Senior economist Richard Wobbekind (PhDEcon’84), associate dean for business and government relations, has worked for the Leeds School of Business since 1985. Here he discusses our nation’s economy in a pandemic world.
How do you best describe your job?
I think of myself first and foremost as an educator. I describe the work we do in the research division as a way to provide information for businesses and government that assists in their decision-making processes. My teaching role follows the same theme, providing a framework for decision-making and describing the best sources of information dependent on the industry sector a student might pursue.
When did the economic reality of COVID-19 first hit you?
It became clear to me in late February that supply chain disruptions were likely to occur due to the severe impact on the Chinese economy. The severity of the impact on the U.S. economy didn’t really strike me until the middle of March when the closures (including live CU classes) began.
Have things unfolded as you expected since March?
Early on I was expecting a more V-shaped recovery. By the middle of April, it became obvious that there was so much uncertainty with the virus that a longer and slower path to recovery was likely. Since that point in time we have seen some parts of the economy with a V-shaped recovery but other parts on a much slower path. The resurgence of cases wasn’t a surprise for us since we have been following the medical side closely. One can argue whether we should have kept the economy closed longer, but the economic devastation was so vast that we anticipated states would reopen. Unfortunately that led to rollbacks in a number of states.
What is the most concerning aspect of this pandemic for you?
The disproportionate impact on the people in our economy who can least afford it. We knew before this happened that there were income inequality issues, but the nation had a 3.5% unemployment rate so most people needing a job could find one. The issue was whether that job paid a living wage. Now people once concerned about earning a living wage have the highest unemployment rates. The jobs lost have disproportionately impacted women and minorities, who have higher concentrations of employment in the most impacted industrial sectors.
Are there positive outcomes you foresee arising from this time?
We will know the actual answer to this sometime in the future, but I believe so. Some of the most impacted individuals will develop new skill sets which will hopefully raise their wages. We will use communications technology in more productive ways (increasing economic efficiency). The U.S. will invest more in medical research.
What are a couple of things people can expect from the U.S. economy moving forward?
Unfortunately, until a vaccine is found, the economy will continue to cycle with the number of new cases and the rate of increase or decrease. The fiscal stimulus has helped stave off what would have been a significant drop in consumption, but consumer and business confidence remain the keys. Until we get this under control, uncertainty, and therefore diminished levels of consumption and investment, will rule the day.
That said, vaccines are not 100% effective so we will have to show that those infected can be treated successfully. Those changes will enable more travel, less distancing and basically return us to economic efficiency levels seen before the virus or potentially even higher.
How many years of recovery could it take for the economy to rebuild?
This is of course the great unknown. My best estimate is three to three and a half years. If you assume a vaccine sometime in the first half of 2021, the full recovery will likely take until the second half of 2023. This timeline is based on the level of economic disruption COVID-19 caused and the extent of the recession. We should actually be on a reasonable growth path the second half of 2021, but when you consider how many displaced workers need to be retrained and how many failed businesses need to be replaced, you begin to see why it will take several years.
Are there areas of business that are performing better than others right now?
A few areas, that are likely obvious, are the replacement activities such as e-commerce for conventional retail and commercial groceries for restaurants. In addition, those companies that provide or support internet technologies are thriving. Biological research is booming. Beyond those more obvious areas, however, there are others in high tech and defense that are doing quite well.
How has Boulder fared compared to similar cities during this time?
Based on the limited data that we can see at the city and county level, Boulder appears to be holding up nicely. A little lower unemployment rate, a decent retail sales bounceback, a lower concentration in leisure and hospitality employment and strong high tech and biotech sectors are a few of the reasons.
Any last thoughts?
It would be a catastrophe to suffer through this episode and not have huge positive improvements as the outcome. If we don’t have improved medical care, educational capabilities, technological efficiency and labor force skills, shame on all of us.
Condensed and edited.
Photo courtesy Richard Wobbenkind ; right: iStock/andresr