The coronavirus pandemic has had significant impacts on major economic sectors such as health care, the petrochemical industry and commercial real estate, according to panelists in The Advocate’s economic summit on bringing back the Baton Rouge economy.
But one of the biggest questions is if the pandemic has led to long-term changes in consumer behavior, said Jonathan Walker, senior commercial sales and leasing executive at Maestri-Murrell Real Estate. He was one of four panelists in The Advocate's "Bringing Back the Baton Rouge Economy," summit sponsored by Hancock Whitney on Tuesday.
“Have we created totally new habits?” said Walker. He wonders if people are going to be cooking at home or getting takeout instead of going out to a restaurant for a meal. Or if people will work out at home or run around their neighborhood instead of go to a fitness center for exercise.
Getting people out and making purchases is critical, especially for restaurants, he said. Government programs aimed at giving a temporary lifeline to the industry, such as the Paycheck Protection Program, will only go so far.
“I don’t know how this will play out in the short term or the long term,” Walker said. And it may take several months for an answer to be found.
COMMERCIAL REAL ESTATE: The pandemic has already affected all aspects of the commercial real estate business. Established national retailers including Neiman Marcus, J.C. Penney and Stage have all filed for bankruptcy and are shuttering hundreds of stores, Walker said.
The demand for office space is in a state of flux because companies don’t know how much room they will need in the future. There are some thoughts that businesses will want more space for social distancing between employees, but on the other hand the economic slowdown may mean a need for fewer workers.
Slowdowns in the oil and chemical industry have reduced the demand for industrial space, although the rise in e-commerce has led to a need for more warehouse space.
One of the few bright spots has been the apartment market, but Walker said that could be slowing down now that the expanded federal unemployment benefits that allowed so many people to keep on paying rent have lapsed.
Adam Knapp, president and chief executive officer of the Baton Rouge Area Chamber, said Congress needs to come together quickly and pass some form of expanded unemployment benefits. The extra $600 a month workers were getting has “served as the primary safety net for the entire country.”
ECONOMIC INDICATORS: The money has buoyed the local economy. Spending at retail stores is pretty much back to where it was in Ascension and Livingston parishes, although in East Baton Rouge, it’s still 8.4% down from 2019, Knapp said.
The coronavirus pandemic caused the number of people working in metro Baton Rouge to drop as much as 13%. In comparison, the Great Recession led to a 6.2% drop in employment. There has been a slight recovery in the number of people who are working in recent months, bumping up to 11.1% in May, but the figures are still down dramatically.
There are some trends that are back to or close to levels they were pre-pandemic. Retail fuel sales, an indicator of how many people who are traveling, are close to or above where they were in summer 2019. Hotel occupancy data has been trending up in recent weeks and is near where it was a year earlier.
Knapp said there are still a lot of concerns from consumers about shopping and getting meals. That’s why it’s so important for people to wear masks. “If you wear a mask, you’re telling your fellow customers they are going to be safe,” he said.
PETROCHEM ACTIVITY: A quarterly survey of petrochemical plant managers found that the forecast for expansions is “very, very low” said Connie Fabré, president and chief executive officer of the Greater Baton Rouge Industry Alliance. Plants are looking to cut costs where they can, so construction projects have been canceled or slowed down. And some sectors the plants produce products for, such as automobiles and durable goods, have been hard hit by the pandemic.
But Fabré said maintenance and turnaround work at the plants has continued. Because facilities are running slower, they are taking the opportunity to get work done, while making sure employees are taking precautions and social distancing. That’s helped hold the line on employment, she said.
Fabré said while about 20% to 30% of the contract workforce at petrochemical plants was temporarily laid off in the spring because of uncertainty; some people have been returning to work. “I don’t have a really good gauge how far off they are, but my sense is plants are slowly rehiring,” she said.
HEALTH CARE IMPACT: The pandemic is the most serious challenge to the system of modern health care in history, said Terrie Sterling, a health care consultant who was the longtime chief operating officer at Our Lady of the Lake Regional Medical Center.
Controlling and confronting the pandemic led hospitals to shut down elective surgeries and highly profitable surgical centers and convert patient visits to online treatment, Sterling said. At the same time, hospital expenses shot up because of the increased staffing and high usage of personal protection equipment. The American Hospital Association estimates that the hospital industry lost $200 billion during the first four months of the pandemic.
Sterling said without reimbursements from the federal government, hospitals will not be able to sustain themselves and may be forced to furlough staff and stall improvements. “We’re hoping for additional financial resources,” she said.
The pandemic has provided an opportunity to look at transforming health care in the future, with more consolidation of services, an emphasis on addressing mental health needs and addressing disparities.
“Many of our essential workers work without essential benefits like sick leave,” Sterling said. “In many cases, they don’t make a living wage. More work needs to be done to improve health outcomes.”
Tuesday’s event was the first of four summits over the next two weeks that will tap local business and community leaders for a big-picture understanding of the economies. Similar events will be held for Lafayette, Wednesday; New Orleans, Aug. 6; and statewide, Aug. 7.
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July 29, 2020 at 07:11AM
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Pandemic has major impact on economy, question remains if consumer behavior has changed - The Advocate
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