BBA Economic Digest: Digital Lifelines
The jobs numbers for April released by the Labor Department were about as dismal as expected: The economy shed 20.5 million jobs and the unemployment rate jumped to 14.7 percent — devastation not seen since the Great Depression. The situation was even worse for minorities. Among African-American workers, the unemployment rate was 16.7 percent, and for Latinos it was 18.9 percent. All told, about half of all Americans have a job — the lowest level on record — and it’s expected to get worse. And some people actually said, "Happy Economic Development Week."
It's a pretty sad state of affairs when Americans without internet access have to sit outside closed cafes and libraries just to get connected. And yet parking lots have been a digital lifeline during the pandemic or many. Instead of spending hours in restaurants, libraries and cafes, people without fast internet access at home are sitting in lots near schools, libraries and stores that have kept their signals on. The dependence on Wi-Fi in parking lots shows the lengths to which people are going to combat the country’s digital divide, one of the most stubborn problems in technology — and one the coronavirus has exacerbated. One in four Americans has no high-speed internet access at home, according to the Pew Research Center, either because it’s too expensive or because the home is in a rural area with limited service.
One reason why many families can’t get fast internet service at home is because government maps say the area already has access. If your census area has one home with fast internet service, the government logs everyone else as having access, too, even if they don’t.
The truth is the government’s national broadband map is flawed because it allows internet providers to overreport where their service reaches, and the Federal Communications Commission has allowed them to get away with it for years.
Democrats and Republicans in Congress generally agree that all Americans should have access to broadband. But they disagree on how. It’s the classic big government versus small government argument.
Democrats say more government funding is needed to bring internet service to those without. Republicans back a new mobile internet technology to replace home internet lines and solve access gaps.
There were similar arguments about electricity and phone service in the early 1900s. Then, the federal government decided those services were essential, and it brought electric and telephone poles to every home, no matter the cost.
“If you do want to find a silver lining within the data, almost all of the increase in people that lost their jobs believe that the layoff is temporary at this point, about 97%. If that proves to be accurate, it is a positive sign.” -- Matthew Luzzetti, U.S. chief economist at Deutsche Bank
The Pros and Cons of Remote Work
Millions of Americans are working from home, and many want to hang onto the benefits. A Gallup poll found most Americans would prefer to work from home “as much as possible” after the pandemic. Telecommuting was already a growing trend that left out many low-wage workers and was viewed warily by employers who worried people were slacking off at home. Researchers warned that problem solving and creativity suffer when workers are isolated from one another.
The dark side from working at home is that it can lead to loneliness, boredom, and mental health issues. Remote workers have also reported they have had to work even longer hours. But if set up properly, experts say remote work has benefits: • Less time on the road. The average American who drives to work spends 54 hours per year stuck in traffic, according to the Texas A&M Transportation Institute. • Greater productivity. • A cleaner environment. Global Workplace Analytics says if everyone in the U.S. worked remotely half of the time, it could reduce greenhouse gas emissions by more than 51 million metric tons a year. • Money saved. Global Workplace Analytics estimated that people could save, on average, $2,000 to $6,500 every year by not spending on things like gasoline and day care. Companies could spend less on real estate. • Less sickness and more time for fitness.
A recent analysis from University of Chicago economists concludes that 37 percent of U.S. jobs can be performed at home, although this varies across industries and regions and is generally far more feasible for high-income workers, Axios reports.
“If you include New York, it looks like a plateau moving down. If you exclude New York, it’s a plateau slowly moving up.” -- Andrew Noymer, an associate professor of public health at the University of California, Irvine, on Covid infection rates.
An Abrogation of Responsibility
Occasionally, I will come across an economic developer who will say something so so outlandishly wrong that it leaves me wondering, "How could you even think that?"
Such was my reaction when one told me why the regional economic development organization that she worked for refuses any involvement in business retention and expansion. This is what she wrote:
" ... I don’t foresee our regional strategy shifting to BRE measures. We are shifting efforts to be more aligned with the local business community but more for the partnership for attraction and not the sake of BRE to prevent stepping on the toes of the individual localities."
She is saying quite a bit here in rationalizing why BRE should not be undertaken by her group. Let's break it down.
When she states that "we are shifting efforts to be more aligned with the local business community," she immediately reveals flawed thinking. How can you form partnerships, indeed develop any sort of relationships if you have no engagement in BRE?
The underlying message is that a one-way relationship is being sought -- that what local businesses can do for the regional group is important and be damned what the regional group can or will do for local businesses. If ever there was a prescription for resentment, that's it, because nobody likes to be used.
(The plant manager of a golf-ball manufacturer once told me that the only time he heard from his local economic developer was when that person was asking for golf balls for an annual tournament.)
Also, do you really want local businesses to speak to prospects if you don't know what they might say? If you haven't formed relationships with local businesses, you are essentially flying blind in your recruitment efforts.
Then she speaks of not "stepping on the toes of the individual localities." Again, wrong-headed thinking. If a regional group does not establish BRE protocols for its members, then you are left with a patchwork affair in which some localities will be involved and others will let it slide.
A regional group can serve as both coach and umpire to its member economic development organizations. At the very least, the regional group can track and record data pertaining to local businesses -- information provided by the individual localities -- so as to have intel on the opportunities and challenges facing local businesses.
Such information would be an invaluable resource in the recruitment process.
I submit that regional and local economic development organizations can develop mutually-agreed to BRE processes that can be effective, which respects the autonomy of localities, all the while providing them with the support and infrastructure needed to form relationships with local businesses.
But that takes work, and some regional groups reveal themselves to be intellectually lazy in not wanting to make it happen. One excuse: "Oh, we've tried that and it didn't work" -- which is exact;u what this regional person told me -- only tells me there was not the desire to make it work.
It is, in fact, an abrogation of responsibility and represents one of the biggest ongoing flaws in economic development today. Folks, this can be fixed, but there has to be a will for there to be a way.
“There is no safe place in the labor market right now. Once people are unemployed, once they’ve lost their jobs, once their spending has been sucked out of the economy, it takes so long to come back from that.” -- Martha Gimbel, an economist and labor market expert at Schmidt Futures
Big Changes Coming to Travel
Most experts say it may take 18 to 24 months before the travel industry begins to return to regular levels. In the meantime, the travel industry will undergo some very big changes: Airports may institute new kinds of security checks to screen travelers who are sick, nervous tourists will vacation closer to home, and the travel experience will be dominated by large chains as small hotels and restaurants struggle or go out of business. A survey published last week by Longwoods International found that 82 percent of Americans have already changed their travel plans for the next six months. 50 percent said they would cancel trips, and 45 percent expect to reduce travel in that time frame, according to the survey of 1,000 American adults. Here are some predictions by industry observers:
• Solving social distancing in airplanes and returning to profitability seem at odds. Nonetheless, expect airlines to dangle cheap fares to get people in the air. • With some states loosening travel restrictions, people want to get out. So expect a boom in road trips. • Family vacations post-pandemic are likely to become shorter to lower the cost of the trip. • Listings for home sharing will grow as more but there will be more supply than demand. Expect cheaper prices.
As travelers venture back to hotels, the changes being made to protect guests and employees will be visible as soon as they enter the foyer. Among the changes: Plexiglass at the front desk, extra cleaning and sanitizing and offering guests the chance to do mobile check-in.
"Past downturns have proven that almost no company is immune to an economic contraction." -- Brian White, analyst at Monness, Crespi, Hardt & Co., Inc.
The Problem with Opportunity Zones
Billed as something new that would transform capital investment on the local level -- that's how some consultants sold it to economic development organizations -- Opportunity Zones have largely been a flash in the pan, as I suspected early on.
At the heart of the Opportunity Zone program is the simple idea that tax incentives for investors will transform declining areas into thriving economic hubs. This is based on the faulty notion that urban or rural deterioration results from excessive taxation undermining capital investment.
It's hardly a new idea. Margaret Thatcher’s government created 11 “enterprise zones” in the U.K. in the 1980s that offered a range of tax breaks and regulatory relief. More than 40 U.S. states eventually would eventually do the same.
"The thing that precludes people from investing in Opportunity Zones is that you have to leave your capital in the deal for a very long period of time. Most investors have a three- to five-year horizon. To get the full benefits of the Opportunity Zone, you have to go well beyond that. There are definitely Opportunity Zone deals I’ve seen, but I don’t get as many calls as I thought I’d get," said Alex Inman, senior managing director at Walker & Dunlop.
"The sites are harder to find than you’d think. When I say sites, I mean sites you can actually build what you want on and make economic sense of it. Then to find equity that wants to go out on that long of a term is even harder." Bottom line: There has to be strong fundamental business reasons for a capital investment in any given place to take place to meet the demands of the market. Tax incentives alone have never been a holy grail unto themselves.
“The result will be a capitalism that would be familiar to Americans in the 1950s, with norms that balance shareholder interests with broader social concerns and a more interventionist regulatory state.” -- Peter Orszag, the head of Lazard’s financial advisory practice
The joyful word “happy” can seem inappropriate at times depending on, well, context. Being wished a "Happy Memorial Day" might offend veterans, as it is a holiday meant to commemorate those who died while serving in the military. This past week was Economic Development Week, created by the International Economic Development Council in 2016. Saying "Happy Economic Development Week" -- as I saw some economic developers state in writing -- rang hollow for me, as we're in the worst economic crisis since the Great Depression. Economic developers -- who belong to an honorable profession whose purpose is to give back to a community and change lives -- are laboring in trying times. Economic development is hard work, even under the best of circumstances.
I'm reminded of the words of the African-American spiritual Gospel Plow -- "Hold on. Hold on. Keep your hands on the plow and hold on."
What We're Reading and Watching (No Covid Here)
Billionaire divorce uncovers secretive world of trusts in South Dakota CNBC
What Happened to Val Kilmer? He’s Just Starting to Figure It Out.
The Life and Fiery Death of the World’s Biggest Treehouse Atlas Obscura
Who Invented the Wheel? And How Did They Do It? Wired
I tasted all 15 flavors of Spam, and there's only one that beats the original Insider
Foghorn Stringband -- Let Me Fall (See above)