost my productivity you get a starter along here so I mean a lot of a lot of this has already been talked about and on a match up very well because the slide deck will be made available to you and you can do and look at some of these things go ahead and Vance the first first page which is got a quick little summary and I noticed that we have the wrong words there next to North Carolina but I can fix that later if need be but but in terms of quantifying the contraction this is going to be a deeper recession that we went through in 2008-2009 but it is going to be shorter much shorter than that and a big part of that is that we didn't have structural excesses that impacted the financial sector and if the financial sector got bogged down and there was some risk of that and the Treasury in the Fed mood very quickly with some well targeted policy moves that I think have really helped minimize the risk that you know high debt burdens the number of companies that slip from investment grade to just below investment grade might have trouble rolling over debt I think we've minimized a lot of those problems that's one of the reasons why the financial markets is stabilized and a lot of large businesses are now focusing on what it's going to take to get their businesses up and running not so much getting back to normal but getting back to whatever the next level is that we're going to be in terms of the shape of the recovery when you look at some of the slides particularly the slide that I have on North Carolina employment growth it looks like a v-shaped recovery but a lot of that has to do with the law of large numbers and so when you have a big sharp percentage point decline in economic activity in the Sabre employment which is what I've got projected that the percentage rebound off of that decline it gives you a v-shape it gives you in fact kind of a J shape but you need a much larger percentage gain to recover the jobs that were lost and so so it's a little misleading when you look at percentage changes and I think that's one of the reasons that economists talk about v-shape and W shape is our looking at GDP growth rates now most people don't look at their business that way it's going to take us by the end of 2021 we figure that we will have recovered a little over half of our losses from the recession which will mostly be incurred in the current quarter most of the losses will be in the second quarter they fear things they need to drip down a little bit in June but we should be on the men by then but it's going to take all the way through the end of 2021 we're only going to recover about 60 percent 55 to 60 percent of our losses and by 2020 to the end of 2020 you think we've recovered go ahead and flip to the next slide which is just a one of the ways that I found it we were early on we were looking for milepost as to how we could benchmark where we are in the cycle and the best that I could find is if you look at the 12 countries and what I would call Western continental Europe so we're not taking the UK in there but basically Italy over to Portugal up to Sweden and you if you take that collection of countries there's 12 of them they have a total population of 334 million people they did not suspension out and travel to China as a result infection took off and you're up about 2 weeks prior to it in the United States and it's been a very good leading indicator as to where we were headed the curve is flattened in all areas right now and some European nations are beginning to talk about reopening and I think we're gonna see the same thing happened here in the US I think that areas that have been less impacted and and have less risk are probably going to start opening soon maybe some by the end of April but certainly by major you know right right on the first week of May I think a bigger round of openings will occur around Memorial Day and around you first On June 20 of the start of summer I think all of those have some significant meaning to them in the areas that can be easily socially distanced are going to come back online but that's not a return to normal but if big percentage increases because if 85% of the restaurants are closed and the ones that aren't as take-home and delivery and you go to 60% of the restaurants being closed that's a huge percentage increase go ahead and flip to the next slide I'm gonna flip through some of them to these slides pretty quick jobless claims as have been mentioned 20 million over the last four weeks it does look like we're past her peak go ahead and flip to the next one a good part of the job losses that we've seen have been in the leisure and hospitality sector which is mostly been at restaurants it's mostly been in the most labor-intensive parts of the restaurant industry which is full service dining more 11 service options sort of the cast fast-casual which was the fastest-growing part of the restaurant industry that's held up relatively well in fast food with drive-throughs is holding up as workers all the polling up also but my guess is that we come out of this there's going to be a greater push push toward fast casual go ahead flip to the next one if you look at the makeup of services and goods consumption in in in the economy what's really unique here is that some areas are typically resilient to recessions have gotten hammered most notably health care but really even restaurant dining is is an area that tends to slow in a recession that doesn't get clobbered like you did go and put that next one in terms of jobs that that are able to be done from at home financial activities is the highest share of jobs that can be done at home called by professional business services and information which is the bulk of the tech sector which tells me that that Raleigh and Charlotte are probably not going to get his hit is hard percentage-wise as other areas of the state even though the two will account for the bulk of job losses there the the core industries that and we don't have government in there which government that can be done from home too but but in terms of where the impact has been there's a lot more resiliency at Raleigh in Charlotte that there aren't a lot of other areas because of the composition of their economies go ahead and flip to the next one in terms of the unemployment rate nationally we're expecting an employment rate to top out at fifteen and a half percent it's still a moving target right now but I do think there's a very good chance that when we get the April numbers that will already be at 12% so I think it could get up that quick that fast something that's very unusual is typically you can't just add up jobless claims to figure out what job losses are going to be because some people get new jobs but in this environment not very many people are getting new jobs so a job that is lost it's likely to show up in them as a decline in employment and increase the unemployment rate go ahead and flip to the next one small business confidence has come down a great deal I'll go ahead and flip to the next one there's a special survey that was done by the NFIB and it showed that a little bit over 50% of businesses said they had enough financial resources to continue to the operate their businesses for one to two months we are now through one month it's a good thing that the payroll protection program has gone through not every company that's applied for it has been able to get funding as we've run out and you know if you add in the number that say three to four months it's about 75% so we are going to need some help there and if if businesses fail it's it's going to greatly extend the period of time that it's going to take for the US economy to recover go ahead and flip to the next one this is a flip the leaves very quickly this is opentable dinner reservations shows you that that the restaurant business is down 100% just about four seated dinners flip to the next one these are some numbers that Tom talked about box office receipts down almost a hundred percent if you can find a drive-through a drive-in movie some of them are still operating but I don't think the movies are very good the number of people passing through the TSA about 90% of should say the movies aren't any good they just said to be older go ahead and flip to the next one saying categories I guess the first one was employment this is on spending and come on three too fast for good health care spending sixteen point nine percent of the economy if there's a surprise right now I think it's in the number of doctors and dentist offices that are shut down in my conversations with medical practices kind of echoing on Michaels thoughts they've all told me not one of them has said that anything different than this telemedicine is here to stay it's going to be important a larger part of their business model going forward and they do not expect to rehire anywhere near the workers that they let go that's what I've heard to come every one of them when I look at some of the economic forecasts that are out there they don't even have a decline in health care so it's it's not just elective surgeries it's all aspects now I would think that dentist offices is something that tunnel is something that's not going to be able to done via telemedicine but a lot of other things can be and so I think that you know it's not so much on the spending side but on the employment side that could be a more significant drag and more significant change go ahead and flip to the next one I want to wrap this up so we have time for questions clip pass this in flip pass the population numbers old news flip past this one and get to North Carolina so economy was slowing before the recession hit job growth was only a one point two percent February to February we're kind of suspecting that we're gonna get a little bit of catch-up number in March so be interesting to see what we get because the March national numbers are down really big in terms of jobless claims since March since the last four weeks fifth 540,000 jobless claims in North Carolina pretty substantial increase about 40% of that it's been in leisure and hospitality another big chunk has been in retailing and another big chunk has been in medical medical care and other services which were mainly household and business versus go ahead and flip to the last slide here this is our projection of job growth and it shows you the v-shaped or the check mark shape that shape we're estimating that we're going to lose a total of about 480 thousand jobs total during the recession and that we are going to gain back about 56% of those by the end of 2021 so even though the percentage gains are you know higher than where we were previously we don't recapture all of those losses I'm go ahead and put the last I guess there is one last slide on here which is our forecast table going out forward now looking for a 22 percent drop in GDP during the second quarter I've seen estimates as high as a sixty percent drop I think that guy must be from Colorado but but you know I do think that there's a wide range out there in terms of of how much activity could fall because there's so many parts of the economy that don't usually get hit in a recession that are likely to get hit pretty hard in this one so let me stop there I mean get to move to Q&A great thank you very much thank you working for that we're going to Janelle boy he's looking at some questions yes I am okay so the first question that had the most votes is do you have any insight on when and how the North Carolina stay-at-home order will be lifted let me this is Dan I'll take a shot at that first take one for the team here governor Cooper talked about yesterday about the idea of tracing testing and trends it's his focal point so we talked a little bit you saw on marks slide about the logarithmic scale of cases and so that's ten sending in a positive direction I think right now we at the chamber and others are trying to get private sector to be of uses what you so we can be to the governor to his team about how do we increase testing I mean they said well we need that so let's get it let's wait let's use all the resources we have here at in a very biotechnology rich State to help with that in in tracing as well so that's the type of thing and to it's going to have to be as Mark indicated that behind restaurants into combinations the biggest job loss and March was an ambulatory health services and those are highways shots of eating restaurants and accommodations highest wage jobs but those ambulatory health services very high wage and I think what's what happened is they're gonna be eager to figure out well now we're going through some of our money or loans or how much that we're going to take out and take some creative ways to help convince government that they're ready to open again and this is Mike Walden let me just add that the General Assembly I believe Dan cracklin I'm wrong comes back to the end of this month President Pro Kemp the Senate Phil Berger has already sent signals he's anxious to see the economy opened up so there's probably be some back and forth probably not surprising between the governor's office and the governor's people and particularly herders office and and him in terms of how fast this will happen thank you okay the next question is PPP is out of money of 250 billion more it's out of money and there are proposals to Mitch McConnell majority leader in the Senate tried to have a simple voice vote on that week or so ago week ago I think shot down I think both parties are interested in and seeing that fun replenished there's some pushback I think you probably all heard about maybe changing some of the provisions particularly the requirement at seventy-five percent goes to payroll in order to have that loan turned into a grant the I think the Republicans appear want just the simple just change the number and the Democrats want to change number but they want to add some other things too so we'll see how that goes back and forth apparently both houses are not coming back however until early May so there's going to be I think there's probably going to be pushback and pressure for something to be done before then because you're right this is this that's out of money and a lot of businesses are relying on this thank you the next question is how much decline do you expect on residential single-family and multi-family combined construction spending this is Mark I'll take that in terms of residential we started out this year really strong and and now I would single family home building single-family homes have been under built you know across the state and across the country so we don't have an oversupply of single-family homes but we've seen a big drop in buyer traffic with all the with all the stay-at-home orders and it's ranked during the spring selling season which accounts for a disproportionate sales and Sharaf of sales we've also seen some contract cancellations it's not been a huge problem it's not like what we saw in in 2008-2009 but that's going to take some of the the wind out of the sails that we started this year but because we started off so strong and we're so so much above where we were in 2019 we're looking at single family home buildings probably only in the end of year down seven or eight percent from where we were last year and most of that decline will occur in spring and early summer would be will be improving in mid summer to the rest of the year so so we're looking pretty looking okay there in terms of apartment construction there's a lot of work underway right now and the apartment market was outperforming expectations for a very long time I don't think we're going to see a move away from the cities I don't think that cities the size of North yet that can rally are Charlotte I think that those cities are preferred they're going to be increasingly preferred as opposed to mega globally Global Gateway cities New York is a global gateway city and I think that the mega global gateway cities are also gateways to to a lot of the undesirable impacts from globalization one of which is you're more susceptible to viruses in Seattle in New York to big global gateway cities those San Francisco in there too or early virus hotspots but there are also those globally
onnected cities tend to be having greater trouble with income inequality because they're magnets for foreign direct investment which has pushed up the value of housing they have a disproportionate share very high-end retailing that focuses entirely on foreign buyers and it kind of shuts out and it kind of feeds the inequality issues I think that that's where you're going to see a backlash I think it actually plays in a little bit to Charlotte Raleigh but we're going to have an over build of apartments because we've got peak levels of deliveries nationally there's nearly two times as many apartments under construction today as they were completed in the last three months so it's you know so we've got balance on the average but there's like six hundred thousand and something under construction completions have been running around three hundred thousand so you know we've got a we've got a whole lot of supply coming in at a time that not only are some folks having trouble paying their rent but job growth is going to be slower on a net basis we're not going to cover all the jobs that we lost for a couple of years or you know eighteen months at least and and that's gonna make absorption very very slow this is time I just add I agree with mark on the fundamental health of the residential sector I'll say though in this environment where you're not comfortable necessarily having someone come into your house there's a core part of the sales process of particularly you know owned real estate that it's gonna have to go through a transition until such time as you're comfortable someone looking at your house it's just gonna be pretty hard to get those under contracts I do see some dip until we get to the other side yeah the numbers I was referring through there was I guess I was on the construction of the new home construction site yes but you don't face that don't face that issue and so I think that that housing starts probably won't see as large of a dent but the existing market you know it in terms of its contribution to GDP it is really grown because the pneuma mark has been smaller and Realtors Commission's are a big part of that it also tends to drive spending in home improvement centers and home furnishings and so it's a you know it's it's a real key driver for the economy the longer that's all off track the longer it'll take for us to recover thank you the next question is coming out of the coronavirus crisis what industries will be the winners and where should North Carolinians concentrate on recruitment well one thing I mentioned my talk is my qual and that is that if we do have renewed interest in developing or reinforcing domestic supply chains North Carolina should look toward that and I'm speaking with our business recruiters they were already thinking ahead to that in that regard potentially new manufacturing supply chains medicine supply chains food supply chains etc so that's something I think that we are well positioned in some areas to pursue and it depends on how what the reaction to globalization is after and when we do get on the other side if it's strong that may actually do some business recruitment and development opportunities for North Carolina yeah just add on that Michael when every recession that we go through trends that were on the downswing tend to be amplified his capital Teresa and almost completely before them and trends that were ascending tend to see more capital throw them and they ascend faster so the downside I really think that that some old line brick-and-mortar retailing the major full-service department stores and certainly not all of them some are doing a better job than others but but I think there's gonna be a big enough shakeout that that the consolidation among reaching of them major enclosed shopping malls is going to accelerate in the you know we were looking for about three-quarters of the malls that are currently in operation to be dismantled and repositioned over the next 10 years that's probably going to happen a much quicker because as these large anchors to clear bankruptcy that's going to trigger covenants in the leases of some of the other stores where they're going to be able to walk and so we're probably that's that's something that I think is a big issue in the very near term on the plus side of course you know the supply chains we were seeing we wrote a paper a couple years ago talked about what was going right in manufacturing and the labor content to produce just about anything his but his dwindled well the political risk the the risk from climate change and the risk from pandemics which we've had a number of this is the first one that's impacted us since China's gotten into the WTO they all now outweigh the potential savings from labor costs we've been seeing a big reassuring I would expect that to accelerate and then certainly all the technologies that are going in and allowing us to to work remotely I think are going to do very well and I guess the last one I would say is this push away from full-service dining and and really somewhat from fast food to fast casual Chipotle's a fast casual example as Clara bread is there's there's lots of other ones I think that that accelerates as well I would just add up and I hope and expect that in the context of this public health emergency our hospitals including rural hospitals our doctors our med schools in nursing schools and certainly public health supplies and manufacturer would be other great places to be right I could add some color to that that there EDP and seen economic develop or North Carolina business is still brisk I mean businesses and I may not be ready to MIT right now to capital spending and turn dirt but certainly there is no downturn and interest in Charlotte and Raleigh markets right now second thing is they'll be interested in it consolidation this will force efficiencies as as this is like saying okay how do we do things more more nimbly and consolidate some of their operations in North Carolina if it keeps its competitive business climate both in reality and reputationally which North Carolina Chamber is helped do is that it will attract those consolidations because they leave you one letter maybe not all together there's a question down a lot about tourism I think that in North Carolina the clearly the cases per 10,000 the deaths per hundred thousand are well below the national averages and in our rural areas we haven't seen that phrase that so I think for the tourism economies is to say yes we're up when we are ready to open that that this was not as big an issue here we do not have that kind of everybody's on some way I can spread that unfortunately the more crowded areas that hit a lot of thank you thank you all for attending today's presentation on ask the experts the kovat 19 economy slowed down or shut down we hope you found today's content valuable you will receive a brief survey of the webinar via email you could appreciate any feedback you can provide to allow us to improve these sessions again the recording of today's webinar will be made available to you via email within 24 hours of the webinar thank you and stay safe and healthy during this time thank you all thank you Mark Tom Dan and Mike have a great day everyone
