Next Steps for the Economy: What Local CEOs Are Saying
February 25, 2021,
I want to tell you about the Economic Outlook meeting the Chamber recently hosted. Since the economy is on everyone’s mind. We wanted to take a deeper dive into economic conditions on the national and local level. To get started we took a survey of the 85 people who attended the virtual meeting we wanted to gage their feelings about economic conditions and how they felt about the economic outlook.
We also had four great speakers, our first speaker was from the Federal Reserve Bank and he provided an overview of the national economy and the FED’s view for the rest of 2021. Then we had three local CEOs share their views. Alan Hyatt from Severn Bank talked about the role of local banks and the roll out of the Payroll Protection Program. Then we had the Tori Bayless from Luminis Health shared her insights about the local health care industry and the challenges the hospital has faced during the pandemic. We wrapped up with Dick Franyo, owner of the Boatyard Bar and Grill talking about the hard-hit restaurant industry and what he sees for the future.
Here are the results of the four question survey. The answers indicated that most of the attendees accessed the PPP or other financial assistance and over all there was a rather positive outlook for future economic conditions with a majority of attendees indicating economic recovery by the Fall of 2021.
Click Here to see survey results
The View from the FED
After reviewing the survey results about economic expectations, Andy Bauer the Vice President and Regional Executive with the Federal Reserve Bank gave a presentation about macro-economic conditions and how the FED is viewing economic activity for the rest of 2021.
Mr. Bauer noted that the disruption to the economy from COVID-19 was tremendous over the last 12 months as GDP dropped 31% in the second quarter of 2020 and the unemployment rate jumped to 10.1%. While the economic collapse was very severe there was a steady and the surprisingly strong recovery that was fueled by the fiscal stimulus provided by the government. Monetary policy and actions of the Federal Reserve Bank and the flexibility of private businesses helped support the recovery.
Mr. Bauer related that the economic disruption could have been much worse if Congress had not been able to rapidly put forth a series of stimulus efforts to push money into the economy through the CARES Act. The Payroll Protection Program, individual stimulus payments up to $1200, and increased Unemployment Insurance payments got money into the hands of taxpayers which greatly supported consumer spending.
Mr. Bauer expressed concern about high unemployment rate for the retail, restaurant and hospitality industries and the potential long term unemployment rate which is about 6%. He noted that the recovery did not slowdown during the first quarter of 2021 and said that the month of January continued to show strong consumer spending. He also shared that the Federal Open Market Committee or FOMC is projecting annual GDP growth for 2021 to be between 3.5% to 5%. He noted that this is a strong number, and he is optimistic about the possibility of a very robust second half of the year if there are no new variants of the virus that cause the return of restrictions and if the vaccine roll out continues at a good level.
Community Bankers Working Overtime
The economic slowdown did not reach crisis stage because of the availability of PPP loans. Alan Hyatt, the Chairman of Severn Bank talked about the importance of the PPP loans for the local economy and shared his views on future economic conditions.
Mr. Hyatt spoke about the great uncertainty caused by the precipitous economic plunge in the spring of 2020 and the amazing rebound. He noted how PPP loans supported the recovery and how Severn Bank responded quickly and worked with local businesses. In his opinion, it was the PPP loans that keep businesses going.
He shared that some businesses were “panicked” during the first round of the PPP because of the limited amount of funds and the limited time to apply. He said the SBA should get a lot of credit for their efforts to get this unprecedented program up and running. He also feels the second round of PPP loans are moving much more smoothly.
As Mr. Hyatt looks out into the future, he feels there is a lot of pent-up demand. As the vaccines continue to roll out consumer spending will grow. Low interest rates will stimulate economic activity in the local real estate market. He also felt that certain niche industries like boating, RVs and home improvement will be strong. Anne Arundel County will benefit from its proximity to Baltimore and Washington as people look for more day trips. He also sees international travel to be in less demand and Annapolis as a tourist destination will attract day trips and the marine industry will be very active.
Health Care Heroes
No one knows the strain COVID-19 placed upon the local health care system more than Tori Bayless, the CEO of Luminus Health Anne Arundel Medical Center. As one of the presenters, she shared her views about the role Luminis Health plays in the local economy and the challenges the hospital is facing fighting the pandemic.
In addition to maintain their normal hospital services, Luminis had to pivot to handle the potential influx of COVID patients. The hospital faced many challenges including obtaining an adequate supply of personal protective equipment, maintaining staffing levels and generating enough revenue to cover operating expenses. The pandemic created a classic supply and demand situation for health care workers and PPE, as the demand went up—so did the cost. This was particularly true for nursing. Being able to obtain funding from the CARES Act helped the hospital meet the cost of doing regular business while gearing up to service COVID patients.
The hospital continued to pivot by establishing a system to vaccinate up to 8400 people a day at various locations. While the hospital has not hit this number because the limited supply of vaccines but they are ready to ramp up when the supply arrives. The COVID-19 pandemic has reinforced the important role the health care system play in the local and national economy.
Restaurants on the Rebound
No other industry has felt the economic fall out of the pandemic harder than the restaurant and hospitality industry. To gain a better insight of the impact, Dick Franyo the owner and operator of the Boatyard Bar and Grill was on hand to share some details and his outlook for the balance of 2021.
In his remarks, Mr. Franyo stated that restaurants in and around Annapolis have experienced revenue loss between 30% to 50% compared to last year. Catering has been crushed due to social gathering limitations; and is off by 90%. He asked the audience, “Can you imagine trying to run your business with this type of revenue loss.” Mr. Franyo spoke for a lot of other restaurant operators when he said, “if it were not for PPP we would not be here. He went on to say that the second round of PPP included some additional help for the restaurant industry and this will be a great help.
As the Co-Chairman of the Mayor’s Task Force for Small Business Recovery, he was able to help shape the City’s policies for recovery. He was very encouraged by the spirit of cooperation demonstrated by restaurant owners and other businesses as they all came together to support each other. He was very bullish about the future of the restaurant business in Annapolis. As the weather warms up and the boaters return there will be an uptick, particularly if the vaccine roll out is strong.
Mark Kleinschmidt is the President and CEO of the Anne Arundel Chamber of Commerce located in Annapolis, MD.