MSU Extension webinar details economic fallout of COVID-19
Last updated 4/3/2020 at 11:52am
Speakers at a free webinar hosted by Montana State University Extension Thursday said despite recent legislation passed by Congress, industries around Montana will continue to face serious economic challenges as the COVID-19 pandemic continues.
“There’s a huge private sector financial storm,” Bureau of Business and Economic Research Director Patrick Barkey said.
In the webinar, Barkey gave a status update on where he thinks things stand for Montana and the U.S.
“In some ways it’s not a surprise. All growth comes to an end there’s always a recession,” he said, “The fact that the recession itself comes from a surprising source, is not a surprise, that’s how recessions work.”
He said even before novel coronavirus 2019 made it to the U.S. it was disrupting Asian supply lines and was having significant impacts on the global economy. But in the last few weeks COVID-19 has cratered consumer spending and led to a record-breaking rise in unemployment. Barkey said these problems exacerbate each other.
“When people lose money, they don’t buy as much stuff,” he said.
George Haynes, a professor and agricultural policy specialist at Montana State University Extension said, the number of Montana’s who filed for unemployment during the week of March 15, was 15,000. The worst week during the great recession was just under 4,000.
Barkey said if people have to shelter-in-place for three months it will suspend a third of all jobs in the national economy.
“That’s 45 million jobs,” he said.
Barkey said developments on the federal level are encouraging. He pointed to the recent drop of interest rates and the recent stimulus package as positive progress.
“Where the economy goes in the future depends largely on how well and how fast we react to it,” he said.
Barkey said the government will need to do more, but injecting funds directly into households and small businesses is what needs to be done to keep the economy from collapsing.
He did however express concern that there seems to be no “tariff holiday” on the horizon yet. He said the U.S. should be negotiating to suspend tariffs and disengage from the trade war with China.
Barkey also said the federal government should avoid some things as the situation progresses.
“We don’t need crony capitalism, which is rolling out your favorite project, be it an infrastructure bill, all kinds of slow moving stuff that really just benefits large companies doesn’t really solve the problem it just uses the crisis as an excuse to do things,” he said, “We really don’t need that.”
He also said now that these initial stimulus packages have been passed, the government needs to make sure that the most attention is being paid to those that are the most vulnerable to economic devastation.
“The needs are great, and some people really don’t have them,” Barkey said.
He said how deep the coming recession will be and how quickly the economy recovers depends on how the pandemic progresses and how the U.S. responds to it. But regardless people should be prepared for a rough time.
“There’s going to be a lot of bad economic news ahead,” he said. “… All the economic measures are going to be really scary, unprecedented, use whatever word you want to use.”
Barkey said in addition to the skyrocketing unemployment, other economic indicators like tax receipts and overall growth are going to be grim going forward.
He said Oxford Economics is predicting an 80 percent drop in tourism to Montana for the month of March, and even though March is not a big tourist month such a substantial drop is troubling.
“Our peak is in the summer, but people are making plans today, so even 25 percent is a huge blow to a place like Montana,” he said.
Bear Paw Development Corp. Executive Director Paul Tuss also expressed concern about tourism and the industries connected to it.
“If your business relies on dollars from tourism, and those tourists aren’t coming, boy that’s gonna be difficult,” Tuss said in an interview.
He said if the outbreak lasts until summer it could devastate many industries in Montana. Havre’s proximity to Glacier National Park, which closed March 27, makes puts it in a vulnerable position.
“If that visitation is stopped, there’s going to be a lot of dollars that we normally anticipate, that will not be flowing into our regional economy,” he said.
Tuss said restaurants, motels and recreation would all be affected by this decrease in tourism. But he added that any business relying on walk-in traffic is going to be hit hard by COVID-19 and Havre’s small businesses are among those in danger.
“That’s a generalization, but I think it’s an accurate generalization,” he said.
He said businesses in the area will need to take advantage of the programs put in place by the federal government.
“My recommendation to small businesses that are having a difficult time during this crisis is to make sure that they take full advantage those programs, whether it is through the Small Business Administration or other agencies,” Tuss said.
He said Bear Paw’s website at https://www.bearpaw.org has a page devoted to the various resources small business may have access to amid the COVID-19 pandemic.
One of those resources was detailed by Haynes in the webinar: The Paycheck Protection Program. He said this program is uniquely advantageous to small business owners who are having difficulty keeping people employed during the pandemic.
“There’s a chance that it could turn from a loan program into a financial support program,” he said.
Haynes said the program, which begins today and runs through the end of June, allows business owners with fewer than 500 employees to apply for a loan equal to 2.5 times their average monthly payroll. People in the hospitality business can count employees by establishment instead of companywide.
If the business owner maintains their current level of employment and salary level for eight weeks, the loan will be forgiven in its entirety. It is currently unclear if average salaries will be based on data from the previous year or since Feb. 15 of this year.
“This is an opportunity to keep people employed,” Haynes said.
He said 75 percent of the money from this loan must be used for payroll, but any left over can be used for utilities or rent. The business will also have to be in existence since Feb. 15 of this year to be eligible, and the money can be used for expenses incurred any time after that date as well.
He said if a business lays off workers during that eight-week period they will be penalized in proportion to the number of lay offs and less of the loan will be forgiven.
Haynes said the loans have two-year maturity at half-a-percent interest with deferred payments for six months and no collateral or personal guarantees.
He encouraged business owners to find an SBA-certified lender quickly.
“If you want money out of this, I think it’s really important that you get in and talk to a lender as soon as you can,” he said.
“Tomorrow is going to be a big day for the Small Business Administration,” Haynes added, “because they’re going to be asked to oversee putting in $349 billion into the economy as guaranteed loans. To give you some perspective on this, a year ago they did about 23 billion.”
He said the SBA will also be providing Economic Injury Disaster Loans that allow loan advances of up to $10,000 which can be received in as little as three days. People who apply for these loans are also able to apply for Express Bridge Loans of $25,000 while they are waiting for the full amount of the EID loans to arrive.