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BBA Economic Digest: Our Pearl Harbor

Our Pearl Harbor

There is no way to sugarcoat what has happened to us. The U.S. surgeon general warned Americans to brace for "our Pearl Harbor moment," a surging death toll from the coronavirus.

“It’s going to be the hardest moment for many Americans in their entire lives,” Dr. Jerome Adams said.

The American economy continues its swift, staggering decline. We learned lat week that another 6.6 million people filed for unemployment, bringing the total number of jobless claims to over 16 million in just the last three weeks.

By the end of the month, more than 20 million people may be out of work, pushing the unemployment rate toward 15 percent, several economists have predicted. It’s as if “the economy as a whole has fallen into some sudden black hole,” Kathy Bostjancic, chief U.S. financial economist at Oxford Economics, told The New York Times

JPMorgan economists cut their second-quarter forecast even more, now expecting the economy will decline by 40 percent. A number of Wall Street firms expect contractions in the second quarter of 30 percent or more.

But the bloodletting will eventually stop as it always does. Forty five economists surveyed by National Association for Business Economics last week expect growth to turn positive in the second half of the year, with an increase of 2 percent in the third quarter and 5.8 percent in the fourth quarter.

As I am not an economist, I make no predictions, but rather report what those trained in the field say, some of which is conflicting. I generally ignore the consultants.

The Day the Music Died

But here is where I will make a prediction: The day of the business recruitment-only model of economic development organizations is over, done, finished, kaput. Stick a fork in it.

The day of merging economic development responsibilities under one roof is about to begin in earnest, with some EDOs going by the wayside as public and private funding dries up.

For an EDO to remain relevant (and survive), it must be able to adapt and pivot to reality. Most importantly, it must show value to the community it serves.

Speaking with an economic development friend in Alabama recently, she told me that her organization's sole focus was business recruitment. Business retention and expansion and entrepreneurial development is done separately by the chamber.

That model, I told her, will not, cannot, hold. All economic development functions -- BR&E (now more than ever), recruitment and entrepreneurial development -- will need to be combined under the auspices of one primary EDO.

Another economic development friend said most of the work that his regional EDO is doing right now pertains to tracking and documenting BR&E. But local EDOs must allow the regionals to become involved, not in the actual visits, but rather in monitoring, tracking, and establishing uniform protocols.

The mission of economic development -- about changing lives -- will remain. That's where it starts and ends. But the practice of economic development will never quite be the same again. Nor probably should it be.

Organizations that adapt will survive. Those that don’t will become distant memories.

Bye, bye Miss American Pie,

Drove my Chevy to the levee but the levee was dry,

And them good ole boys were drinking whiskey and rye,

Singing this will be the day that I die, this will be the day that I die.

All EDOs should periodically make the courageous decision to look within, especially now, to identify strengths and weaknesses. All should embrace change and accept feedback from their customers to remain relevant.

So who are an EDO's customers? Famed business consultant Peter Drucker said the primary customer is the person whose life is most changed through your work.

Almost by definition that would be residents and existing employers. They are not the only customers to be sure (there's absolutely a place for recruitment), but if an EDO focuses on serving people in the community, it will be effective and will survive.

Forever Changed

The coronavirus pandemic has deeply penetrated more into global supply chains than many thought possible.

In response, manufacturers are establishing lists of critical components and determining the origin of supply -- which can reveal vulnerability -- while identifying alternative sources. They are also rethinking how to use inventory for use as a bridge to keep production running and enable delivery to customers.

As a result of this crisis, more companies will diversify their supplier base to hedge against future disruptions by building in redundancy and perhaps even moving away from the practice of holding near-zero inventories.

US companies sourced substantially fewer manufactured goods from Asia in 2019 due to US government trade policies. With the supply chain vulnerabilities revealed by the coronavirus outbreak, that trend will only further deepen with a decoupling from China and a likely trend toward reshoring.

We are indeed quite fortunate at BBA to have Tim Feemster on our team. Tim is our logistics and supply chain "guru." His depth of knowledge of supply chain issues is a result of a life-long commitment.

Tim and I have worked together on SWOT analyses for communities as part of our BBA Action Plan, in which transportation infrastructure and existing supply chains figure very much into our work.

For corporate site selection, ongoing logistics costs involved in shipping product are far more important than the initial cost of real estate. Again, Tim knows.

Quotable Quotes

“The behavior of people in terms of wanting to travel or go to events or even go to a restaurant, it’s been utterly changed by the concerns about this disease. No one should think the government can wave a wand and all of a sudden the economy is anything like it was before this happened." -- Bill Gates, co-founder of Microsoft

“Why now? The needs are increasingly urgent, and I want to see the impact in my lifetime,” -- Jack Dorsey, chief executive of Twitter and Square in a series of tweets that he plans to donate $1 billion to relief programs related to the coronavirus.

“I think capitalism is going to become a lot smarter and a lot more compassionate because of what we’re going through ... It can’t just be about shareholders. In fact, you have to put employees ahead of shareholders.” -- Mark Cuban, billionaire entrepreneur and owner of the NBA's Dallas Mavericks

"The previous status quo was not serving people well. This could be a chance to remake some of the rules about what we expect of employers in terms of how they treat their workers and reframe what it means to be a good employer." -- Martha Ross, Brookings Institution

“As much as I love that the government’s basically keeping businesses on life support through this difficult period, at the end of the day there are no customers. Many of these smaller enterprises might have to close because, even with government assistance, it’s not worth trying to stay open.” -- Jim Cramer, CNBC

“The crucible of a crisis provides the opportunity to forge a better society, but the crisis itself does not do the work. Crises expose problems, but they do not supply alternatives, let alone political will. Change requires ideas and leadership. Nations often pass through the same kinds of crises repeatedly, either unable to imagine a different path or unwilling to walk it.” -- from an editorial in The New York Times

A Family of Foodies

Doing the right thing is always the right thing. The San Antonio-based grocery chain H-E-B gets that.

With the foodservice sector hit hard by the coronavirus pandemic, H-E-B decided to help out local restaurants by selling their meals in its stores. Under a pilot program, the company is carrying ready-made meals from five restaurants at 29 supermarkets in San Antonio, Houston and Austin.

All proceeds from the sales of the chef-prepared meals will go directly to the restaurants, the San Antonio-based grocery chain said.

“We are a family of foodies, and we have a deep relationship with lots of restaurants and chefs. So this is something we wanted to do to help in these difficult times,” Dya Campos, a company spokesperson said in a statement.

I have always been impressed by H-E-B. From the company website;

"While the emergence of the coronavirus (COVID-19) is an evolving situation with many unknowns, we are sure of one thing: We will do our part to help our fellow Texans prepare."

Lest We Forget

In this time of turmoil, let us us remember all the good times and good people who have made our lives all the more better.

Many of them, we don't even know their names, but they played a huge part in making those memorable moments special. They were workers at the Greek restaurant who made my wife's surprise birthday party such a fun experience. Opa!

We have come to habitually rely on so many people, without giving them much thought. Many are now the most vulnerable among us.

According to McKinsey up to 86 percent of jobs vulnerable to layoff paid less than $40,000 a year, and 98 percent of at-risk jobs paid less than the national living wage for a family of four ($68,808).

Almost 40 percent of the vulnerable jobs are in small firms with fewer than 100 employees.

"It's quite striking how widespread the vulnerability is. This is going to be a workforce disruption larger than any of us have lived through, " said Susan Lund with McKinsey.

An estimated 13.4 million vulnerable jobs are in the restaurant industry. Another 11 million are in customer service and sales, including 3.9 million retail clerks and 3.3 million cashiers. These are jobs that to pay a median annual wage of less than $30,000, per McKinsey's data.

Brookings found that the workers most vulnerable to job loss are those with a high school diploma or less. About half of low-wage workers are either primary earners or contribute substantially to paying family expenses.

Non-Pandemic Stories We're Reading (Because we need a break)

Making a Home That’s Affordable, for Good CityLab

How Eliud Kipchoge Broke Running’s Mythic Barrier GQ

The sound of icebergs melting: my journey into the Antarctic

The Guardian

Farewell to ‘Schitt’s Creek,’ a delightful show ending at the most unfortunate time The Washington Post

The Weirdly Enduring Appeal of Weird Al Yankovic The NYT Magazine

Britain’s 'toughest secret agents’ during the Second World War who went behind enemy lines to seek revenge

Oh no. Dean sings "Worried Man Blues."

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