Economist: We're not the way we were
In a year like no other, well-known local economist John Mitchell presented a 2021 economic forecast like no other during his annual presentation to the Portland Business Alliance on Tuesday.
For the past 11 years, the retired U.S. Bankcorp economist has documented how the local and national economies have been recovering from the Great Recession — and predicting the recovery would continue into the next year.
But on Dec. 8, Mitchell had to admit the COVID-19 pandemic and government responses to it had upended the world as we know it, decimating economies, destroying jobs, and creating uncertainty, perhaps for years to come.
"The way we were is not the way we are," Mitchell said near the end of his hour-long presentation.
Mitchell also said Portland's reputation for livability suffered because of the months of protests that frequently turned violent late at night. He noted that political candidates outside the city ran against the image of turmoil during the 2020 general election. Weeks of heavy smoke from the forest fires in the western part of the state also hurt.
"How long will it take to recover?" Mitchell asked.
Even the format was radically different from all previous forecasts. Instead of roaming with a portable microphone in a crowded ballroom filled with business leaders in a downtown hotel, Mitchell gave a remote online presentation, sitting at his desk in his study. As ever, he showed slides filled with economic facts and figures on the screen.
Still, as he always has in the past, Mitchell could step back and highlight trends that emerged from the data. For example, although unemployment increased across the country during the first COVID-19 shutdowns, Mitchell pointed out that businesses have seen record growth over the year. The hospitality industry — including restaurants and hotel — have suffered huge losses and layoffs. However, sales at grocery stores have surged, and delivery-services are still hiring.
"Fascinating. Creation and destruction at the same time," Mitchell said.
Much of what happened also accelerated trends that were already underway, Mitchell said, such as working from home and online shopping.
"The challenge for society is facilitating the changes. This is not something new, but it's just very rapid at the moment, given the shocks that we are undergoing," said Mitchell.
Even the large number of people who lost their jobs did not affect income tax collections as much as expected, thanks to the stimulus bill passed by Congress during the early stages of the pandemic. Transfer payments such as increased unemployment benefits increased overall earning, helping income tax-dependent states like Oregon, which is projecting a 5% increase in personal income tax collections next year.
"That's not going to give you enough for a continuing services budget that's going to have to be dealt with. That's a long shadow," Mitchell said.
At the same time, Mitchell said thousands of families who lost their jobs could lose their homes when the current eviction moratoriums end, posing a threat to the country's stability that is not yet clearly understood.
But Mitchell was also hopeful that the economy could flourish if the upcoming COVID-19 vaccines are as effective as promised, distributed efficiently, and taken by enough people to end the pandemic. In that case, Mitchell said, many people have accumulated savings by cutting back on expenses that they will want to spend. He said the same thing happened after the Black Plague ended in Europe in the 1340s and the more widespread Spanish Flu subsided in the 1920s.
"Neither of these events do I remember, but I read about them," Mitchell joked.
Unlike previous years, Mitchell hedged his bets and did not make specific economic predictions for the coming year. He admitted most of the information about the effects of the pandemic now is anecdotal. "George Stigler said, the plural of anecdote is data." Also, the recovery length and speed depend on how people behave when confronting challenges they have never faced before.
"The recovery is underway, but the trajectory of it is very uncertain," said Mitchell, ending on his usual couplet poem, a stylistic cross between Jay-Z and Dr. Seuss.
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