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After more coronavirus closures, how deep will California's recession go?

Hair salons and barbershops were among the businesses required to close on July 15 two days in Santa Clara County, ceding to state rules. Photo by Lloyd Lee.

In late June, it looked like California might be turning a corner in the coronavirus recession. Unemployment had leveled off at a jarring 16.3%, but thousands of waiters, bartenders and hair stylists were going back to work.

Then came the surge in infections that state officials have been dreading — a record 11,000 new cases on Tuesday alone — and with it, a new wave of business closures.

"We are so sorry," began the email to customers from San Jose's Limón Salon this week. "After being open for only one day, we learned that our reopening will be short lived." With appointments back on hold, the salon said any donations and product sales will go to pay employee health care premiums for next month.

If the reality is harsh for business owners and employees seeking stability, the public health rationale for the retreat to isolation is clear. Outbreaks continue to spiral at San Quentin State Prison and workplaces such as meat processing plants. Coronavirus testing backlogs have led to rationing. In some regions, hospitals are approaching capacity.

As the health crisis unfolds, changing state and local health orders have combined with looming deadlines like the July 31 expiration of enhanced unemployment benefits to create false starts, intense financial anxiety and confusion about who is supposed to be enforcing regulations on the ground. Workers and businesses alike are left to wonder how deep the recession will go, how long it will last and how many livelihoods might be gone for good.

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"The best word to describe it is chaotic," said Kaya Herron, director of community engagement and advocacy at the Fresno Metro Black Chamber of Commerce. "There's people that are grasping at straws, that are saying, 'I'm down to my last dime, and I don't know when I'm going to be able to allow customers back into my space.'"

The re-closures began before the Fourth of July holiday, when Gov. Gavin Newsom ordered bars closed in Los Angeles and a half-dozen other counties on a state "watch list" for elevated virus transmission levels. This week, he ordered a halt to all indoor dining and entertainment statewide, plus a ban in 29 watch list counties on fitness centers, places of worship, protests, hair salons, indoor malls and some offices.

It may be a final blow to business leaders who have latched onto hopes of a "V-shaped" economic recovery, or a quick bounce back from economic paralysis, said Jerry Nickelsburg, director of UCLA's Anderson Forecast. In late June, the Anderson Forecast warned that fallout from the virus had already tipped California and the rest of the country into a "depression-like crisis" with a longer "Nike-swoosh-shaped recovery" likely to last through early 2023 — that is, if businesses could safely reopen this year.

"There was a sense that the public health crisis was moving in a direction that would allow the continuing opening up of the economy," Nickelsburg said. "Though that has not been entirely dashed, there is certainly more uncertainty."

'A critical time'

Hopes of a quick recovery have also dimmed in recent weeks as hiring has stalled. On the career site Glassdoor, 35% of employers have reduced job postings since June 22. Economists say it's unclear how many are being cautious because of uncertainty and how many may be in the throes of more severe hiring freezes or nearing bankruptcy.

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"The next several weeks will be a critical time for the economic recovery," Glassdoor senior economist Daniel Zhao wrote in the job report published Tuesday. "The question is whether the worsening public health crisis will completely drown out the fledgling recovery."

In California, one area of concern is that the unemployment rate already lagged other states in rebounding as businesses reopened this summer, said Sarah Bohn, vice president of research at the Public Policy Institute of California. After an initial blow to hospitality, tourism and other in-person professions, she's tracked a more recent surge in public sector and health care unemployment.

"How temporary are these temporary layoffs?" Bohn said. "Is it really going to bounce back? By how much? How fast?"

"The question is whether the worsening public health crisis will completely drown out the fledgling recovery."

-Daniel Zhao, senior economist at GlassDoor

Time is of the essence because federal legislators have not reached a deal to extend an additional $600 per week for unemployment benefits set to end July 31 amid widespread complaints in California about backlogs and unreceived benefits. Longer term, Bohn expects that the state will have to grapple with the prospect of "this crisis worsening inequality." State lawmakers already have enacted a bitterly contested new law extending benefits for freelancers and gig workers; voters will be asked whether to curb its provisions for ride-hailing drivers with Proposition 22 in November. Other debates concern how far to expand the safety net for struggling workers in other fields.

"A roller coaster of opening and closures seems like what we should be expecting," Bohn said. "Unfortunately it's hard to know how many cycles of the roller coaster we'll be on."

Other short-term relief such as federal Paycheck Protection Program loans have so far largely failed to materialize for small businesses in Fresno, Herron said, especially those with Black, Latino or Asian owners. Her team is wading through dozens of applications for $3,000 emergency grants and running extra financial literacy programs about managing debt. She worries that the coming weeks will make or break not only individual lives, but also the entire city's fledgling revival.

"Our downtown and our business districts are at risk of losing their tenants, but also of losing their diversity and vibrancy," Herron said. "If businesses don't make it through this wave, a lot of them will never reopen."

Email Lauren Hepler at [email protected].

Find comprehensive coverage on the Midpeninsula's response to the new coronavirus by Palo Alto Online, the Mountain View Voice and the Almanac here.

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CALmatters.org is a nonprofit, nonpartisan media venture explaining California's policies and politics. Read more state news from CALmatters here.

Follow Mountain View Voice Online on Twitter @mvvoice, Facebook and on Instagram @mvvoice for breaking news, local events, photos, videos and more.

After more coronavirus closures, how deep will California's recession go?

by / CalMatters

Uploaded: Tue, Jul 21, 2020, 1:48 pm

In late June, it looked like California might be turning a corner in the coronavirus recession. Unemployment had leveled off at a jarring 16.3%, but thousands of waiters, bartenders and hair stylists were going back to work.

Then came the surge in infections that state officials have been dreading — a record 11,000 new cases on Tuesday alone — and with it, a new wave of business closures.

"We are so sorry," began the email to customers from San Jose's Limón Salon this week. "After being open for only one day, we learned that our reopening will be short lived." With appointments back on hold, the salon said any donations and product sales will go to pay employee health care premiums for next month.

If the reality is harsh for business owners and employees seeking stability, the public health rationale for the retreat to isolation is clear. Outbreaks continue to spiral at San Quentin State Prison and workplaces such as meat processing plants. Coronavirus testing backlogs have led to rationing. In some regions, hospitals are approaching capacity.

As the health crisis unfolds, changing state and local health orders have combined with looming deadlines like the July 31 expiration of enhanced unemployment benefits to create false starts, intense financial anxiety and confusion about who is supposed to be enforcing regulations on the ground. Workers and businesses alike are left to wonder how deep the recession will go, how long it will last and how many livelihoods might be gone for good.

"The best word to describe it is chaotic," said Kaya Herron, director of community engagement and advocacy at the Fresno Metro Black Chamber of Commerce. "There's people that are grasping at straws, that are saying, 'I'm down to my last dime, and I don't know when I'm going to be able to allow customers back into my space.'"

The re-closures began before the Fourth of July holiday, when Gov. Gavin Newsom ordered bars closed in Los Angeles and a half-dozen other counties on a state "watch list" for elevated virus transmission levels. This week, he ordered a halt to all indoor dining and entertainment statewide, plus a ban in 29 watch list counties on fitness centers, places of worship, protests, hair salons, indoor malls and some offices.

It may be a final blow to business leaders who have latched onto hopes of a "V-shaped" economic recovery, or a quick bounce back from economic paralysis, said Jerry Nickelsburg, director of UCLA's Anderson Forecast. In late June, the Anderson Forecast warned that fallout from the virus had already tipped California and the rest of the country into a "depression-like crisis" with a longer "Nike-swoosh-shaped recovery" likely to last through early 2023 — that is, if businesses could safely reopen this year.

"There was a sense that the public health crisis was moving in a direction that would allow the continuing opening up of the economy," Nickelsburg said. "Though that has not been entirely dashed, there is certainly more uncertainty."

Hopes of a quick recovery have also dimmed in recent weeks as hiring has stalled. On the career site Glassdoor, 35% of employers have reduced job postings since June 22. Economists say it's unclear how many are being cautious because of uncertainty and how many may be in the throes of more severe hiring freezes or nearing bankruptcy.

"The next several weeks will be a critical time for the economic recovery," Glassdoor senior economist Daniel Zhao wrote in the job report published Tuesday. "The question is whether the worsening public health crisis will completely drown out the fledgling recovery."

In California, one area of concern is that the unemployment rate already lagged other states in rebounding as businesses reopened this summer, said Sarah Bohn, vice president of research at the Public Policy Institute of California. After an initial blow to hospitality, tourism and other in-person professions, she's tracked a more recent surge in public sector and health care unemployment.

"How temporary are these temporary layoffs?" Bohn said. "Is it really going to bounce back? By how much? How fast?"

Time is of the essence because federal legislators have not reached a deal to extend an additional $600 per week for unemployment benefits set to end July 31 amid widespread complaints in California about backlogs and unreceived benefits. Longer term, Bohn expects that the state will have to grapple with the prospect of "this crisis worsening inequality." State lawmakers already have enacted a bitterly contested new law extending benefits for freelancers and gig workers; voters will be asked whether to curb its provisions for ride-hailing drivers with Proposition 22 in November. Other debates concern how far to expand the safety net for struggling workers in other fields.

"A roller coaster of opening and closures seems like what we should be expecting," Bohn said. "Unfortunately it's hard to know how many cycles of the roller coaster we'll be on."

Other short-term relief such as federal Paycheck Protection Program loans have so far largely failed to materialize for small businesses in Fresno, Herron said, especially those with Black, Latino or Asian owners. Her team is wading through dozens of applications for $3,000 emergency grants and running extra financial literacy programs about managing debt. She worries that the coming weeks will make or break not only individual lives, but also the entire city's fledgling revival.

"Our downtown and our business districts are at risk of losing their tenants, but also of losing their diversity and vibrancy," Herron said. "If businesses don't make it through this wave, a lot of them will never reopen."

Email Lauren Hepler at [email protected].

Find comprehensive coverage on the Midpeninsula's response to the new coronavirus by Palo Alto Online, the Mountain View Voice and the Almanac here.

CALmatters.org is a nonprofit, nonpartisan media venture explaining California's policies and politics.

Comments

Robyn
another community
on Jul 21, 2020 at 3:15 pm
Robyn, another community
on Jul 21, 2020 at 3:15 pm
13 people like this

As Bruce Springsteen sang, "...those jobs are gone. And they're not coming back."
People are leaving Silicon Valley. There are many vacancy signs and for sale signs.
Remote working and social distancing are two reasons.
We will return to new empty multistory buildings that never housed anyone.


Carmen
Cuesta Park
on Jul 21, 2020 at 4:00 pm
Carmen , Cuesta Park
on Jul 21, 2020 at 4:00 pm
8 people like this

County officials, open the business! We will survive the virus, we will not fare well with a collapsed economy! So sad that the officials making these decisions are motivated by political gains!


Member
Cuesta Park
on Jul 21, 2020 at 4:51 pm
Member, Cuesta Park
on Jul 21, 2020 at 4:51 pm
3 people like this

Just require masks with fines for not doing it. Too much freedom and bs attitude in America, give me liberty or give me death. Well we got death because people can’t do the freaking simplest of things. We could have squashed this by staying home a month and then wearing masks after. It’s not that hard.


The Business Man
Old Mountain View
on Jul 22, 2020 at 10:17 am
The Business Man, Old Mountain View
on Jul 22, 2020 at 10:17 am
Like this comment

In response to Carmen you said:

“County officials, open the business! We will survive the virus, we will not fare well with a collapsed economy! So sad that the officials making these decisions are motivated by political gains!”

Just simple logic here:

The Economy can be replaced easily, let it fall apart because it can always be rebuilt.

People becoming disabled or dying is something that cannot be remediated with money. Unless you will commit to providing free replacement earnings or insurance to cover the costs of those being made sick because you want to open up business.

WAIT, there is legislation being passed to immunize businesses for making people sick with COVID.

NO RESPONSIBILITY, NO ACCOUNTABILITY, NO PROTECTION FROM COVID MEANS NO BUSINESS UNTIL WE HAVE A CONTROL ON IT WITH A MEDICATION OR VACCINE THAT ADDRESSES THE VIRUS.

Carmen, you just want to encourage more activities that will make the situation worse. Let’s just swallow the reality, the economy is Dead On Arrival until the COVID is dealt with.

Our politicians and business leaders are terrified of this REALITY. They are stumbling over themselves to try to cover this up.


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