March 30, 2020

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Produced by Beacon Economics and released exclusively by the CIRB (Construction Industry Research Board) Report on March 23, 2020, The Economic Outlook – Spring 2020 analyzes the impact of the coronavirus, employment trends, housing and construction, the next recession and more.

Beacon Economics is the latest organization to contribute a publication to the CIRB Marketplace, an online platform and marketing service for research organizations to publish data reports on various topics in the building industry.

Here are 5 important takeaways from this comprehensive near-term forecast for the U.S., California, and California regional economies*:

 

1. The coronavirus (COVID-19) is an economic force to be reckoned with. Beacon even describes COVID-19 as “the greatest threat to the nation’s economic expansion in over a decade.” Ten years ago, California issued the lowest amount of permits for new housing units in recorded history, according to CIRB statistics. Though the statewide building industry has not fully recovered from the Great Recession, great strides in economic recovery were evident – until now.
2. Residential construction is taking a hit. CIRB statistics show that building permits for new single-family and multifamily dwellings have declined statewide in 2019 compared to 2018, and the current halt in economic activity will undoubtedly affect 2020 statistics as well. Even though California deemed residential construction an essential service during the COVID-19 pandemic, building department closures will create a roadblock in the permitting process and backlog productivity in issuance long after outbreak restrictions are lifted.
3. Effects are unique to regional economies. Jobs, construction and real estate tell a different story in San Diego than they do in the San Francisco Bay Area. Though housing affordability continues to be a statewide concern, employment in specific industries varies by region (i.e. the strong tech companies in the South Bay) and will respond differently to economic fluctuations caused by the coronavirus. (*Regional analysis included in The Economic Outlook are LA, San Diego, San Francisco, South Bay and East Bay.)
4. A recession is not likely. The fallout from COVID-19 spans from business closures and event cancellations to decreased home sales, and creates a ripple effect that will touch nearly every employment sector throughout the next few months. However, it’s important to note that the impact from the COVID-19 pandemic will be temporary. As Beacon puts it, “these are furloughed jobs, not lost jobs.”
5. Our economy is resilient. According to Beacon’s analysis, “business-to-debt GDP is actually lower than five years ago… Banks look rock-solid in their portfolios as well… This is an economy that can take a hit.” We cannot accurately predict the extent or duration of COVID-19’s sweeping impact at this time, but we can derive some hope from the state of the economy prior to the onset of this pandemic.

There is currently no sufficient data on the impacts of COVID-19 to plug into Beacon’s forecast models, but as the economy rapidly changes in response to this pandemic, Beacon will monitor the situation and adjust their analysis accordingly in the next installment of The Economic Outlook, which will be available on the CIRB store in Summer of 2020.

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This Economic Outlook and other reports on building permit activity can be downloaded from https://www.cirbreport.org/reports.

About Beacon Economics:
Founded in 2007, Beacon Economics, an LLC and certified Small Business Enterprise (SBE) with the state of California, is a leading independent research and consulting firm dedicated to delivering accurate, insightful, and objectively-based economic analysis. Leveraging unique proprietary models, vast databases, and sophisticated data processing, the firm equips its clients with the analysis needed to understand on-the-ground realities and make informed business and policy decisions. Learn more at http://www.BeaconEcon.com.