State’s economy derailed rapidly, but could get back on track quickly, too, expert believes
by Matt Harvey, Managing Editor
April 20, 2020
MORGANTOWN — One of the state’s leading economic experts hasn’t seen anything to compare with the way the economy derailed due to the COVID-19 pandemic.
However, Dr. John Deskins, director of the Bureau of Business & Economic Research at West Virginia University, eschews comparing this event to the flu pandemic of 1918, or The Great Depression.
And Deskins sees a quick turnaround for the West Virginia economy, with one caveat: If it takes until a vaccine is developed for a return to a semblance of normalcy, meaning probably not until sometime in 2021, that could spell trouble.
Deskins doesn’t believe the current economic crisis is “comparable to anything. I have never heard of a recession occurring like this. Like the last recession, 2008-2009, there were some deep-seated problems in the economy that were building for years, in some cases a decade, leading up to ’08-09.”
“And every thing finally came to a head, there was a financial crisis, and the economy was thrust into a deep recession. And other recessions were caused by various crises, like the ’73 oil embargo, something like that, where there’s a pretty clear, well-designed cause,” said Deskins, who’s also assistant dean for Outreach and Engagement of WVU’s John Chambers College of Business and Economics.
“But I don’t know of anything like this where a crisis occurs and our economy is shut down in an instant, or at the very least parts of our economy, like a lot of entertainment venues, restaurants, bars, etc.,” he said.
“I’ve never heard of anything like this. We have had major health crises in the past: Some of the things like the Spanish flu of 1918. That’s so long ago — it’s kind of hard to talk about economic events before World War II because the economy was so different. I think it’s unprecedented in modern times to see a shutdown of our economy of this scale, and a shutdown that happened so abruptly,” Deskins said.
“You know we think the unemployment rate in West Virginia is about 15 percent right now. The official data aren’t out yet, and the next specific unemployment rate that comes out might not actually be 15 percent, because it’s kind of going to be reflective of what happened over the course of a month, altogether; it’s not like an instantaneous rate,” he said.
“But when we finally get the real rate, we think it’s going to be 15 percent. So we’re talking about a jump from 5 percent to 15 percent that happened virtually overnight. Never heard of anything like that happening before,” he said.
Deskins acknowledges it’s “hard to say” how many state residents thrust into unemployment by COVID-19 will return to their job rapidly, or in some cases, at all.
“But, I’m optimistic that we’re going to have a relatively quick recovery once the shutdown ends. Again, the cause of the recession was so clearly well defined. Normally, there are a few things that come together to create a recession. But this time it was one thing, and it’s very clear,” Deskins said.
“And when that ends, I think we might be able to enjoy a relatively quick recovery. Once people are confident that the virus scare is over with, restaurants, bars, entertainment venues, baseball, whatever, should bounce back to normal pretty quickly,” he said.
“I mean it won’t be completely back to normal, because some people will still have lingering fears, and I’m sure there will be some people who are more reluctant, even after things open back up officially,” Deskins said.
“But I’m still optimistic it will be relatively quick. There will be some kinks that emerge in the economy that take some time to unfold, so I’m not saying we’ll go from 5 percent to 15 percent back to 5 percent overnight,” he said.
“But I think it will be relatively quick, at least quicker than what we’ve seen of the past three recessions or so. The past recession took years. The ’08-09 recession, it was several years before our unemployment got back to normal. But I don’t think that will be the case this time,” Deskins said.
Getting back to normal
Deskins’ expertise isn’t in the public health arena, so he isn’t prepared to comment on what has to happen in addressing COVID-19 to help the country get moving again.
Still, “my personal opinion is I think that once the numbers start to go back down and once people see that people are back out again and things are happening again, I personally think that people will gain confidence relatively quickly,” he said.
“But I don’t know for sure. If it does take a vaccine, then that’s going to be a much longer time frame, because it takes a long time to get vaccines through approvals, manufactured and administered,” Deskins said.
A vaccine might take a year or longer, health experts have said.
“If it takes a year, it will be dramatically different. You’re going to see major kinks develop in the economy,” Deskins said. “Right now, we have a lot of federal government relief. Some employers are able to make it through on their savings in terms of keeping their employees online, keeping their employees paid.
“In some cases, landlords are providing like little holidays for payment, based on the expectation this is going to be relatively quick, one or two months maybe. But if it takes a year, I think the repercussions could be dramatically larger. So let’s hope that’s not the case,” Deskins said.
If the economy recovers quickly, Deskins doesn’t see many West Virginians needing to update their job skills or getting training in other fields.
“If it does end in May or June, then I think the economy can get back on its footing quick enough that a lot of people will start to get their jobs back and they won’t be thinking about a long-term investment like that,” Deskins said.
“But the longer it takes, the more people will probably think about updating their job skills, getting more training and putting in more effort to update those skills,” he said.
But if that becomes a necessity, Kathy D’Antoni, associate superintendent for the West Virginia Department of Education’s Division of Technical and Adult Education, believes West Virginians have a great resource.
She points to the state’s Advanced Career Education program that’s available at most career technical centers in West Virginia.
Residents can learn to weld, run heavy equipment, drive a truck or train for certain medical jobs.
“It’s an unbelievable opportunity, and they’re available in almost every county,” D’Antoni said. “It would be worth a person’s time to look and see what’s available in their area of interest.”
Some students also can obtain Pell grants to pay for these courses, she added, pointing those interested in this kind of education to wvace.us. These classes remain temporarily suspended for now due to COVID-19.
Others may decide now’s the time to start their own small business, or augment their current one.
Anne Barth, executive director of TechConnectWV, said they have resources to help.
“Of course, we don’t yet know how the stay-at-home order will be lifted, or when it will be lifted. It may be that some people who were displaced from their jobs are giving thought to other possibilities, including starting their own business,” Barth said.
“Perhaps it’s a business idea that came from watching the effects of stay-at-home orders and how that’s changing daily life. Maybe it’s someone who has long held a dream of starting their own business, and the pandemic was the impetus needed to get them to take the first step,” she said.
“Either way, there are programs to help. Some existed before the pandemic, but have now been moved online. TechConnectWV has moved our SBIR-STTR bootcamps online, and we’re encouraging small business owners who may have found some extra time to explore research and development opportunities during the crisis to participate,” Barth said.
“The INNOVA Commercialization Group in Fairmont has a program for entrepreneurs launching companies called 3 Steps to StartUp, and that work continues even as parts of the program go virtual,” she said.
“Advantage Valley has launched the FASTER West Virginia program to promote entrepreneurship, which will help foster new small businesses and support existing ones. More information is available at https://advantagevalley.com/faster-wv-initiative,” Barth said.
“Others are new programs that help business owners who are struggling to adapt to all the changes that have come about because of the pandemic. Co-Starters is offering a free, virtual two-hour workshop to help business owners figure out their next steps,” she said, adding that can be reached here.
“These are just a sample of what we see happening in the entrepreneurial ecosystem, but it’s still early and all of this is evolving,” Barth said.
Depression comparisons don’t fit
The Great Depression wasn’t a case of the economy cratering overnight, even though many people believe that’s what happened.
“No, no that’s not true. The Depression unfolded over the course of three years, really. It started, of course, in October 1929, but it continued to unfold until 1933,” Deskins said.
“The initial stock market crash was a bust, where the stock market lost about a third of its value in one day. But the market went on to lose far, far, far more over the following two or three years,” he said.
“Furthermore, the Depression was very complex. A lot of things were happening. But it definitely unfolded more slowly than this, and the causes of the Depression were building over the course of the whole decade of the 1920s,” he said.
“It was a long buildup as well in terms of the stock market bubble and other problems of the economy and the financial system that caused the Depression,” Deskins said.
Probably the only way 2020 and 1929, or 1933, are somewhat the same is the unknown of what lies ahead.
“It’s the most uncertain times that we’ve had in our economy for a long time,” Deskins said.
“I think that’s actually a key takeaway, just the level of uncertainty and how unprecedented it is. The severity of the decline, the speed of the decline, and the uncertainty,” he said.
“But, we still have optimism for a relatively quick recovery once we see the virus being contained.”