A&M expert: Local economic health tied to COVID-19 vaccine
BRYAN, Texas (KBTX) - The September edition of the Texas A&M Private Enterprise Research Center’s Economic Indicators of the College Station-Bryan MSA was recently released. So we sat down with the Director of PERC, Dennis Jansen to break down the findings.
You can view the full report here.
You can view the condensed version of the interview in the player above.
Look below for a full transcript of the complete interview.
Karla Castillo: So let’s start with the unemployment data. Specifically, the weekly unemployment claims here in Bryan-College Station. We were dropping in claims from the beginning until the end of July. But in the last month, claims are trending upward. What could cause unemployment to rise in the last three to four weeks?
Dennis Jansen: The unemployment claims at the state level had a similar pattern. They too declined from the week ending July 4 to the week ending August 8. The next four weeks at the state level exhibit the same pattern. New state-level data were released yesterday for the week ending September 12. The number of initial claims in the state, 49,644 for the week ending September 12, was the lowest since March 14. If our MSA continues to follow the same pattern as the state, our numbers could also be lower for the past week. Also, these are seasonally unadjusted counts, so we are seeing all of the fluctuations, and some of the fluctuation may possibly be seasonal effects.
KC: A similar trend can be seen in state numbers but not U.S. numbers. Any thoughts as to why?
DJ: The local area is much more attuned to what is happening within Texas than to what is happening nationally. There is also the seasonal adjustment issue – the local and state numbers are not seasonally adjusted.
KC: Looking at the unemployment rate locally versus state and nationally, is our area recovering quicker than the state and national average?
DJ: Our area is faring better than both the state and the nation. Texas is faring better than the nation. Our unemployment rate is much lower than the state level, and the Texas unemployment rate is lower than the overall USA rate.
KC: Looking specifically at the leisure and hospitality industry, it appears as though that sector of the economy has bounced back well. In April there were more than three-thousand fewer jobs than in April of 2019. But now in July, we’re down just two-hundred jobs. Is it possible for the industry to get back on track with the return of football and how much is that industry an indicator for our overall economy?
DJ: Good question. One thing to keep in mind is that employment typically falls in the leisure and hospitality industry in our local area in the summer, and this is not the usual pattern in the state or nation. Typically employment in leisure and hospitality goes up in the summer.
Our falling employment in this industry in the summer is due to the relative slowdown of activities at Texas A&M University in the summer, including the departure of students. Because we always have a lull in employment in leisure and hospitality in the summer due to low activity on campus, the COVID-caused slowdown in leisure and hospitality employment in the summer does not show up much. We would already be having reduced employment.
That said, the fall is typically a time of a jump in employment in leisure and hospitality in the local area, with students moving to town and activities at TAMU increasing, including football. This year the students do appear to have largely returned to town, but activities at TAMU are reduced relative to prior years, and the attendance at football games and other events will be much reduced. So I do not expect the industry to return to 2019 levels during the fall. They will improve over the summer, as always happens, but the improvement will likely not be as much as in a typical fall semester.
KC: The year-to-date taxable sales are down four-percent or roughly one-hundred million dollars for our local area. How big of a lasting impact does that missing four-percent have in the near future and for years to come?
DJ: The reduction in taxable sales is largely a permanent loss of sales. Some of these purchases might still take place in future months, but many are lost forever. The main question is whether the decline in monthly sales continues into the future, or if monthly sales returns to levels seen in 2019 and even grows beyond that level. Time will tell. Eventually, the level of sales should return to prior levels, but the timing of this return is currently a question mark. The state-level data indicates that, for the same period, sales tax revenues are down 3.6%, so the local situation is quite similar to the statewide situation.
KC: Lastly, looking at the B/CS business cycle, the great recession pales in comparison to what the pandemic has done to our economy. Is this the greatest economic challenge in our nation’s history and will we be able to fully recover by the end of the decade?
DJ: The Great Recession was a typical recession in that it built up slowly but then persisted for some time, with a slow recovery. The local economy stalled at the same level for almost 3.5 years during/after the Great Recession. The current crisis is different. Covid-19 has caused one of the most costly public health crises we have faced, and part of that cost is that in dealing with the public health crisis we have caused an economic impact unprecedented in its speed and magnitude. The rebound of the last two months is encouraging, but it is hard to say what will happen going forward.
A remaining issue is the length of time until we return to something resembling economic normalcy. A safe and effective vaccine, arriving quickly, will hasten the recovery. The economy needs two things, a lifting of government-imposed restrictions, and for consumers to willing return to activities such as flying and to certain activities that are difficult when respecting social distancing, such as large indoor and outdoor gatherings for sporting events, for concerts, for amusement parks, and so on. A vaccine would provide a big boost in this direction. The Congressional Budget office projects that it will take two years for output to get back to where it was before the current recession. I tend to think that the recovery will be somewhat faster than currently predicted by the Congressional Budget Office and other forecasters, but all forecasts of our economic future depend at least implicitly on an assumption about the appearance of that safe and effective vaccine, and economists have no special knowledge of vaccines and the development of vaccines. So, again, time will tell.
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