PITTSBURG — As the coronavirus crisis and governmental restrictions on business and public activities in response to it continue, a major question that remains difficult to answer is what the long-term economic impact will be.
Nationwide, restrictions put in place in response to the COVID-19 pandemic have resulted in millions of layoffs. In Kansas, in the week ending March 21 there were 23,563 initial unemployment claims, according to the US Department of Labor — more than 10 times the weekly average over the previous ten weeks. Claims more than doubled again the next week to 54,330.
In a recent interview Pittsburg Area Chamber of Commerce President Blake Benson discussed the local economic impact of the novel coronavirus and the government’s response to it.
“Our retail and service sectors were hit first and hit hardest, although grocery stores, liquor stores, restaurants that relied heavily on delivery are actually still doing well,” Benson said.
“I think the most damaging part to the retail and the service sector is that here locally they are typically able to know what to expect from each time of the year, and this is typically a pretty busy time of year and this just basically dropped off the cliff overnight, so our retail and service sectors really didn’t have time to prepare for it, so I think that’s been kind of an extra edge to this that’s made it even more difficult for them.”
One of the biggest concerns for local small business owners is what will happen to their employees — or those who were their employees until they were recently forced to lay them off.
“They have the same concerns that we all do about their family and their health, but our business owners are also concerned about their customers and their employees while also being concerned to make sure that those employees still have jobs on the other side of this,” Benson said, “and I know that has really weighed heavily on the minds of our local business owners, is they truly look at their employees like family and absolutely want to avoid layoffs if at all possible.”
Staying up to date on the seemingly ever-changing rules governing their operations has been a significant challenge for businesses, Benson said.
“I think our businesses just want to know what is expected of them and they want to know the parameters around who can operate, who needs to shut down. If they are still deemed essential and they’re allowed to operate, what are the requirements as far as spacing and the precautions that they need to take into account? So I think that has probably been the most frustrating thing for business owners,” he said.
Last Thursday, Benson said, the chamber spent much of the day “trying to decipher” Gov. Laura Kelly’s latest executive order, which was the subject of much media coverage mostly because of its restrictions on church gatherings, but also “did make it sound like restaurants could be open as long as tables were spaced six feet apart,” Benson said.
“This has been such a fluid situation that I don’t know if that was just an oversight, but at the end of the day it was really rendered null and void with the Legislative [Coordinating] Council overturning the governor’s order,” he said. That decision by the LCC has itself now been reversed by the Kansas Supreme Court, however, and it remains somewhat unclear how Kelly’s Executive Order 20-18 affects businesses such as restaurants.
“I think, as the Governor’s order relates to restaurants, it was intended to reiterate that while restaurants may still offer takeout and delivery, they must maintain the social distancing requirements for their customers,” Benson said in an email Monday. “It didn’t say that specifically, so there’s room for different interpretation, but this would be consistent with the Governor’s previous orders.”
While it was later superseded by another order from the governor, the Crawford County Board of Health issued an order in late March that was never formally rescinded and which prohibited public access to the inside of bars or restaurants, while still allowing curbside service.
Another aspect of the coronavirus crisis that remains unclear is what long-term effect it will have on other kinds of businesses, such as manufacturing.
“Whether manufacturing will get hit hard will likely depend on how long the national and global economic slowdown lasts,” Benson said.
Dr. Michael Davidsson, director of Pittsburg State University’s Business and Economic Research Center, similarly said in an interview last Friday that the long-term economic impact of the coronavirus crisis depends on how long restrictions have to remain in place.
“I would say what’s going to happen in the near future of course is going to depend on how long this COVID virus situation is going to last,” he said. “These quarantine or stay at home orders that we have gotten are of course devastating for the economy — if they’re going to last a long time. But if they only last another one week or two weeks I think it’s not going to be a problem.”
Davidsson stressed that the local economy has been doing well and improving rapidly in recent years, and that if extensive restrictions on business operations and public activities do not remain in place for an extended period of time lasting for months, it is likely to quickly recover.
In the last five years, Davidsson noted, over $44.7 million has been invested in Pittsburg in the retail and service industries alone, and more than ten times that amount has been invested in the local economy in all industries combined. The number of households in the middle income bracket, meanwhile, increased by 9.5 percent from 2010 to 2019 — much higher than the average for Kansas or the United States overall.
“So you can see that the economy is on a good foundation, and so obviously the longer this situation lasts with the quarantine and people staying at home and only essential workers working, obviously the more likely it is that our economic foundation is going to be eroded. But it is on a very good footing, very solid,” Davidsson said.
“If it prolongs and you continue to get layoffs nationwide, and you’re talking about maybe another two or three months, then of course the economy is going to be in trouble, the local economy. But the local economy as it is today is on a sound foundation. So it has local businesses. They are in good shape — or were in good shape when this pandemic hit. And how long it’s going to take for the economy to falter, it's difficult to say, but definitely if you’re talking about three or four months, I mean then obviously we are going to see a major recession.”
On Friday, Gov. Kelly reportedly said she would extend her statewide “stay-at-home” order by “early next week,” but her office had not made any announcement giving further details by early Monday afternoon. A resolution approved in March to grant emergency powers to Kelly only lasts through May 1, however, so it seems that would limit how long she can extend the order.
Davidsson said he hopes the restrictions put in place in response to COVID-19 can be eased by early May and people can go back to work. Even if that happens, however, the recovery of the local retail and service industries could be slowed because Pittsburg State University students will not be returning to campus before the end of the semester, Davidsson said.
“If the Pittsburg area economy takes a major hit, it will be a devastating blow to the Southeast Kansas region, not only to Pittsburg and the Pittsburg area,” Davidsson said.
Whether other kinds of local businesses besides those in the retail and service industries, such as manufacturing, see a major impact from the coronavirus crisis “depends on the national economy,” Davidsson said. “Of course most of the big businesses locally are national in scope, they produce for the national economy.”
In discussing the improved local economic situation in recent years, Davidsson noted that in 2019 alone home sales in Pittsburg increased by 19 percent, with a 29 percent increase in median sale price. Whether areas of the economy such as the real estate market take a hit as a result of the COVID-19 pandemic depends, again, on how long the coronavirus economic shutdown lasts, Davidsson said.
“I think if we don’t see a significant improvement in the next two months — and I would say one or two months — then you’re going to see some pessimism set in nationwide,” he said.
“I think, you know, in the beginning of May, I mean I really hope that’s going to happen, that everyone that is not sick and not high-risk will be able to go back to work, gradually at least, and you know with the understanding of course that we have to change our behavior. You might have to wash your hands 15 times a day and can’t really congregate in the workplace, you have to have social distancing and so forth. But as soon as people are able to go back to work, then I think people are going to start to see the light at the end of the tunnel and you’re going to get this optimism back,” Davidsson said.
“I think when people start to get optimistic you’re going to get a major boost in the economy because I really believe that everyone is going to be going out and enjoying the freedom of being able to go out and congregate, you know, so I think all the restaurants and services are going to be busy — if that happens.”