Economist predicting nearly 15% local unemployment says time to recovery depends on getting crisis under control
“It wouldn’t surprise me at all if it moves up into the high teens and even pushes towards 20 percent”
SAN ANTONIO – At first, Steve Nivin could hardly believe his own projection.
“It sort of took me aback when I first saw the numbers,” said the economist and Associate Professor at St. Mary’s University.
Nivin, who was formerly the chief economist for the city, provided the projection of a 12 to 14 percent March unemployment rate for the eight-county San Antonio-New Braunfels metropolitan area that city staff presented to San Antonio City Council members on Thursday. Despite the eye-opening figures, which would surpass even what the area saw during the Great Recession of the late 2000s, Nivin believes they are valid.
And depending on how quickly the health crisis can be brought under control, he thinks they could get worse.
“It wouldn’t surprise me at all if it moves up into the high teens and even pushes toward 20 percent,” Nivin said Friday. “Again, I know those are astronomical numbers, but that’s that’s kind of a worst-case scenario where this drags on for for a good while.”
The levels would far eclipse the 7.7 percent unemployment rate the area saw following the Great Recession, according to data from the Federal Reserve Bank of Dallas. The February unemployment rate, the most recent entry on the website, was 3 percent.
As a record-breaking surge of Americans file for unemployment, Nivin said many industries are affected by the pandemic. It’s no surprise that the hospitality industry, which Nivin said accounts for about 13 percent of overall employment in the metro area, is a large driver of his local forecast.
“So when you have an industry like that bearing, you know, a large brunt of these types of shocks, then it’s going to have a pretty profound effect on your economy,” Nivin said.
Restaurants are limping along with only takeaway and delivery options, bars are closed completely, and hotels are temporarily shutting down amid reports of low occupancy rates.
While government orders meant to slow the spread of COVID-19 are an obvious source of much the economic disruption, Nivin says there would be negative effects even if there were no restrictions.
“So just the uncertainty around, oh, you know, this ‘if I go out to eat am I going to catch this thing?’ We’d probably have the effect to keep a good number of people inside anyway,” Nivin said.
Dealing successfully with the virus is first step to getting the economy back on track, he believes. While Nivin says the recovery is likely to be more rapid than during a typical recession, he said it will not be immediate.
“The unemployment rate is not going to stay at that high of a level for a year or whatever. But it's not going to just go from 12 percent, say, back down to 3.1 percent in one month,” Nivin said.
Many workers may find their jobs are gone, as businesses succumb to the deep shock of a sudden recession, and he expects a reduction in spending.
Nivin expects a return to normal economic numbers around the end of this year or the beginning of 2021. However, it all depends on how soon the virus is brought under control.
“It’s a lot of uncertainty,” Nivin said, “but that’s my sense of things right now.”
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