Economist in SLO: ‘odd recovery,’ but economy ‘on fire’
History shows that natural disasters have had “little” long-term economic impact, according Chris Thornberg, an economist who spoke at the annual Central Coast Economic Forecast on Nov. 5 in San Luis Obispo.
In spring 2020, the United States economy abruptly came to a sudden halt as public health officials issued restrictions, such as stay-at-home orders and remote workplaces, to limit the spread of COVID-19. Activities deemed “nonessential” came to a standstill and the crisis impacted the regional economy and national economy in several ways.
“There’s no doubt that COVID has been a tragic situation — 5 million people were alive and lost their lives,” Thornberg, a founding principal at Beacon Economics, said at the forecast. “But, natural disasters don’t have long-term economic consequences. As simple as that.”
A quicker-than-normal economic recovery was certain, Thornberg said, adding that a V-shaped recovery “was almost certain regardless of what the government did.”
Thornberg said he thinks the fiscal and monetary policy reactions to the crisis have been “excessive,” though they have helped generated $29 trillion in new private household wealth in the past two years, he said.
“That’s an almost 25% increase in household net worth in two years,” Thornberg said. “But when spaced out, it all starts with that $9 trillion of fiscal monetary stimulus.”
Cyclical risks lie primarily in the public sector, Thornberg said, noting the twin issues of inflation and levels of public debt.
“The cyclical risks, problems in the future are now on the public side of the ledger,” Thornberg said. “We all have to pay attention to how this shakes out.”
The resultant supply chain issues are a drag on the rebound, Thornberg said, adding that, “It’s an odd recovery. The economy is on fire right now. There’s no doubt about it.”
There are no economic “new normals” from the pandemic, Thornberg said, but it has accelerated underlying trends that were already occurring in the economy, particularity the labor shortage.
“The last two, three and four years prior to this, I’d say: ‘It’s coming,’” he said. “Well guess what? It’s here, and because it has been accelerated by this pandemic, these things we do have to pay attention to yet again in that post-pandemic world we are now entering.”
Thornberg’s presentation was titled “The Great Recovery: Could It Be Derailed? Growth, Change and Renewal in a Post-Pandemic Economy.” He was one of three speakers at the economic forecast event, which was attended by hundreds of business leaders and others from San Luis Obispo and Santa Barbara counties.