Regional Business Conditions and Long-Term Recovery from COVID-19 (Greater Washington Board of Trade). The COVID-19 pandemic is a public health emergency with far-reaching and severe economic impacts. Tom Barkin, President & CEO of the Federal Reserve Bank of Richmond, explained what the Fed has done to address the pandemic crisis and how he sees that dovetailing with other government intervention. Key points from his remarks include:
The economic impacts are serious.
• The US is mostly a service economy, and now 70% of the service sector has been shut down. Other industries have been deeply impacted too, including auto sales, hospitals, retail, and airlines. Unemployment claims have skyrocketed.
The response has three lanes: public health, fiscal, and monetary.
• We can’t get our economy rolling again without knowing that people will be safe. The best “stimulus” would be widespread testing. Making sure the hospitals have enough capacity and that we are working as quickly as possible on a vaccine are also important.
• The second lane is fiscal. The aim here is stabilization more than stimulus. The challenge now is delivering these benefits to people and businesses in a timely manner.
• The third lane is monetary. With lessons learned in 2009, the Fed was able to move the fastest, dropping interest rates to 0 among other steps.
How do we get to the other side of this economic crisis?
• We need our essential industries to continue to operate and for those workers to be safe in their jobs. We need a return of confidence where consumers spend and businesses invest again. For this, we are going to need a health protocol. You need to know that you can go shop, or go to a restaurant, and you aren’t going to put your life at risk.
For the latest case totals and peak resource use forecasts by state, the Civic Meter COVID-19 Tracker maintains updated data, click here.
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Two recent pieces of legislation, the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) contain provisions intended to help small businesses affected by the COVID-19 pandemic. As an added resource, see the Small Business Administration’s resource page for Coronavirus Relief Funding Options, click here.
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How Are Small Businesses Adjusting to COVID-19? (National Bureau of Economic Research). To shed light on how COVID-19 is affecting small businesses – and on the likely impact of the recent stimulus bill, researchers conducted a survey of more than 5,800 small businesses. Several main themes emerge from the results. First, mass layoffs and closures have already occurred. In the sample, 43 percent of businesses are temporarily closed, and businesses have – on average – reduced their employee counts by 40 percent relative to January. Second, consistent with previous literature, many small businesses are financially fragile. For example, the median business has more than $10,000 in monthly expenses and less than one to two months of cash on hand. Third, businesses have widely varying beliefs about the likely duration of COVID related disruptions. Fourth, many businesses planned to seek funding through the CARES act. However, many anticipated problems with accessing the aid, such as bureaucratic hassles and difficulties establishing eligibility.
State Economic Performance
Initial Unemployment Claims Remain Near Historical Highs (Upjohn Institute). The last few weeks have seen an extraordinary influx of workers losing their jobs and filing claims for unemployment that has accompanied state-ordered business closures and stay-at-home orders in response to the COVID-19 pandemic. For the week ending April 4, the number of initial claim filings for unemployment insurance (UI) after seasonal adjustment was 6,606,000, a decrease of 261,000 from the prior week’s (revised) record high of 6,867,000. The map below shows cumulative claims since the surge began during the week of March 15. To show magnitudes on a common scale, claims are shown as a percentage of the state’s average payroll employment over the past 12 months. Of the ten most populous states, five have cumulative initial claims that exceed 10 percent of employment: Michigan (18.4 percent), Pennsylvania (17.6 percent), Ohio (12.4 percent), California (12.4 percent) and Georgia (11.6 percent).
Topics and Trends
* SEDE Webinar Recording Now Available *
State Approaches to Increasing Production of PPEs
States are wrestling with how to coordinate assets supporting increased production of Personal Protective Equipment (PPE) and the roles that state agencies and officials can play. This includes options for how to: engage the right partners to link demand with potential supply, tie together the suppliers of raw materials and component parts, and provide financial and technical assistance for companies willing to pivot. Listen to the April 10, 2020, SEDE Network webinar on State Approaches to Increasing Production of PPEs, where Kelly Schulz, Maryland Commerce Secretary, Mark Burton, Michigan Economic Development Corporation CEO, and Bert Brantley, Georgia Economic Development COO, highlight efforts in their states along with other examples and ideas that merit broader consideration. Stefan Pryor, Rhode Island Commerce Secretary, moderated the webinar.
What Each State is Doing to Help Restaurants Harmed by COVID-19 (Restaurant Business). Individual states have been determining policies for dealing with the coronavirus. A vast majority of them have chosen to close restaurants to all but delivery and takeout, dealing a major blow to the industry. States are offering different types of assistance to restaurants in response. The most common concessions by states are allowing for the sale of alcohol for delivery and takeout as well as the extension of deadlines for filing and paying taxes. About a dozen states are offering emergency loans for eligible small businesses, including restaurants. Just a few have set aside funding for restaurants specifically. On the federal level, small businesses are eligible to apply for low-interest emergency loans via the Small Business Administration (SBA). And the $2 trillion aid bill passed by Congress also has provisions that can help restaurants.
* SEDE Webinar Recording Now Available *
US Trade Policy Update for State Economic Development Executives
Passage of the USMCA, progress on China, new opportunities emerging with the UK, the European Union, India…and most recently, the Coronavirus pandemic. The landscape for trade and tariffs is changing quickly. Listen to the March 24, 2020, SEDE Network webinar on US Trade Policy Update for State Economic Development Executives, where Christopher Sands from Johns Hopkins University School of Advanced International Studies (SAIS) and Jennifer Hillman from the Council on Foreign Relations discussed the US Trade situation: what’s happened, what it means, and implications for state strategies. Andy Karellas, Executive Director of the State International Development Organizations (SIDO), moderated the webinar.
Outdoor Recreation Industry Seeks Tariff Payment Deferrals (Daily Camera Colorado). If you think U.S. companies’ anxiety over tariffs has faded into the background with the coronavirus pandemic raging, it hasn’t. The outdoor recreation industry says the economic blows dealt by the worldwide health crisis make it more important to ease the tariff burden on goods from China. The Boulder-based Outdoor Industry Association is rallying its members nationwide to urge their elected representatives to support deferring tariff payments for at least 90 days consistent with the three-month delay in filing and paying income taxes. While agriculture has been a prime object of China’s counter punches, the outdoor recreation industry paid high tariffs on many goods before the trade war ignited. Levies on outdoor products, including clothes, backpacks and tents, averaged about 14% with some nearly 40%. Then the industry saw those tariffs jump by 10% and 25% on a wide range of goods. A delay in payments would help these businesses with cash flow issues given that stores like REI are closed and outdoor recreation is constricted with the closure of ski resorts and national parks.
Opportunity Zone Deadlines Extended by Covid-19 Disaster Declarations (JD Supra). All 50 states as well as the U.S. Virgin Islands, the Northern Mariana Islands, Washington, D.C., Guam and Puerto Rico have received a federal disaster declaration. American Samoa is the one U.S. territory that isn’t under a major disaster declaration. These declarations will extend two important deadlines in the rules relating to investments in qualified opportunity zones. First, the 31-month deadline for spending cash or other financial assets held by a qualified opportunity zone business under a working capital safe harbor plan can be extended by as much as 24 additional months. Second, where an opportunity fund receives capital or proceeds from the sale of qualified property, it has 12 months to reinvest the funds before they will be counted in the fund’s 90% asset test. The fund can get an additional 12 months to reinvest the funds if the fund’s ability to reinvest is delayed by a federally declared disaster. To view the Final Regulations on Opportunity Zones issued by the U.S. Treasury Department and IRS, click here.
How OZs Can Support Affordable Housing Creation, Preservation (Novogradac). Even with standard funding streams—affordable housing properties often rely on a combination of bank financing and tax credits—budget gaps remain. Federal sources of funds for construction and preservation, such as the Community Development Block Grant Program and HOME Investment Partnerships Program, have been traditionally used to cover funding shortfalls. However, those funds are in shorter supply in recent years, making it necessary to find funding alternatives. This is where the OZ incentive can make a difference. State housing finance agencies (HFAs) use qualified allocation plans (QAPs) to promote their LIHTC priorities and practices. By providing specific set-asides, directives for the location of affordable housing using LIHTCs and other preferences, HFAs can use QAPs to incentivize investments in OZs. Examples include Delaware, where the state provides two points for developments in an OZ and 10 if it also contributes to a concerted community revitalization plan; and Missouri which lists OZs as one of 11 “housing priorities”. For more information on Opportunity Zones, CDFA has extensive resources available, click here.
The Opportunity Zones program provides a tax incentive for investors to re-invest their unrealized capital gains into Opportunity Funds that are dedicated to investing into Opportunity Zones designated by the chief executives of every U.S. state and territory. Treasury has certified more than 8,700 census tracts as Qualified Opportunity Zones (QOZs) across all states, territories, and the District of Columbia. For a map of all designated QOZs, click here.
The Places a COVID-19 Recession Likely Hits Hardest (Brookings). At first blush, it seems like the coronavirus pandemic is shutting down the economy everywhere, equally, with frightening force and totality. In many respects, that’s true: Across the country, consumer spending—which supports 70% of the economy—is crashing in community after community, as people avoid stores, restaurants, movie theaters, offices, and other public places. Already, the layoffs have begun. However, while essentially all of America will likely be affected by COVID-19’s economic effects, those effects will be distinct and varied from place-to-place. Among the “most at risk” industry groups include mining/oil and gas, transportation, employment services, travel arrangements, and leisure and hospitality. The map shows those industries’ presence as a share of the economy within the nation’s various metropolitan areas. Among the nation’s 100 largest metro areas, Las Vegas is most exposed, followed by Orlando, New Orleans, which has ties to both the energy and tourism/hospitality sectors, Honolulu, and Oklahoma City. The economically safest are mostly tech-oriented university towns. For larger metros, Provo, UT is the least exposed, followed by Durham-Chapel Hill, NC, Hartford, CT., Albany, NY, and San Jose, CA.
How an Economic Crisis Impacts Innovation (Sidewalk Talk). The Great Depression fundamentally altered the course of American innovation, shifting it from independent inventors into companies. During the Depression, independent patents from economically distressed counties dropped, on average, 13 percent more than independent patents from places whose banks stayed active — suggesting a strong, direct role of local distress on independent innovation. However, a county’s economic distress had no impact on company-filed patents. This suggests the Great Depression destroyed the ecosystem of early-stage financing that made independent innovation possible. What does that mean post-Covid? Even today, proximity still matters for innovation, with frequent in-person interaction between investor and inventor a known predictor of venture success. Therefore, it is important for governments and others to support local funding networks and establish early-stage venture funds specifically designed to support local entrepreneurs and startups.
Rural Broadband in the Time of Coronavirus (Harvard Kennedy School Shorenstein Center). Almost everyone with a job that offers a telework option is now teleworking due to the coronavirus pandemic. But being able to telework requires more than an office job — it requires stable broadband. More than 21 million people in America lack advanced broadband internet access, according to the U.S. Federal Communications Commission. The FCC defines “advanced” broadband as download speeds of at least 25 megabits per second with upload speeds of 3 mbps, “25-3” for short. Rural America fares poorly on broadband speeds. The case for making urgent rural broadband investments hinges on “six pillars”. The first is economic development. Housing values increase and businesses move more product when rural communities have broadband. The second is public health with a shortage of doctors and health centers in rural America. Teleworking is the third pillar. Education is the fourth. For instance, the homework gap — kids who can’t do online homework at home because they don’t have internet access — is now extending to higher education. The fifth pillar is public safety, having to do with emergency response call lines that rely on broadband. The sixth is broadband improves quality of life, as rural communities then become an option for young people. After the coronavirus, rural America cannot afford to return to broadband as usual.
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The SEDE Network engages in regular activities and events throughout the year. You can stay up to date on all these activities via the SEDE Network website. The newest addition to the site includes a collection of websites and other communication resources used by states to address the Coronavirus Challenge.
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Incentives in Action
New Mexico Offers New Loan Program, Priority Assistance to Virus-Impacted Businesses (NewMexico.gov). The state of New Mexico is adjusting its business loan guarantee programs in order to make capital available to business owners whose operations are severely impacted by the COVID-19 health emergency. The New Mexico Economic Development Department (NMEDD) has created he COVID-19 Business Loan Guarantee Program to assist businesses seeking emergency loans or lines of credit to deal with negative economic impacts from COVID-19. NMEDD can guarantee a portion of a loan or line of credit up to 80% of principal or $50,000. Loan proceeds are flexible and can be used for (and not limited to) the following: working capital, inventory, and payroll. The department’s signature Local Economic Development Act (LEDA) program provides grants to certain businesses pay for land, buildings, and infrastructure to relocate or expand. Under the Statewide Public Health Emergency declaration, the Governor has authorized the NMEDD to make no-interest loans from LEDA to assist COVID-19 impacted businesses as well. The loans are limited to expenditures for land, building, and infrastructure, and can also be used for lease abatement or mortgage assistance. Companies applying for the loans must be a qualified manufacturing business with over 50% of its revenue coming from outside of New Mexico or a retail business in a community under 15,000. All loans will be required to provide security equal to the amount of the loan.
New Jersey Offers Technical Assistance to COVID-19 Impacted Small Businesses Applying to SBA (MyVerona New Jersey). The New Jersey Economic Development Authority (NJEDA) announced that it is partnering with four organizations to offer support services to businesses seeking federal financial assistance through Small Business Administration (SBA) programs. These organizations include the African American Chamber of Commerce of New Jersey, New Jersey State Veterans Chamber of Commerce, Rising Tide Capital, and the Statewide Hispanic Chamber of Commerce of New Jersey. Each will help small business owners file their applications through the SBA to receive working capital loans to help them survive this crisis. This assistance includes, but is not limited to, preparing financial information, packaging application documentation, and completing and submitting the on-line or paper-based application. Compensation for these organizations will be based on completed and submitted SBA applications. This technical assistance is the latest in a series of steps New Jersey is taking to help small businesses impacted by the COVID-19 outbreak.
The State Business Incentives Database is a national database maintained by the Council for Community and Economic Research (C2ER) with almost 2,000 programs listed and described from all U.S. states and territories. The Database gives economic developers, business development finance professionals, and economic researchers a one-stop resource for searching and comparing state incentive programs. To view the information available in the database, click here.
New Growth Opportunities
A Road Map to Reopening (American Enterprise Institute). To move away from a reliance on physical distancing as the primary tool for controlling virus spread, we need better data to identify areas of spread and the rate of exposure and immunity in the population. Improvements are also needed in state and local health care system capabilities, public-health infrastructure for early outbreak identification, case containment, and adequate medical supplies; and therapeutic, prophylactic, and preventive treatments and better-informed medical interventions. Each requires advancement in our ability to aggregate and analyze data in real time, and more investments in pharmaceutical research and development for the rapid deployment of effective diagnostics, therapies, and eventually a vaccine. After we successfully defeat COVID-19, we must ensure that America is never again unprepared to face a new infectious disease threat. This will require focused investments and directed initiatives for research and development, expansion of public-health and health care infrastructure and workforce, and clear governance structures to execute strong preparedness plans.
How Many Jobs Can be Done at Home? (University of Chicago Becker Friedman Institute). Evaluating the economic impact of “social distancing” measures taken to arrest the spread of COVID-19 raises fundamental questions about the modern economy: How many jobs can be performed at home? How does the scope for working from home vary across cities or industries? The report classifies the feasibility of working at home for all occupations and merges this classification with occupational employment counts for the United States. The results imply that 37 percent of U.S. jobs can plausibly be performed at home. Identifying which jobs cannot be performed from home may be useful as policymakers try to target social insurance payments to those that need them most. Likewise, the share of jobs that could be performed at home is an important input to predicting the economy’s performance during this or subsequent periods of social distancing.
Many U.S. Workers in Critical Occupations in the Fight Against COVID-19 (LMI Institute). As the COVID-19 pandemic continues to spread across the United States, many states and communities have enacted “Stay-at-Home” orders with exemptions for essential businesses and workers. The list of businesses and occupations deemed “essential” is not uniform, nor clearly defined in most cases using the government-established classification scheme for industries and occupations. This can create difficulties for the ongoing monitoring and longer-term analysis of impacts from these mitigation efforts. The LMI Institute and C2ER produced a list of Standard Occupation Classification (SOC) codes connected to critical infrastructure (e.g., essential) industries. The list is based on the Department of Homeland Security’s guidance for identifying the critical infrastructure workforce during COVID-19 response. More than 104 million U.S. workers, or 71 percent of the total U.S. workforce, are employed in the “Essential Critical Infrastructure Workforce” battling COVID-19. Critical worker numbers vary by state, with around 75 percent employed in these essential occupations in Mississippi, Indiana, and Kentucky, to a low of 48 percent in the District of Columbia.
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SEDE Network Updates
* Upcoming SEDE Event Postponed *
The previously scheduled
May 31, 2020
In-Person SEDE Meeting before the SelectUSA Summit
in Washington, DC
POSTPONED Due to the CORONAVIRUS TRAVEL RESTRICTIONS
and Cancellation of the SelectUSA Summit
We are currently considering alternatives for continuing to share information and support the network. Please check the events page at www.stateeconomicdevelopment.org for the latest updates.
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The SEDE Network Steering Committee includes: Stefan Pryor (RI), Chair; Val Hale (UT), Vice Chair; Julie Anderson (AK); Dennis Davin (PA); Jennifer Fletcher (SC); Kurt Foreman (DE); Joan Goldstein (VT); Manuel Laboy Rivera (PR); Jeff Mason (MI); Kevin McKinnon (MN); Don Pierson (LA); Mike Preston (AR); Sandra Watson (AZ).
For further questions on the content in this Bulletin or for information on the SEDE Network contact Marty Romitti, CREC Senior Vice President, at email@example.com