Nearly three million people filed new unemployment claims last week, bringing the two-month tally to 36.5 million. For those who've managed to get applications approved, the extra $600 a week should help avert household financial catastrophe. But the extra cash won't last forever, and timelines for economic recovery are becoming less optimistic.
Up Your Game
Every day now we see stories in which local governments foresee huge reduction in tax revenues. When that happens, something has to give -- either tax increases or a reduction in services.
"It speaks to the economic place we are in right now. We’re seeing what could be a $250 billion shortfall in local governments year over year, so it won’t just be this year, it will be next year as well," Brooks Rainwater, director of the National League of Cities' Center for City Solutions tells Axios.
EDOs now more than ever have to prove their value if they are to be spared budget cuts.
Last week, the Haines Borough Assembly in Alaska voted to cut all funding to the Haines Economic Development Corporation.
Said one elected official: “Economic development does a lot of reports, and I don’t see that those reports have a lot of results that are necessarily meaningful to growing the economy in any significant way.” he said.
Said another: “I’ve talked to lots of people and one of their frustrations about economic development is it’s so nebulous. It’s so intangible. Who knows what it means…”
My advice to EDOs: Up your game in business retention and expansion, establish emergency loan funds for small businesses and work on re-skilling workers in your community.
And if business recruitment is your primary and/or sole function, you're operating on an old model that never was very efficient even during the "good times."
"There is a sense, growing sense I think, that the recovery may come more slowly than we would like." -- Jerome Powell, chairman of the Federal Reserve
Photo Credit — Dschwen on WikiCommons
Big City Turn Me Loose
As a result of the pandemic, more people will have more say over where they live than ever before. This is especially true as companies consciously choose to maintain low overhead, canceling real estate leases and favoring the lower overhead cost of virtual teams.
Economic developers in smaller markets can take advantage of the fact that some highly skilled people living in densely-populated cities may want to get out.
Economic downturns have a way of altering people’s decisions about where and how to live. And while American history has largely been a story of movement toward cities, a shock to the system can reverse that trend.
During the Great Depression of the 1930s, as factories shuttered, many people left cities to be closer to cheaper housing, work and relatives.
The density of social contact in urban areas—home to almost 60 percent of the global population—makes them Petri dishes for the spread of contagious diseases. The Covid-19 “attack rate” in New York City was five times the national average.
(I live in a rather densely populated North Dallas and wish about now for some country living.)
Axios reported on a Harris Poll survey that found nearly one-third of Americans are considering moving to a less densely populated area because of the novel coronavirus outbreak.
″Without more aggressive action from the federal government, we may have no choice but to reopen as the economy spirals into a depression.” -- CNBC's Jim Cramer
An Industry Leveled
Already facing an industry-wide recession coming into the year, the coronavirus pandemic has leveled the global transportation industry and pushed U.S. freight volume to its largest year-over-year percentage decline since the Association of American Railroads began collecting data in 1989.
By the numbers: The total number of originated carloads on U.S. railroads last month averaged 196,107 per week, "easily the lowest weekly average for any month since before January 1988, when our data began," AAR analysts wrote in the latest monthly assessment of the industry, "Real Time Indicators."
"In fact, the five months from December 2019 through April 2020 are the five lowest-volume months (measured by weekly average total carloads) since before 1988."
"In April 2020, total carloads were down 25.2 percent, or 329,693 carloads, from last April. That’s the biggest year-over-year monthly percentage decline since our data began."
"We used to live in this really sophisticated jigsaw puzzle ... now we're trying to put the puzzle back together, and we don't have all the pieces." -- Mohamed El-Erian, chief economic adviser for Allianz
Photo by NeONBRAND on Unsplash
What Good May Come
If there is any good resulting from the COVID-19 pandemic, it’s the acceleration of the shift to stakeholder capitalism away from companies’ singular emphasis on shareholders. So says Bill George, a senior fellow at Harvard Business School and former CEO of Medtronic, in this opinion piece for Fortune.
Ever since Nobel Prize-winning economist Milton Friedman declared in 1970 that the social responsibility of business is to increase its profits, a debate has raged between advocates of shareholder primacy and stakeholder capitalism.
In 2019, the Business Roundtable, composed of America’s leading companies, rewrote its purpose statement around meeting the needs of all stakeholders, dropping its prior purpose of shareholder primacy.
Now the economic harm caused by the pandemic has shifted the pendulum further toward the multi-stakeholder model, as the importance of employees and customers are brought into sharper focus.
CEOs are rapidly adapting to the new normal that will define the future economy, giving top priority to the safety and well being of employees and customers. While 2020 profitability is taking a back seat to health concerns, companies are shoring up their balance sheets to weather the storm and compete for the long term.
"Never before has it been so imperative for American businesses to demonstrate social responsibility by prioritizing their workers. In the immediate future, this will entail both the protection of essential workers on the front lines and providing support to those who have been furloughed or laid off. In the long term, many American business owners will have to fundamentally rethink the ways and conditions in which they expect employees to work." -- Pehr Gyllenhammar, former CEO of Volvo
A Successful Template
Almost everyone agrees that rural Americans need better access to broadband internet. The question is how.
I think we have the answer.
When no other businesses are willing to build networks without charging exorbitant fees, hundreds of rural cooperatives are closing the digital divide between city and country, and often doing it with little outside help.
“Co-ops in my mind are the unsung heroes of broadband rural deployment,” Christopher Ali, a professor of media studies at the University of Virginia, told The Christian Science Monitor. “Co-ops are much more responsive to needs of their local communities.”
Co-ops are private businesses owned by their customers and governed by directors chosen from among them. They are familiar institutions in rural America, especially in the upper Midwest, where in the 19th century farmers came together to establish cooperatives to better market their crops.
But it was during FDR's New Deal that brought a wider flourishing of cooperatives across rural America, as hundreds of co-ops sprang up to deliver electricity with support of the federal government. In the 1950s a new wave of cooperatives brought telephone service to rural areas.
Bottom line: Broadband is essential to creating economic vitality and we have the successful co-op template before us.
“In the world of business today, if you don’t have fiber in rural areas, you’re obsolete.You’re a dinosaur. People don’t want to work with dinosaurs.” -- Allen, president of Bartels Truck Line
Those Who Bear the Brunt
Economic developers take note: Lower-income people are getting slammed.
Nearly 40% of those with a household income below $40,000 reported a job loss in March, according to the Federal Reserve Bank's Economic Well-Being of US Households report.
At the same time, for the majority of adults, their income and ability to pay current bills appeared to remain generally stable during the initial weeks of the coronavirus pandemic.
Also essentially unchanged was the percentage of people who reported they could pay off an unexpected $400 emergency expense entirely using cash, savings, or a credit card at the next statement.
The findings back up other reports that show that lower-income Americans, as well as black and Hispanic people, are bearing the brunt of the outbreak's financial fallout. They are more likely to work in sectors that are laying off or furloughing workers, such as food services.
More than one in five Americans have filed initial jobless claims since the pandemic began.
"Consumers are very cautious. We're right in the middle of the storm." -- Russell Price, chief economist at Ameriprise Financial
What We're Reading and Watching (No Covid Here)
Bear the dog saves more than 100 injured koalas BBC
The weird reason we are so entertained by movie villains Ladders
Putin Is Well on His Way to Stealing the Next Election Atlantic
The murder of 9 American Mormons in Mexico and what came after Insider
Why Humans Totally Freak Out When They Get Lost Wired
Molky's Mountain Drifters -- Free a Little Bird