Brittany Nove is concerned about her older customers at Johnny Russo’s Restaurant in Banning, where she has worked off and on for nearly 13 years.
Just a week ago the restaurant reopened after being closed for more than a week for remodeling. It was nine days she couldn’t collect tips.
“I’m worried, because a lot of our loyal customers are older, and many of them have been staying home” because of government orders for senior citizens to self-quarantine.
The timing to reopen in just those few short days is unfortunate.
Business has dropped significantly, with a lot of their county employees also avoiding public places.
And, without going on record, she noted that her tips were rather dismal compared to when the restaurant is enjoying its normal business. It is a major concern considering that she is the breadwinner for her family.
Countless other service employees in the Pass area are seeing the effects of customers choosing to not go out, and heeding the government’s requests to stay home.
Hardly surprising, regional economists are bearish on how the areas around Beaumont and Banning will look for the rest of 2020 while the novel coronavirus grinds the world’s economy into a recession.
As government agencies command industries and commercial enterprise to close down or severely limit services, and workers begin to feel the financial strain of not working, the Pass area is forced to weather an ominous financial forecast.
One of the few reprieves residents can enjoy are the lower fuel prices, which have practically nothing to do with COVID-19, resulting instead from a spat between Russia and OPEC.
Also on the national radar is Washington’s interest in a $1 trillion stimulus that could mean providing cash to citizens in order to stimulate the economy, and to compensate for at least two weeks’-worth of lost wages for workers.
Retirees and logistics
Dan Hassey, a senior investment adviser with Los Angeles-based financial planner McIntosh Capital Advisors, paints an economic portrayal of long-term doom and gloom.
“We’re in unusual times,” he points out. Financially speaking “People are going to suffer. We all have to hunker down. There’s no way around this, as the government does its best to prevent us all from overwhelming the healthcare system.”
In a region that caters significantly to retirees, and an area that has a large population of poor people, “This community is especially vulnerable” to the health impact that the novel coronavirus has reaped upon the region.
Add to that, the health statistics: according to Hassey, “half of the country is overweight and subject to diabetes, to the tune of 100 million nationwide, and if you break it down proportionately to us here, that’s a lot of people in the Pass area” who are at-risk of COVID-19.
“Businesses need to close, people need to stay home. Business will suffer, people are going to lose their jobs. It’s going to hurt,” but the alternative is, the outbreak doesn’t get contained, and a significant number of patients will surpass the capacity of local medical facilities to care for them, Hassey says.
John Husing, a Redlands economist who has addressed chamber of commerce functions and regional events in the Pass area over the years, says “If you think about the Pass area, a large number of those who live there are commuters who work elsewhere and bring income home, which drives a good portion of that economy.”
With the ports in Los Angeles, Long Beach and air freight to Ontario braking to a halt as trucking and warehousing jobs wane, and tourism in the Coachella Valley and the retail outlets of Cabazon becomes virtually nonexistent, there is going to be an economic shutdown, Husing warns.
And it is not just the warehouse jobs that are in jeopardy: should the slowdown continue, companies looking to invest in building logistics centers and warehouses may also have to put such plans on hold, and the Pass area has been a magnet for that industry, with access to railways and freeways.
“For a six-month period Beaumont and areas west is going to be in trouble” with that reduction in cargo shipments and trucking, Husing says.
Over the weekend Husing was in Washington, D.C., and says that the hotel he stayed at had an occupancy of 18 percent, whereas just a couple weeks earlier occupancy was closer to 96 percent.
The gym he normally attends in Yucaipa has shuttered operating hours.
“The service economy is not usually the first ones hit” when an economic slowdown happens, Husing says. But the draconian measures to ensure public health will guarantee to be a drain: for the Pass area, “It doesn’t bode well for the next six months.”
Stock market woes
Hassey, as a registered investment adviser, claims that he and his clients are “80 percent in cash” when it comes to investments.
“For the last few years, the markets have been overvalued. We’re not even in a recession yet, and the news could get a lot worse.”
With “black swan” events — “unpredictable” events that range from the 9/11 terror attacks and the announcement of Brexit to sudden declarations of trade embargoes — such rare occurrences can have catastrophic effects on the international financial markets, Hassey explains.
As the nation’s economy was not in a recession, Hassey disagrees with the government’s decision to lower interest rates to zero, because now none of the monetary tools traditionally relied upon to add liquidity and stimulate the economy have been taken away, coupled by providing tax reductions to corporations that will now not contribute those needed revenues.
The president has been trying to invest in the economy as if the country still relies on manufacturing as a significant part of its GDP.
“The president’s focus on manufacturing is misguided,” Hassey claims. “A significant part of our manufacturing is done overseas. We’re a service-driven economy, from hospitals and hotels to entertainment and restaurants, and a lot of people are going to lose jobs and houses. We have to slow the amount of people getting sick — that is why California and New York have been so aggressive to slow it down, because there are not enough health resources to handle this. It’s do or die.”
He did not offer suggestions for individual companies to invest in. Instead, he recommends that investors look to diversified mutual funds.
“When there is light at the end of this tunnel, there will be some bargains — that is normally the case after a bear market and recession,” Hassey says.
He did not seem convinced that the market has fully corrected itself, despite wide swings in the New York Stock Exchange and elsewhere.
Staff Writer David James Heiss may be reached at firstname.lastname@example.org , or by calling (951) 849-4586 x114.