SANDAG predicts moderate recession post-coronavirus

Posted at 4:17 PM, Apr 13, 2020
and last updated 2020-04-13 19:28:55-04

SAN DIEGO (KGTV) — Exactly one year ago, Leah Kirpalani opened the Shop/Good boutique inside One Paseo's retail center.

She never thought she'd now be running the business from her living room.

"We miss the space so much, we can't wait to all be back in there," Kirpalani says.

But that is the life for her and thousands of business owners and their employees amid coronavirus restrictions.

Shop/Good ended its spa services and is now selling its nontoxic skin care products online. In all, revenue is down 50 to 60 percent as Kirpalani awaits a federal stimulus loan.

"We're really holding onto what the state and federal government has communicated," she said. "The longer this goes on, the more scary that it gets."

How long this goes remains a key question of this era, and one economists are diving into.

A new forecast from the San Diego Association of Governments says the longer the disruption lasts, the bigger the recession will be coming out of it.

"It could be long, it could be short, it could be deep, it could be not deep," said Ray Major, SANDAG's chief economist.

Major says the agency looked at about 40 different scenarios. He's now predicting a moderate recession with the economy taking one to two years to get back to pre-coronavirus activity.

SANDAG is projecting two most likely scenarios:

  1. The restrictions lift in May, with a loss of $10.1 billion in taxable retail sales to the region. A moderate recession ensues, with the economy getting back to pre-coronavirus activity projected levels by July 2021.
  2. The economy hit is harder under this projection at the outset, with a $13.4 billion loss in taxable sales in May, growing to a $15.9 billion loss in June, when the restrictions are lifted. A moderate recession ensues, but this time it takes until July 2022 to get back to pre-coronavirus level activity.

SANDAG says the situation is fluid and that it will update its forecasting model as new information comes available.

Either way, the consumer will be the wild card.

"Will restaurants be able to just open up and everybody will be sitting next to each other? Will they have to minimize number of tables that they have there?" Major said. "Will people go to retailers wearing masks and just be okay with that, or do we still have to queue up in front of the store to get in?"

All of that will impact spending, at places like Shop/Good, and beyond.