Readers' Mailbag: Post Pandemic Economic Growth: How to Take the Lake Economy to the Next Level and Make it a Worldwide Destination
Twice this past year I penned OpEds in support of the proposed amphitheater project in Osage Beach, adjacent to Backwater Jacks. Although my comments were related to that project, I offered supporting data regarding the Lake area economy – both prior to the pandemic and during the crisis. Some of the information documented anemic economic growth even prior to the pandemic. I made the claim based on my firm’s modeling data that predicts Local Area Gross Domestic Product (LAGDP) would shrink by at least ten percent or by as much as twenty percent in the current year. I stand by that forecast.
I received significant feedback on both OpEds from business owners, citizens and even a few public officials. Many were as concerned as I am; however, a few challenged my logic. “Afterall,” one business owner preened, “this place is booming.” A realtor told me the real estate market is as hot as he could remember with values seeing double digit increases in the span of only a few months. A school official predicted that the Lake area school systems would experience a significant number of new students this year as parents from urban areas relocate to their lake vacation homes to enroll their children in school locally. I do not model real estate value data nor school enrollment trends so I cannot support or deny these claims. However, antidotally at least, I realize there is some truth to such statements. But the disappointing fact is that much of this extra economic activity is likely not permanent.
So what gives? It is true the Lake area economy has been brisk this season as a large number of visitors flocked to the Lake Area to escape the urban areas that typically had much more stringent pandemic restrictions and in some cases outright social unrest. There indeed has been significant national media attention with that theme. From the axiom that “all publicity is positive,” many visited the Lake area for the first time after such reports. It seems plausible that urban areas will face a host of challenges post pandemic and that many will lose population. But it remains to be seen how permanent the current influx will be post pandemic as a significant portion of this year’s extra visitors return to their urban domiciles and ways. Moreover, those whose jobs and businesses are negatively impacted might be forced to sell their second homes, condos, boats, etc.
My second OpEd was published just a few days prior to the release of second quarter economic data or I would have included it. The data is extremely dismal. In the second quarter, the US Economy contracted by nearly ten percent. Annualized (i.e. if the next three quarters contract by an equal amount), the US Economy will be a whopping one-third smaller in just a year’s time. This is unprecedented and exceeds the rate of decline even during the Great Depression. There is some data to support that the second quarter will be the worst and subsequent quarter declines will be much milder or even show some growth. But the data is mixed. The stock market has recovered and flirts with new highs, but volatility remains high and there have been major sell offs just this past week. Moreover, employment data remains dismal. A few days ago, updated August employment data was released showing the US Economy added 428,000 jobs during the month. In normal times this would represent robust job growth, however when taken into the context that at least 40 million jobs were lost in the first half of the year, the statistic is quite dismal. Most analysts expected a number twice that high. Moreover, approximately one million US workers applied for initial unemployment coverage in the same month. Jobs can be gained while others are still being lost. Due to the unprecedented nature of the current crisis, our economic modeling techniques are challenged and therefore it remains uncertain if the economy has begun recovery or has yet to bottom out. Regardless, we have already entered a very deep recession or worse.
Despite the local boom, there is plenty of evidence and data to support the worse is yet to come. Many states continue to have entire industries shut down and some have been increasing restrictions further rather than relaxing them. Nationwide, most sporting events have been canceled or greatly curtailed. Most major conferences and other large gatherings have been or likely will be cancelled. Air travel is a fraction of its former self. The hospitality industry has been decimated, and one estimate predicts an industry one fourth smaller when the pandemic finally ends. Las Vegas and many other tourist destinations are ghost towns. A significant percentage of US children likely will not see the inside of a classroom this year. To be sure, many businesses will be forced to close permanently - more and more as months tick by. At this point, there appears to be no end in sight.
It is true the huge and unprecedented economic stimulus funds pumped into the US Economy by the Federal Government softened the short-term blow significantly, but there is no free lunch and such funds do not represent actual economic output. Nobel Laureate Economist Milton Friedman once stated, “Inflation is always and everywhere a monetary phenomenon.” Therefore, expect some serious inflationary tendencies as all those dollars chase a fixed, or perhaps shrinking stock of goods. This means we will soon be paying much higher prices for just about everything. So can the Lake, with its unique economy, dodge the economic bullet – since it appears to have thus far? Perhaps, but not likely. The obvious affluence and wealth of the Lake area is mostly generated elsewhere. It may be on display here, but in most cases such wealth was created far away in places that even now are facing severe economic stress. Stated differently, the Lake will eventually and almost certainly be affected by a deep national recession. Perhaps some of the aforementioned factors will become permanent, but many will not.
But this too will end at some point and we should look forward. In my previous OpEds, I stated that for the Lake area to prosper, creative destruction will have to be embraced and bold new projects undertaken (such as the amphitheater project). In Part Two of this series, I will outline what I believe to be five new bold initiatives that should be undertaken to take the Lake economy to the next level.