Looking Ahead

by Julie Shannon | Jan 29, 2021
Looking Ahead

With so much uncertainty still lingering due to the pandemic, South Jersey’s economic recovery for 2021 is largely dependent on the success of the COVID-19 vaccine rollout.

Predicting 2021’s economy is no easy task. Many places of work that aren’t considered essential are still closed, as are several schools and event spaces. Not to mention COVID-19 cases are still rising each day, which only delays openings even further.
 
But there is a light at the end of the tunnel when it comes to not just putting an end to the coronavirus, but for South Jersey’s economy to fully recover, and it starts with the COVID-19 vaccine. Distribution started at the end of 2020 with hospital and other health care workers receiving the first doses, which provided a sense of hope.
 
The experts we spoke with say the economy has recovered from 2020, but this vaccine is key to getting the economy rolling again.
 
“I think [the vaccine] is going to have an unbelievable impact,” says Michael Hayes, assistant professor of public policy, Rutgers University-Camden. “First, it allows businesses that have been most impacted—restaurants, malls, retail—to be able to open back up and people will feel comfortable. But more importantly, there’s going to be a surge in demand for those types of services and goods because people have been prevented from utilizing them because of the pandemic. It’s going to be safer, and most people are going to want to use these services again because they missed out on them last year.
 
“It also depends on if we can keep the spread [of COVID-19] to a minimum. If we can do those two items, then we’ll be able to keep it closer to normal which is great for the economy, great for consumer confidence and great for businesses making long-term investments. All those things lead to recovery and a positive economic growth.”
 
John Torrence, managing partner with Masso Torrence Wealth Management, says there are other factors he thinks are already contributing to the economic recovery.
 
“Besides the vaccine, I think the embrace of technology and health care, using them in more efficient ways is going to continue to revolutionize parts of the economy,” he says. “People understand if they have a sore throat they may not have to go to a doctor, they can have a telehealth appointment.”
 
Based on the current slow pace and other issues with the vaccine rollout, Oliver Cooke, Ph.D, associate professor of economics at Stockton University, says the economic recovery won’t be a quick fix—it will take some time.
 
“Based on current public health information, I assume the vaccination process will be relatively well developed/evolved by the third quarter of 2021. So, while I don’t expect a quick V-shaped recovery, I do believe the national GDP story will be fairly solid once we move into the second half of the year,” he says. “Additional fiscal stimulus should provide the economy additional support assuming it is passed quickly by the end of the first quarter/start of second.”
 
The newly administered Biden administration unveiled an astounding $1.9 trillion coronavirus relief package. It has not been finalized and critics are unsure if it will pass, but Hayes says if it does, he thinks it could provide enough relief for consumers where another large stimulus package would not be needed again to get out of this current recession.
 
“I think more than likely, this current stimulus package that is being introduced by the Biden administration could be the last—at least the last big one,” he says. “Will there be additional needed stimulus? Possibly, but more than likely this could be the last big stimulus package needed if able to help curb the spread of the virus.”
 
Hayes says the money from the relief package gives more aid to state and local governments and will have a bigger impact than most people realize.
 
“I think the additional aid to state and local governments is going to be a much bigger story in the recovery than I think is currently being considered,” he says. “That’s the sector where you can give your biggest bang for your buck, helping state and local government balance budgets and minimize the likelihood of laying off employees, particularly employees that had middle-class jobs.”
 
Additionally, with consumers not spending nearly as much money as they would pre-pandemic at places like restaurants and malls, Hayes says he expects them to spend the money they have pocketed away as soon as more places open up.
 
“There is a lot of money parked on the sidelines,” he says. “The savings rate in this country has grown substantially over the last year. Households received stimulus checks and that money was put in the bank, so we’re going to have consumers who are ready to spend. That’s always good for businesses and recovery.”
 
But, Hayes notes if there continues to be a surge in cases and the vaccination rollout doesn’t pick up, it will make it much more difficult for businesses “on the edge of failing to come out ahead of this.”
 
Good news on the job market is the unemployment rate is slowly coming down, but it may not fully recover for almost a year.
 
“I think job market recovery will lag by several months as businesses that have been the most adversely affected will take the first six months of the year to gauge the economy’s momentum, take stock of their staffing levels [in light of their 2020 experiences], etc.,” Cooke says. “So, I don’t expect to see a full job market recovery until late 2021.”
 
“We’ve recovered at least 50% of the jobs that were lost. What’s uncertain is the other jobs that have been temporarily lost, will they turn into permanent loss jobs? That’s going to have a huge impact on what the economy of 2021 will be,” Hayes adds. “The challenge is, if that is the case, we could have a longer recovery. The stimulus package can make an impact on preventing some of these temporary job losses not to become permanent, particularly when it comes to the state and local sector.”
 
The pandemic has also caused people to look at their finances in a different way and take extra steps to make sure their assets are protected.
 
“Our clients are spending more time with their accountants and attorneys to get a holistic view of the financial picture. Deciding what they want to do from a tax situation, setting up trusts and retitling things,” Torrence says. “We’ve always done that in the past, but now it’s heightened based on the new variable.”
 
Between the vaccine and consumer confidence slowly coming back, and a mix of hope and patience, there is cautious optimism about South Jersey’s economy getting back to where it used to be pre-pandemic.
 
“I'm fairly optimistic that things can improve,” Hayes says. “We see with the Biden administration, the president signed the executive order bringing the National Defense Production Act into play and it makes you feel like this administration is taking this issue a lot more seriously. That’s good news for consumers and businesses.

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“We can see the light at the end of the tunnel, but we have a lot more work to do to make sure we get through the next couple months.”
 
 
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Published (and copyrighted) in South Jersey Biz, Volume 11, Issue 1 (January 2021).

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Author: Julie Shannon

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