Fed Economists Say NE Ohio May See ‘Disproportionate’ Economic Impact from Virus
CLEVELAND, Ohio – Although data currently available isn’t enough to paint a full picture of the coronavirus’ impact on the economy of northeastern Ohio, an economist with the Federal Reserve Bank of Cleveland says it’s likely the region will take a hard hit.
“We don’t really have enough solid data now to know the difference [between northeastern Ohio and the rest of the country]. With that caveat, what we can tell from the available information is that it’s likely northeast Ohio will be disproportionately negatively affected by the economic impact of the pandemic,” said policy economist Joel Elvery. “Several of the industries that are particularly concentrated and important to the economy of northeast Ohio are ones that have been particularly hard hit.”
Elvery spoke about the economic impact of the COVID-19 pandemic during a Cleveland Fed webinar Thursday, joined by policy economist Hal Martin and senior economist Roberto Pinheiro.
The three industries Elvery highlighted are health care, automotive manufacturing and machine tooling. All three sectors have been named by Team NEO, a regional economic development agency, as among the largest business sectors in northeastern Ohio, with health care taking the top spot in a report by the agency last year.
The health-care sector, Elvery explained, is likely to see a dip in revenue as patients getting elective procedures continue to delay them, even after Gov. Mike DeWine’s order barring such operations in the early months of the pandemic has expired.
Auto manufacturing, meanwhile, will slow down as new-car sales remain depressed. Despite regional numbers rising in July, according to the Greater Cleveland Automobile Dealers Association, year-to-date totals are still down significantly from the first seven months of 2019. In April alone, regional new- and used-car sales fell 50% from the previous year.
“Auto parts production remains a very important piece of northeast Ohio’s economy. With auto sales down by a third in the second quarter, there’s going to be a negative impact on [parts production],” he said.
Finally, Elvery pointed to machine tooling. Regionally, the sector relies heavily on exports and with countries that are often large buyers of machine tooling products being hard hit – he named China and Brazil – it’s likely that the purchasing companies will delay orders from northeastern Ohio.
“If other countries aren’t buying from the U.S., that typically means they’re not buying from northeast Ohio,” he said.
One of long-lasting workplace effects of the pandemic, Fed senior economist Pinheiro said, may be work-from-home policies. While studies completed before the outbreak pointed to a reduced job satisfaction among employees working from home, a recent survey by Harvard Business School found an increase during the pandemic.
“One of the reasons that’s different from what we’ve seen in the past is that before, people working from home were just a couple people in the department, which made them feel isolated,” he said. “Now, with everyone working from home, it’s pushed people toward the benefits of not having a commute and things like that.”
A report in March by Stanford University professor Nicholas Bloom noted some jobs, primarily those involving clerical work, were seeing increased productivity among workers doing their jobs from home.
“Chatting with people at work can actually be more detrimental to productivity than making a trip to their fridge or doing some housework while they’re working from home,” Pinheiro said.
On an individual level, Martin said the financial impact of the coronavirus crisis is likely to fall disproportionately on low- and middle-income households, especially renters.
For households earning between $50,000 and $74,999 per year, the Census Bureau’s Household Pulse Survey conducted July 16-21 found that 86% of homeowners were able to make their most recent housing payment, compared to 85% of renters. At the lowest income level, below $25,000, the split was 74% of homeowners and 70% of renters. At the highest level – above $200,000 – the figures were even at 97%.
Looking ahead, the differences were more stark. Of homeowners in the $50,000 to $74,999 range, 73% said they had moderate or high confidence of being able to make their next housing payment versus 65% of renters. At the lowest income level, 62% of homeowners and 52% of renters reported the same. Above $200,000, 96% of homeowners and 93% of renters expected to make their next payment.
“One of the biggest impacts on workers from loss of income is their loss of home. Policymakers have been concerned about that since this began. Protections available to homeowners and renters are very different in this crisis,” Martin, the policy economist, said.
Meanwhile, evictions are down almost entirely across the board, regardless of whether municipalities instituted bans on filings or not. Year-over-year, when areas aren’t using a ban on either eviction filings or hearings, evictions are down about 45%. In areas where only hearings have been banned, that figure is 80% and, as expected, areas that ban both hearings and filings are down 100%.
“There was some expectation that there would be a surge, but we have to think about the policy context in which eviction takes places. There are several things that may continue to hold evictions down,” Martin said. “One is the pandemic unemployment assistance, which expired at the end of July, giving people an extra $600 per week that help households that otherwise would have been constrained. There are also local policies in place such as emergency rent funds, which Cleveland has in place and is accepting applications for renters who face eviction.”
Though parallels have been drawn between the coronavirus pandemic and the 1918 influenza pandemic, Pinhiero warned that it’s not always safe to use economic lessons learned in the outbreak a century ago in modern times.
Then, he says, the country was younger and the influenza pandemic saw the highest mortality rate in those between 15 and 44, with a rate comparable to what is seen today in the 75-plus population.
“This is going to have significant implications on the impact of the disease on labor markets and economic output. Another important distinction between the 1918 pandemic and COVID-19 is that the economy was quite different,” he said.
“In the 1918 to 1920 economy, it was quite concentrated in the agriculture and extraction sectors, which weren’t as affected by the measures taken to reduce the spread of the disease and are activities that are concentrated in rural areas.”
Copyright 2024 The Business Journal, Youngstown, Ohio.