CalChamber Alert, Volume 46, Number 27 — California Chamber of Commerce, September 18, 2020
Summary
The California Chamber of Commerce Alert newsletter, Volume 46, Number 27, dated September 18, 2020. Its lead article describes the campaign opposing Proposition 15, which it calls a $12.5 billion a year property tax increase, ahead of the November 3 general election. A Labor Law Corner column explains how federal COVID-19 leave laws under the Families First Coronavirus Response Act interact with state leave laws. A COVID-19 update reports that California had 766,201 confirmed cases as of September 17 and that 30 of the 58 counties were in the purple/widespread risk tier as of September 15. Other items cover the 2020 Census deadline, a column on the Legislature and economic recovery, an Economic Advisory Council special report and disability access tips for outdoor dining.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
VOLUME 46, NUMBER 27 • SEPTEMBER 18, 2020
Ads Highlight Problems Employment Law
Attorney Joins
with Prop. 15 Split Roll CalChamber Policy
Team
Broad Coalition Opposes
Ashley Hoffman
In addition to the California Chamber joined the Cali-
of Commerce, the coalition leading the fornia Chamber
campaign against Proposition 15—Stop of Commerce
Higher Property Taxes and Save Prop in August 2020
With just weeks remaining before the 13—includes the California Taxpayers
November 3 general election, the broad- as a policy
Association, California Business advocate special-
based campaign opposing Proposition 15 Roundtable, Howard Jarvis Taxpayers
is highlighting reasons to vote against the izing in labor and
Association, California Business employment and
split roll property tax measure in social Properties Association and California
media and televised ads. workers’ compen-
State Conference of the NAACP. sation issues.
As pointed out in the ads, Proposition Also part of the bipartisan coalition
15 is a $12.5 billion a year property tax
Ashley Hoffman
Before join-
opposing Proposition 15 are more than ing the CalChamber policy team, she was
increase—the largest in state history— 1,500 organizations, businesses, state and
that is riddled with flaws which will hurt an associate attorney in the Sacramento
local elected officials, and individuals office of Jackson Lewis P.C., represent-
all Californians. The measure will also from throughout the state.
hurt the small businesses that employ half ing employers in civil litigation and
of all California employees. Help Defeat Prop 15 administrative matters as well as advis-
Proponents have admitted that home- ing employers on best practices, includ-
The California Chamber of Commerce ing compliance with laws such as the
owners are next. Contrary to what its
is urging members to provide financial California Labor Code, California Wage
supporters claim, Proposition 15 will
support to help spread the word to voters Orders, and the Fair Employment and
not help local governments and schools
that the split roll property tax hike will Housing Act.
recover from the COVID-19 induced
lead to a higher cost of living. “We’re pleased to welcome Ashley
economic crisis.
The CalChamber issues political to our policy team. Her insights from
Hurts Small Business action committee, CalBusPac, may representing clients in the private sector
accept contributions in any amount, but will serve CalChamber members well in
In brief videos viewable online, small the funds may not be earmarked. Defeat
business owners testify to the harm our continuing effort to protect employ-
of the split roll measure is a high prior- ers’ ability to manage their employees
Proposition 15 will cause if passed: ity for CalBusPac. Contributions may be
• Increased rents because of the “triple in ways that are safe and productive for
sent to CalBusPac (ID #761010), P.O. both the business and the worker,” said
net lease” under which many small busi- Box 1736, Sacramento, CA 95812-1736.
nesses operate, making them responsible CalChamber Executive Vice President
Download and mail the contribution form Jennifer Barrera.
for paying property taxes, insurance and from www.calchamber.com/calbuspac
maintenance costs. Hoffman previously worked as a liti-
or contact the CalChamber Public Affairs gation associate and a summer associate
• Increased fuel prices and energy costs. Department, c/o linda.wallace@calcham-
• Increased prices from vendors. ber.com.
See Employment Law Attorney: Page 4
Consumers will ultimately bear the
burden of higher prices if Proposition 15
is adopted because businesses of all sizes
operating on tight margins will be forced
Inside
to pass along the increased costs. Special Report: Economic
Advisory Council: Pages 6-11
W W W. C A L C H A M B E R A L E R T. C O M
CALIFORNIA CHAMBER OF COMMERCE SEPTEMBER 18, 2020 • PAGE 2
Labor Law Corner
How Leave Laws Interact When a Couple Works for Same Employer
Family and Medical Leave Act ity requirements for CFRA are the same
(EFMLA). Due to this, leave interactions as FMLA.
have become more complicated. Let’s However, an employee is not eligible
dive into a recent question we received to for CFRA if they are disabled by preg-
review leave interactions. nancy. Therefore, the pregnant employee
“We employ a married couple who are on PDL will not be using any of their
expecting a baby. The pregnant employee CFRA leave.
Matthew J. Roberts gave us a doctor’s note taking them off
Employment Law
work for 8 weeks due to the pregnancy. Families First Act
Counsel/Subject
Matter Expert The nonpregnant employee is currently As discussed above, the FFCRA
taking EFMLA for 12 weeks because created an EFMLA leave entitlement.
they lost child care due to COVID-19 Employers with fewer than 500 employ-
How do the federal COVID-19 leave laws for their other child. Both employees are ees nationally must provide up to 12
adopted this year interact with related eligible for leave under federal and state weeks of job-protected leave for an
state laws, including pregnancy leave, the law. What are their leave rights going employee who cannot work or telework
family rights act and baby bonding time forward for the baby?” due to a school or child-care closure due
for a married couple at our business? to COVID-19 under EFMLA.
Due to COVID-19, Congress enacted Pregnancy Disability Leave Time used under EFMLA counts
the federal Families First Coronavirus In California, employers with five or against an employee’s regular FMLA
Response Act (FFCRA) that created a more employees must provide employees 12-week allotment as well, so the
new paid sick leave and an Emergency disabled by pregnancy with pregnancy nonpregnant employee using 12 weeks
disability leave (PDL). of EFMLA has also exhausted any
Employees are eligible for up to four other leave available under the FMLA;
months of job-protected PDL. Because a however, time spent on EFMLA does not
doctor certified the pregnant employee as run concurrently with CFRA.
disabled for 8 weeks, the employee may
use PDL during that time. Baby Bonding
California Chamber Officers
Both the FMLA and CFRA provide
Mark Jansen FMLA/CFRA eligible employees with 12 weeks of
Chair Under the federal Family and Medical job-protected leave to bond with a baby
Donna L. Lucas Leave Act (FMLA), employers with 50 or within one year of the birth. Because the
First Vice Chair more employees must provide 12 weeks various leaves our expecting employees
Kailesh Karavadra of job-protected leave to employees with have taken thus far do not run concur-
Second Vice Chair serious medical conditions who meet the rently with CFRA, the parents will still
following criteria: be eligible for 12 weeks of baby bonding
Gregory S. Bielli
• 12 months of service with the leave.
Third Vice Chair
employer; Because the employees both work for
Grace Evans Cherashore • 1,250 hours worked in the previous the same employer, the CFRA allows an
Immediate Past Chair 12 months; and employer to require the employees share
Allan Zaremberg • Work at a location with 50 or more the 12 weeks; so if one parent takes all 12
President and Chief Executive Officer employees within a 75-mile radius. weeks, the other parent is not entitled to
While the pregnant employee is out any leave.
Alert (ISSN 0882-0929) is published weekly on PDL, the disability qualifies as a seri-
during legislative session with exceptions by ous medical condition under the FMLA Column based on questions asked by callers
California Chamber of Commerce, 1215 K so their FMLA allotment runs at the same on the Labor Law Helpline, a service to Cali-
Street, Suite 1400, Sacramento, CA 95814-
3918. Subscription price is $50 paid through time as PDL. So, this pregnant employee fornia Chamber of Commerce preferred and
membership dues. will also be using 8 weeks of FMLA at executive members. For expert explanations
the same time as her PDL use. of labor laws and Cal/OSHA regulations, not
Send email address changes to alert@
calchamber.com. Publisher: Allan Zaremberg. California also has a separate family legal counsel for specific situations, call (800)
Executive Editor: Ann Amioka. Art Director: Neil and medical leave called the California 348-2262 or submit your question at www.
Ishikawa. Capitol Correspondent: Sara Proffit. hrcalifornia.com.
Family Rights Act (CFRA). The eligibil-
Permission granted to reprint articles if
credit is given to the California Chamber of
Commerce Alert, citing original publication
date of article, and reprint is emailed to Alert
at address above. See calchamber.com/events for
Email: alert@calchamber.com.
Home page: www.calchamber.com.
the latest list of CalChamber-
sponsored seminars, trade Next Alert: October 2
shows and webinars.
W W W. C A L C H A M B E R A L E R T. C O M
CALIFORNIA CHAMBER OF COMMERCE SEPTEMBER 18, 2020 • PAGE 3
COVID-19 Update: State Eyes Antigen Tests
This week, the 14,721 deaths. A total of 13,080,037 the purple to the red/substantial risk tier
state moved diagnostic tests had been conducted and are Amador, Orange, Placer, Santa Clara,
more counties to the rate of positive tests over the previous Santa Cruz (as of September 8); and Inyo,
a less restrictive 14 days was 3.5%. Marin, Tehama (as of September 15).
COVID-19 cate- Charts and the latest statistics are Readers can check on the status of
gory and Dr. Mark available at update.covid19.ca.gov. activities allowed in their county and
Ghaly, California view a color-coded map of the entire state
Health and Human Services Agency secre- County Movement at covid19.ca.gov/safer-economy.
tary, emphasized the “slow and stringent” Counties are assigned to color- A search box at the top of the webpage
approach behind the Blueprint for a Safer coded risk tiers—purple, red, orange enables the visitor to look up the require-
Economy unveiled at the end of August. and yellow—based on the rate of new ments for a specific county. Also available
Dr. Ghaly said the goal is to bring COVID-19 cases per 100,000 people per on the page are questions and answers on
down the transmission rate of COVID- day (seven-day average) and the rate of topics such as why some activities and
19 to make sure hospitals can handle flu/ people testing positive for the virus. businesses open while others have to stay
pneumonia cases in addition to coronavi- The California Department of Public closed and whether schools can open.
rus cases as California enters the cold and Health website notes that the case rates
flu season. will be adjusted, starting September 15, Ongoing Reminder
In response to questions from report- based on California median (not average) The final question and answer reiter-
ers at his September 15 briefing, Dr. testing volume. ate the points with which the Governor
Ghaly said the state is learning more Dr. Ghaly said the state is working and Dr. Ghaly end their COVID-19
about COVID-19 antigen tests—which with stakeholders on a “health equity briefings.
are less costly and provide results more metric” that will take into account the What can I do to help my county reach
quickly than the molecular (PCR) tests. disproportionate impact COVID-19 has a lower tier?
Antigen testing for COVID-19 creates had on certain communities, particularly • Wear a mask in public.
an opportunity for the state to allow test- Latinos and Blacks. • Wash your hands regularly.
ing at a broader level using a combination As of September 15, 30 of the 58 coun- • Keep at least 6 feet of physical
of both the PCR and antigen tests, Dr. ties were assigned to the purple/widespread distance when in public.
Ghaly said. risk tier, a decline from the 33 in that tier as • Limit mixing with people you don’t
As of September 17 (with data from of September 8 and the 38 that were in that live with.
September 16), California had 766,201 most restrictive tier on August 31. To see the Blueprint and industry
confirmed cases of COVID-19 and The counties that have moved from details, visit covid19.ca.gov.
Census Deadline Approaches; Count Affects State Clout, Federal Funding
The unremitting could lose political influence as well as encouraging Census participation, with
pandemic and resources that contribute to individual the goal of reminding Californians why
economic crises well-being and thriving communities, the Census is important and how to
of 2020 have like health clinics and public transporta- complete it.
overshadowed tion options. For those of you who have not
what would We can all agree that California’s completed the census, go to https://
normally have clout and eligibility should be no less my2020census.gov/ for the online form.
been a dominant event of community than our true relative size. (It’s cybersecure and cannot be used for
action: the decennial census. Most of So far, California’s self-response rate anything other than statistical analysis.)
you are probably generally aware of the is just over two-thirds of households, For more information on reaching
census, but few of you likely know that just ahead of the self-response rate of the out to your business or community part-
the census will conclude at the end of this 2010 census, and also slightly ahead of ners, see https://census.ca.gov/resource/
month. the national average and of most other sector/.
The census is more than just a head large states. Enumerators are also out in And if you want to keep up to date
count. The results of the enumeration will the field counting hard-to-reach fami- on how California counties and hard-to-
determine how many seats California lies (as the COVID-19 crisis response count areas are responding, visit the inter-
gets in Congress and will guide how permits), but the bulk of the remaining active map at https://census.ca.gov/.
more than $675 billion in federal funding response still must be self-reported. Also, be sure to read the latest “On
is distributed to states and communities Since we’re getting down to the wire, the Record with Governor Newsom”
each year on infrastructure, health care, the California Complete Count Census column stressing the importance of
schools and more. Office and outreach partners are hold- getting counted for the 2020 Census.
Communities that are undercounted ing statewide Census Weeks of Action, Contact: Loren Kaye
W W W. C A L C H A M B E R A L E R T. C O M
CALIFORNIA CHAMBER OF COMMERCE SEPTEMBER 18, 2020 • PAGE 4
California Legislature Fumbles Chance
to Boost Economic Recovery in State
The California These include requiring businesses crisis. Fashion a few more tools to create
Legislature with as few as five employees to provide more housing in already-urbanized neigh-
fumbled 12 weeks of protected leave each year; borhoods or larger economic develop-
a chance imposing novel, retroactive and unwork- ment projects? Not on your NIMBY life.
to boost able “right of recall” for employees in State agencies barely drew an extra
economic certain industries; and requiring invasive breath before diving back into aggres-
recovery in and unprecedented data disclosure of tax sive rulemaking, from imposing new
the state by liabilities and credits and employee pay, consumer privacy rules to encouraging
choosing the among others. “road diets,” among many others.
easy path:
business-as- No Boost for Employers Unlike Past Response
usual. More inexplicable is the lack of Political leadership during prior
Loren Kaye
Facing the interest in giving a boost to employers economic crises did not hesitate to use
three horsemen of the CApocalypse— struggling to stay solvent, resurrect their state leverage to remove barriers to
pandemic, economic collapse, and social markets and rehire their workers. recovery.
unrest—the Legislature instead took During the 1991–93 recession, the
refuge in the warm embrace of its special Guest Commentary Governor and Legislature offset tempo-
interests, legislating as if millions of resi- rary tax increases with tax reforms
dents weren’t jobless and thousands of By Loren Kaye and incentives, regulatory reforms and
small businesses were not bankrupted. aggressive economic development efforts
Economic development doesn’t do any Simple, even time-limited pauses in and resources.
good if a business has no customers and litigation, regulation or new costs were During the Great Recession in the last
no jobs to offer California workers. This dismissed with barely a second thought. decade, the Governor and Legislature
year, legislators seemed tone-deaf to the Restaurants struggle to regain their created additional tools for regulatory
issues that are among the most important footing. Delay a minimum wage hike for oversight and some additional economic
to Californians—electric reliability, ubiq- one year? No. development tax benefits.
uitous testing and business re-opening. Employers scramble to establish But in response to the current reces-
Unfortunately, it seems that lack of work-from-home protocols for all their sion, the worst in terms of unemployment
awareness on legislators’ part is merely employees. Pause litigation over taking in the post-war era, the new burdens the
business-as-usual. We’re in a hole, and meal and rest breaks at home? Not a Legislature has voted to place on small
the Legislature continues to dig. chance. business vastly overwhelm the few bene-
Threats of vexatious lawsuits related ficial crumbs.
Unneeded New Mandates to coronavirus hobble small businesses’
This year, the Legislature passed a ability to reopen. Provide a limited safe Loren Kaye is president of the California
handful of new, unnecessary business harbor for small businesses to limit Foundation for Commerce and Education, a
regulations, which is not unusual for a lawsuits? See you in court! think tank affiliated with the California Cham-
typical year, but particularly inappropri- Housing cost pressures have contin- ber of Commerce.
ate during a pandemic crisis. ued unabated during the COVID-19
Employment Law Attorney Joins CalChamber Policy Team
From Page 1 She also was a law clerk at the U.S. University of California, Santa Barbara,
at Gibson, Dunn & Crutcher, LLP, Los District Court for the Western District and earned her J.D. from the UCLA
Angeles, representing clients in a vari- of Tennessee in Memphis and a judicial School of Law where she was a Michael
ety of matters including employment extern for the Ninth Circuit U.S. Court of T. Masin scholar, an editor at the UCLA
discrimination, consumer protection class Appeals in Pasadena. Law Review, and staff member for the
actions, trademark disputes, immigration Hoffman holds a B.A. with high Women’s Law Journal.
matters, and other issues. honors in political science from the
W W W. C A L C H A M B E R A L E R T. C O M
CALIFORNIA CHAMBER OF COMMERCE SEPTEMBER 18, 2020 • PAGE 5
A View from Japan
Longtime Commercial Relations Promote
Opportunities to Form Reliable Partnerships
The following intellectual property and the like. cies totaling 12 trillion yen (approximately
answers to ques- Especially in the Bay Area, the robust $113 billion), including a Special Cash
tions posed by the startup ecosystem makes Japanese and Payments Program and Subsidy Program
California Cham- American companies natural partners, for Sustaining Businesses, the degree
ber of Commerce combining each other’s strength in such of the impact was limited compared to
are from Toru areas as entrepreneurship, financial the other major economies such as U.S.
Maeda, consul general, Consulate resources, and technology. and European countries, which experi-
General of Japan in San Francisco. The enced 30%–60% GDP declines due to the
office was established 150 years ago, on economic lockdowns.
August 25, 1870. The Japanese government is commit-
ted to ensuring economic recovery, growth
Japan-California Relations and prosperity by implementing various
Please describe your thoughts on the unique economic and fiscal measures, as is evident
relationship between Japan and California? in its quick actions earlier this year.
Japan and California share a long As the third largest economy in the
history. It dates back to 1860 when the world, Japan shares the responsibility
first Japanese diplomatic mission arrived to contribute toward a global economic
in San Francisco Bay. The purpose of recovery. The Japanese government will
the mission was to exchange ratification continue to make every effort to rebuild
documents for the Treaty of Amity and the economy and to return to a growth
Commerce between the United States and path as quickly as possible.
the Empire of Japan. Thus, commercial
interests have always played a significant U.S.-Japan Trade Agreement
Consul General Toru Maeda, Consulate General
role in promoting Japan-U.S. relations, of Japan, San Francisco What does the U.S.-Japan Free Trade
with California serving as the gateway Agreement mean for Japan?
between the two countries. As we fight to overcome the COVID- The Japan-U.S. Trade Agreement,
Over the past one-and-a-half centu- 19 pandemic, we are inevitably redefin- which entered into force on January
ries, the relationship between Japan and ing our priorities—business relationships 1, 2020, will surely contribute to the
California has gone through good times are no exception. In this regard, there is, economic growth of Japan and the United
and bad times. However, in the past I believe, a new window of opportunity States, as well as to the development of a
few decades, the excellent economic for the Japan-California partnership to free and fair, rule-based world economy.
and commercial ties between Japan be expanded and deepened in the post- This agreement brings down barriers
and California have offered numerous COVID-19 world. against trade between the two countries,
opportunities for Japanese and American which cover approximately 30% of global
businesspersons to trade, invest, and COVID-19 Impact on Japan GDP. Moreover, in combination with
collaborate with each other. As countries all over the world feel the this agreement, the Comprehensive and
Japan currently ranks as California’s pandemic, what is the economic impact of Progressive Agreement for Trans-Pacific
fourth largest global trade partner. COVID-19 on Japan? Partnership (TPP11) and the Japan-EU
According to the World Trade Center According to the first preliminary gross Economic Partnership Agreement will
Los Angeles (WTCLA) 2020 Foreign domestic product (GDP) estimate released create a free economic sphere which covers
Direct Investment (FDI) report, Japan is by the Cabinet Office of Japan, evaluating approximately 60% of the global economy.
California’s top nation in terms of the the period between April–June 2020, real In addition, the Japan-U.S. Digital
number of foreign-owned enterprises GDP decreased at 7.8% compared to the Trade Agreement, which entered into force
(3,380 firms), job creation (121,223 jobs), same period year over year, which is equiv- on the same day as the Japan-U.S. Free
and wages ($10,988 million). alent to an annual rate decrease of 27.8%. Trade Agreement, demonstrates high-stan-
In more recent years, it seems that In Japan, GDP has decreased three dard rules in the area of digital trade, which
Japanese and American businesspersons consecutive periods, resulting in the most is expected to grow exponentially in the
tend to regard each other as reliable long- severe impact to the country’s economy “data-driven” global economy.
term partners. This, I believe, is due to since the 1980s, where comparable data is In close cooperation with the United
the fact that both Japanese and American available. States, Japan will continue to lead efforts to
businesspersons run their businesses under An emergency declaration issued in create rules designed for the 21st century, to
the principles of a free market economy April and May put the economy into stasis realize further growth in the world economy
with the same or similar rules in terms and resulted in severe consequences. and to strengthen the free trade system.
of trade, finance, investment, standards, However, thanks to various support poli- Staff Contact: Susanne T. Stirling
Special Report: Economic Advisory Council ®
CALIFORNIA CHAMBER OF COMMERCE SEPTEMBER 18, 2020 • PAGE 6
To ‘V’ or Not to ‘V,’ That is the Question…
The COVID-19 induced recession of the Great Recession—with many toss- be a permanent shift in the structure of
2020 began with the ferocity of an ing around the term “depression” as a the economy, outside of the pandemic
unexpected tsunami smashing onto the descriptor of what was to come. quickening the pace of retail’s capitula-
shore—one month the economy was fine, In contrast, Beacon Economics has tion to the internet.
the next it was in freefall. been an advocate of the “V” scenario
In February 2019, long before Wuhan from the start. As dramatically bad as Case for ‘V’
saw the first cases of COVID, nearly the numbers have been in the last few The case for the “V” has been vindi-
80% of economists who contribute to the months, there is simply no reason to cated by recent data. Indeed, the big
Wall Street Journal’s consensus survey expect the current business cycle to be as news is that, officially, the recession has
suggested there would be a recession by negative as during the Great Recession already ended. The National Bureau of
the end of 2020—driven by trade wars, given how profoundly different the shock Economic Research (NBER) dates the
inflation, a collapse in real estate, and is to the economy. start and end points for recessions based
other “miserabilist” theories on peaks and troughs of
that generate headlines. Unemployment by Reason economic activity (www.
In February of this year, nber.org/cycles.html).
that share had dropped to 12% For example, the peak of
10%. It appears many fore- economic activity prior to
casters were panicked by 10%
the Great Recession was in
mirages and missed the real 8%
the fourth quarter of 2007,
threat to the expansion. while the bottom was hit in
Now with the second 6% the second quarter of 2009.
quarter behind us, we have The economy took another 5
a better idea of the damage 4% to 6 years to fully recover—
caused by the pandem- this is a separate part of the
ic-linked closures of the 2% business cycle. The NBER
economy. Consumer spend- has dated the peak of the
ing cratered in March at 0%
January May October March August last expansion as February
a level never experienced 2019 2019 2019 2020 2020 2020 and the trough in April
before. This caused U.S. Unemployed Temporary Layoff Discouraged 2020. Since April, economic
output to drop almost Source: Beacon Economics
activity—from housing sales
12% from the fourth quar- to consumer spending to
ter of 2019 to the second quarter of The Great Recession was the worst payroll employment—has been growing
2020, the sharpest decline ever seen. business cycle since World War II sharply.
Unemployment in the nation surged from because the economy had been badly There are ways that economists can
50-year lows to 80-year highs in a matter distorted by the subprime credit bubble estimate quarterly gross domestic product
of weeks. that preceded it. It took years to repair (GDP) though the use of certain monthly
household balance sheets and to work data and interpolation of data that is
Where Now? through excess inventories of homes, cars available only on a quarterly basis.
The big question is: where from and other durables. Millions of jobs that One estimate from Macroeconomic
here? While there are all sorts of witty had been created by the bubble were lost Advisors estimates that the economy
responses to the forecast letter game, permanently, and displaced workers had contracted by 16.5% from February to
the predictions can largely be put into to build new careers in new sectors. April, and then bounced back by 9.2%
two camps—the “V” group and the “U” In contrast, the shock that set off the through June. If economic activity in the
group. While there is no set definition current crisis has none of these long-term third quarter doesn’t grow at all from
between the two, roughly, the “U” camp characteristics. The economy was well June, the United States will still experi-
sees the pandemic’s damage to the econ- balanced when the pandemic arrived. A ence a 20% real growth rate in the third
omy as severe enough to suggest a slow, collapse in consumer spending occurred, quarter—the highest ever recorded.
long-term recovery. not because people couldn’t spend money, It’s certainly clear that growth won’t
Most of the economic forecasts that but because fear and caution surround- be flat. And while a lot of July data,
were released immediately after the start ing the disease itself and government outside of retail sales, employment and
of the COVID crisis suggested a down- mandates prevented them from spending. the ISM numbers, are still not available,
turn worse than what occurred during There is no reason to think there will See Next Page
Special Report: Economic Advisory Council ®
CALIFORNIA CHAMBER OF COMMERCE SEPTEMBER 18, 2020 • PAGE 7
To ‘V’ or Not to ‘V,’ That is the Question…
From Previous Page Reasons for Optimism quarter of lower spending through the
all this suggests continued growth. The Great Recession, nor did it lose jobs. The
While this second wave has shifted
third quarter could approach a 25% to hit this time was not driven by reduced
the date of full recovery out modestly
30% growth rate. demand but because the health care
relative to earlier predictions, Beacon
system deferred nonessential visits until
Shifting Predictions Economics remains certain that a quick
the virus was brought under control. This
recovery will occur once the virus is
“An economic forecast is an expert is simply spending delayed, and will help
under full control. This optimism is based
who will know tomorrow why the things he the bounce in economic activity in the
on a number of observations.
predicted yesterday didn’t happen today.” second half of the year.
• As dramatically bad as the second
These surprisingly good numbers • One of the more pessimistic predic-
quarter numbers were, there is also plenty
have forced some pessimists to sharply tions at the start of the pandemic was the
of evidence indicating that the shocks
alter their projections upwards (some “W” recovery—where economic activ-
to the system were largely transitory.
have attempted to spin their ity would again spiral downward with
misses in the press in recent another surge in the virus.
months). But most prognos- Real Consumer Spending to July But the economic impact of
ticators continue to predict a the first and second surges
long, painful recovery. 150 couldn’t be more differ-
The current outlook from ent. In March, there was
the Congressional Budget 140
an unprecedented collapse
Office (CBO) is a good 130
in consumer spending. In
example. The CBO’s most July and August, the most
recent forecast suggests 120 that can be said is that the
a full recovery will take surge slowed the recov-
close to a decade—simi- 110 ery in consumer spending.
lar to the amount of time Additionally, there was
it took to recover from the 100 an expectation that July’s
Great Recession. But given labor figures would be
the current trajectory of the
90
January May October March July
flat and unemployment
economy, it’s likely they will 2019 2019 2019 2020 2020 would rise. Instead, another
have to upgrade their fore- Goods Services surprise: payroll jobs rose
cast in the coming months. Source: Beacon Economics
and unemployment fell
The key issue with the despite the number of new
more bullish “V” outlook has been the cases. Businesses and consumers have
For example, the enormous surge in
unfortunate second surge in new COVID- adapted—an important factor that is
unemployment was not driven by true
19 cases that began in June. Increased often left out by forecasters. Even if a
job losses but by temporary layoffs. The
economic activity, a lack of consistent true second wave of cases did occur, it is
share of the labor force who were truly
and forceful public policy, and a basic clear that the economic impact wouldn’t
unemployed (either lost their job perma-
decline in Americans’ fear of the virus approach what happened the first time.
nently or have entered the labor market
has driven an escalation of new cases • The underlying strength of the
and are looking for work) was slightly
in places such as Texas, Florida, and economy at the start of the pandemic
over 4% in July—substantially lower
Arizona, which didn’t formerly have high has been reinforced by excessive—yes,
than the 8%-plus rate seen at the peak of
numbers. that is the appropriate word—stimulus
the Great Recession, and not yet as high
This isn’t, by the way, the second spending. Congress’s first pass at stimu-
as during the very mild tech recession of
wave that many experts were discussing lus came in at almost $3 trillion. Putting
the late 1990s.
early on in the crisis, where a place like aside the well-deserved criticism of how
• Consumer spending, not surpris-
New York City would see a big second poorly thought out these programs were
ingly, is where most declines in economic
surge in new cases. At its peak, the from an operational standpoint, the cash
activity have taken place during the
United States was experiencing about 200 that was put into the economy is vastly
current crisis. But the damage largely
new cases per million people per day. more than what was lost. Earned incomes
occurred in April. Much of the decline
The silver lining is that this second didn’t drop nearly as much as expected,
was in restaurants, travel, and personal
wave has not led to a huge number of about $260 billion less (seasonally
care services, as would be expected.
new deaths or overwhelmed hospitals. adjusted, not annualized) in the second
But over one-third of the decline in
Moreover, it has begun to subside; as of quarter compared to the previous three
consumer spending was in health care
August 17, the nation was recording 140 months for workers and proprietors.
consumption. Health care is not a cycli-
new cases per million people per day. cal sector; it didn’t experience a single
See Next Page
Special Report: Economic Advisory Council ®
CALIFORNIA CHAMBER OF COMMERCE SEPTEMBER 18, 2020 • PAGE 8
To ‘V’ or Not to ‘V,’ That is the Question…
From Previous Page economy, which is allowing it to weather new parts of the world.
On the other hand, the increase the COVID storm and will allow it to But it is easy to overstate the aggre-
in government benefits, unemploy- rapidly bounce back to normal levels of gate impact of these stressed sectors.
ment, and direct payments increased activity once the virus is brought under Together, they represent less than 5%
by $600 billion. The U.S. government full control. Continue to believe in the of U.S. GDP. Additionally, these sectors
paid people more than $2 for every $1 “V,” just a modestly wider one than have mitigated at some level. Retail sales
of lost income—albeit it probably has before. at restaurants in July are only about 20%
not been distributed proportionately to Clearly some sectors will do worse below where they were last year. And a
income losses. And spending dropped than others. Business hotels, restau- lack of spending in some sectors is driv-
by $400 billion. The difference ended rants, airlines, and leisure and recreation ing opportunities in other parts of the
up in consumer savings, which shot up firms will all lag the recovery for obvi- economy—campers and bikes are selling
to almost $1.2 trillion, four times what it ous reasons. Retail is far and away the like crazy, while golf courses and local
was in the fourth quarter of biggest flashpoint. That sector has been drive-to hotels are busier than ever.
2019. That $900 billion in
excess savings will undoubt- Some Sectors Recovering Faster than Others
Concerns
ably be spent once life There are two major
returns to normal. Unlike concerns to pay attention to
the Great Recession, where 0% as the recovery continues.
there was a collapse in net -7.3%
• The first has to do
worth that hurt spending for -20% with the spread of the virus
years, in the current crisis, itself. The United States
has experienced a second
-26.9%
net worth is increasing.
• The numbers above -40%
surge in cases, and it’s possi-
will be accentuated by -47.4% ble there could be a third.
additional payments -60% Notably, the second surge
in July. And of course, is almost over without the
none of this includes all massive public health regu-
the payments that went to -80%
January March May July August 30 latory controls implemented
limited liability compa- in the first wave. In other
nies (LLCs) and corpora- words, shutting down restau-
Total Spending Restaurants & Hotels Transportation
tions through the Paycheck Source: Beacon Economics
rants, nail salons, and malls
Protection Program. It is does not seem to be the most
understandable why the Federal Deposit struggling with oversupply even as the effective way of controlling the spread
Insurance Corporation (FDIC) is report- internet continues to wrestle market share of the virus. Controlling transmission is
ing one of the most dramatic surges in away from traditional brick and mortar about not gathering in large groups, wear-
commercial bank account deposits ever stores. The non-store share of retail sales ing masks, and washing hands.
seen—$2.2 trillion in three months. went from 14.7% in January to 17.4% That personal behavior may be more
This is the dry powder that will fuel a in July, and it’s unlikely to give much of important than government regulation
rapid recovery. Data from the New York that back. in controlling the virus is supported by a
Federal Reserve showed consumer debt There will be stressors in the coming recent report from the NBER (www.nber.
delinquencies falling, not rising, in the months regardless of the strength of the org/papers/w27432.pdf).
second quarter. And while there have recovery. Undoubtably, a portion of the 9 Sweden, for all the criticism that
been a few big-name bankruptcies, most million people who in July still classified nation faced for its lax regulatory
have been among companies that were themselves as being on temporary layoff response to the virus, has seen its rate of
already on the brink due to broader will find themselves in the permanently new cases drop to the same level as the
trends in the economy. The financial lost job category. European Union overall in recent months.
Armageddon that was predicted by many And while in the aggregate things are And without any closures. Japan has
of the talking heads on network television good, we also know that the fiscal stimu- been the wonder story. Despite being
seems pretty far away. lus did not adequately protect everyone. the third nation in the world to identify
The blunt and poorly thought out systems COVID cases, it still has fewer than 500
Return to Normality that were implemented have guaranteed cases per million people compared to the
There is little doubt that the nation that a lot of the stimulus money went to United States’ 16,000. Governments need
still has a ways to go to return to normal- places it was not actually needed. Global to worry less about regulating businesses
ity, but these recent trends clearly demon- supply chains will also remain in turmoil and more about regulating people.
strate the underlying strength of the U.S. as the virus continues its expansion into See Next Page
Special Report: Economic Advisory Council ®
CALIFORNIA CHAMBER OF COMMERCE SEPTEMBER 18, 2020 • PAGE 9
To ‘V’ or Not to ‘V,’ That is the Question…
From Previous Page This borrowing will have conse- when the nation’s fundamental economic
The rebound in the economy will quences. Right now, there is little issue growth slowed due to the start of dein-
continue, but the speed of the recovery with raising the funds—between record dustrialization even as excessive mone-
is completely contingent on keeping the deposits in the banking system and tary growth caused inflation to accelerate
virus in check. On the current trajectory, aggressive quantitative easing by the to the worst pace ever seen in the modern
expect U.S. unemployment to fall to 7% Federal Reserve, there is plenty of loose U.S. economy.
or lower by year’s end and the nation’s cash in the system. But what happens The next (future) hit to the economy
economy to be almost fully recovered in when the virus is conquered, and the could end up looking very much like
2021. If there is a third surge, however, population rushes to catch up on life? what happened in the early 1980s when
that date may have to be pushed back yet Spending will jump, the money supply Paul Volker put the hard stop on inflation,
again. will expand rapidly, and the federal which was good for the long run, but in
• The second concern is the U.S. government will be sucking up liquidity the short run caused the United States to
government’s “over” stim- experience a deep recession.
ulus. Despite clear resilience
in the economy and pent Overall Spending in California California Outlook
up demand that is ready These are unprecedented
times for California. New
0.1
to spring once the virus is
under control, amazingly, economic records are set,
Congress is discussing a 0 both positive and negative,
second aid package and are on a monthly basis. As of
tossing around numbers as -0.1 this writing, 42 of the state’s
high as the first—$3 trillion 58 counties are currently on
or more. -0.2
the state’s COVID-19 watch
While this will super- list, which means bans on a
charge the economy, it significant number of indoor
also suggests that the U.S.
-0.3
activities including gyms,
government will be borrow- restaurant dine-in service,
ing $4.5 trillion to $7.5 -0.4 museums, indoor malls,
trillion this year—18% to January February March April May June July and hair salons. At the same
33% of national GDP. Never Source: Womply/Opportunity Insights
time, mobility data reveal
has the U.S. government that people have remained
borrowed so much in either cautious about venturing
absolute or relative terms. To put this in in every direction. This a recipe for accel- out. The magnitude of the economic
context, the overall U.S. economy has erating inflation and rising interest rates. shock will ripple throughout the econ-
been adding $3 trillion to $4 trillion in Moreover, it will be a completely omy, affecting labor markets, budgets,
total public and private debt per year over different circumstance from what both state and local, as well as real estate
the last few years. happened after the Great Recession. markets.
In June alone the federal government The collapse in wealth at that time kept With respect to local budgets, commu-
borrowed more money than it had in all spending in check as households worked nities that are heavily reliant on the
of 2019. During the worst year of the to rebuild their balance sheets. And the transient occupancy tax will see sharp
Great Recession, the U.S. government decline in private sector debt kept money drops as the peak summer travel season
borrowed slightly over $1.3 trillion, and supply growth in check. In fact, the has come and gone in the middle of the
that was enough to set off the backlash Federal Reserve had to keep rates near pandemic. This will severely disrupt local
that came to be known as the Tea Party. zero just to keep the money supply grow- service provision for these communities.
Amazingly, there doesn’t appear to be a ing. This is why rates were so low in the At the state level, plans are being
single person left in Washington who is years following the recession. Not this made to cover revenue shortfalls.
worried about the current pace of borrow- time. Recessions create a double whammy for
ing. We seem to have allowed the “miser- If the Federal Reserve fails to aggres- state budgets. They create greater expen-
abilism” of our times to make us forget sively back off on quantitative easing this diture on social services at the same time
that this money will have to be paid back time, the sharp increase in velocity will that revenues decline. Around 70% of the
by our children and grandchildren—as cause inflation to heat up, which will put state’s budget comes from income and
they struggle to cope with the ever-rising even more pressure on interest rates. All capital gains taxes.
cost of entitlements for baby boomers, of this sounds a lot like what happened While the stock market has returned
who are retiring in droves. in the late 1970s, in the era of stagflation, See Next Page
Special Report: Economic Advisory Council ®
CALIFORNIA CHAMBER OF COMMERCE SEPTEMBER 18, 2020 • PAGE 10
To ‘V’ or Not to ‘V,’ That is the Question…
From Previous Page recover from the effects of the COVID- one year earlier, a 30% decline. Other
to all-time highs, which is positive for 19 pandemic in July, with total nonfarm significant job losses have occurred in
capital gains revenue, the unemploy- employment in the state expanding by the Government, Retail Trade, Other
ment rate remains at historically elevated 140,400 positions. The rate of job growth Services (a sector which includes hair
levels. Since many job losses have fallen slowed compared to June, when 558,200 and nail salons), and Healthcare and
disproportionately on lower-income earn- total nonfarm positions were added by Social Assistance sectors of the economy.
ers, higher-income earners have fared the state’s employers. Of course, these are the sectors that have
better, providing a measure of support for The slowing rate of job growth is been the most vulnerable to the spread
state revenues. That said, high-income in large part due to the reaction to the of the virus since the in-person nature of
earners have not been immune to job resurging spread of the virus throughout their activities has meant their operations
losses, and ultimately, the magnitude of June and July, leading the state govern- have been curtailed through government
California’s revenue losses will be teth- ment to reimplement certain business mandates and consumer reticence. Again,
ered to the recovery of the state’s labor closures and constraints on business once the spread of the virus is contained,
market. activity in the second half of July. The these sectors should see significant job
hope is that job gains will accelerate gains.
Coronavirus in California later in the year, once the virus is better The biggest job losses, in terms of
In August 2020, California hit some contained, but given that the spread of percentage change, have occurred in
unwelcome milestones. More than the virus has continued into August, it’s Santa Cruz (-14.7% year-over-year), San
600,000 people have tested positive for likely August will look more like July Luis Obispo (-13.3%), Salinas (-12.4%),
COVID-19 in the state, and more than than June. A strong but not “blow-out” and Oakland-Hayward-Berkeley
11,000 residents have died as a result month of job gains. (-12.2%). Three out of four of these
of the virus. On a per capita basis, at Despite the nascent labor market places are home to major universities
nearly 16,000 cases per million resi- recovery, year-over-year employment and have suffered from a lack of student
dents, the state has seen fewer cases than growth in California stands at -9.4%, spending at local businesses as instruc-
the national average of nearly 17,000 one of largest annual declines on record. tion has moved online. Since remote
residents per million. The number of In July 2020, there were more than 1.6 learning will continue into the fall, we
virus-related deaths in the state has been million fewer people employed in the can expect the performance of these loca-
much lower than the national average, state than in July 2019. California has tions to lag the labor market recovery in
with nearly 300 deaths reported per continued to perform slightly worse than other regions.
million residents compared to more than the nation, where nonfarm employment Unemployment rates are elevated
500 nationally. declined by 7.5% over the same period. in a number of regions, most notably
The number of new cases in the This is in large measure due to the more Los Angeles County, which as of July
state has plateaued and there are early aggressive stance taken by state leaders had an unemployment rate of 17.5%.
signs that new cases are starting to fall. to contain the spread of the virus than in Los Angeles is home to a number of
As of August 16, the average number other locations. industries for which remote work is
of new cases over the previous 7 days From July 2019 to July 2020, 1.7 not well-suited. Beyond tourism, retail,
stood at 9,137, compared to a peak of million workers were added to the state’s and dining, Los Angeles County has a
more than 9,600 cases for the previous unemployment ranks. California’s unem- large concentration of workers in health
7 days on July 25 (the peak). There has ployment rate declined to 13.3% in July, care, as well as entertainment, industries
been a significant drop in the number of a 1.6 percentage-point decline relative which require workers to be on loca-
COVID-19-related hospitalizations in to June, but a far cry from the 4.0% rate tion. The inability to work from home in
California, falling from a peak of nearly enjoyed one year ago. A small majority of these sectors has led to elevated levels of
9,000 patients at the end of July to fewer those who have joined the unemployment unemployment in the county.
than 6,500 patients as of the August 16. rolls still report the nature of their unem-
Beyond important public health ployment as temporary. However, the Recovery on Ice
concerns, containing the spread of virus number of people who identify as being Despite the strong performance of
is critical for the state’s economy since temporarily unemployed has been shrink- California’s labor market in June, the pace
the economic recovery that has been ing in recent months, a worrisome sign of the recovery has undoubtedly slowed
underway since April has slowed follow- that many layoffs are turning permanent. since then. This is clear in the employment
ing the resurgence in new cases. The largest job losses have been numbers, where the rate of job growth fell
concentrated in the state’s Leisure and significantly from June to July. We also
Labor Market Recovery Hospitality sector, where 620,000 fewer see evidence of a slowing economy in
California’s labor market continued to workers are employed compared to See Next Page
Special Report: Economic Advisory Council ®
CALIFORNIA CHAMBER OF COMMERCE SEPTEMBER 18, 2020 • PAGE 11
To ‘V’ or Not to ‘V,’ That is the Question…
From Previous Page of time people spend at home—in other July. This is a positive sign, but to place
so-called “high frequency data.” words, it’s a measure of time spent away this figure in context, if we continue to
Nonconventional data sources deliver from workplaces and recreational activ- add jobs at this rate, it would take until
an interesting perspective on the econ- ities. These data reveal a very similar August 2021 to return the labor market
omy, providing data that is more timely pattern to the consumer spending data: to the position it was in in February
than traditional data sources. Consumer the recovery in economic activity stalled 2020. Since the labor market normally
spending data, gathered by Affinity as the number of new cases in the state would have been adding 22,000 jobs per
Solutions, reveals a sharp recovery in grew—and has been stalled since. These month over this period, based on 2019
consumer spending in California through data run until the middle of August. employment figures, this means that in
April and May, which began to stall at August 2021, the economy would still be
the end of June, as the number of new
Fixing a Hole 250,000 jobs behind trend.
COVID-19 cases surged in the state. Given the trauma sustained by the Job growth in California will also
Over the period from June slow in the second half
21 to August 2, consumer of 2021. As the recovery
spending in the state was Changes in Mobility: Time Away from Home proceeds and the majority
flat. As of August 2, it was of jobs lost are replaced, the
rate of job growth naturally
0.1
15% lower than in January
2020. Consumer spending slows.
nationally was 8% lower Even if in the second
Mobility (indexed to Jan 3 - Feb 6)
0
over the same period. half of 2021 the number of
The key lesson from jobs added to the state each
the Overall Spending in -0.1 month is double the number
California chart is the extent of jobs that were added each
to which the speed of the month in 2019, which would
recovery is shaped by the -0.2 be a historically high figure,
spread of the virus. As the it would take a further year
virus’s transmission in the for the labor market to return
state slows, consumer spend- -0.3 to the pre-pandemic trend.
ing should increase.
February March April May
Away from Home
June July August
Of course, predicting the
That being said, the Source: Google/Opportunity Insights
precise rate of job growth
federal government’s inabil- over the next two or three
ity to extend additional years is not an exact science,
unemployment benefits will act as a head California economy, the key question but this hypothetical scenario illustrates
wind to consumer spending in California. centers on how long it will take the labor the depth of the labor market hole, and
The recovery in consumer spending market to recover. The 1.7 million jobs how long it will take to fully repair.
was fueled in large part by enhanced lost will not return to the economy over- Staff Contact: Dave Kilby
unemployment benefits from the federal night, even after the spread of the virus is
government, which provided unemployed fully contained.
workers with an additional $600 per There are two components to the labor The California Chamber
week beyond what they would normally market recovery. First is replacing the of Commerce Economic
receive from state governments. jobs that have been lost, which would Advisory Council, made
Given the high number of unem- only return the labor market to where up of leading economists
ployed workers in the state, the cut in it was before the pandemic began. The from the private and
economy should have been adding jobs public sectors, presents
additional unemployment benefits will
over this period under normal circum- a report each quarter to
represent the equivalent of a major pay the CalChamber Board
cut for California’s unemployed. This will stances. In 2019, the state’s economy
of Directors. The council
undoubtedly act as a drag on consumer added roughly 22,000 jobs per month. For
chair is Christopher Thornberg, Ph.D.,
spending until the labor market recovers. each month that it takes to return to the founding partner of Beacon Economics, LLC.
Mobility data is another widely used pre-pandemic level of employment, the The California Outlook section was prepared
measure of “real-time” activity. The state is effectively losing a further 22,000 by Taner Osman, Ph.D., Beacon Economics.
data are based on people’s mobility as jobs per month, based on the 2019 trend. Graphics are a selection of those presented at
recorded on Google Apps. The Changes As mentioned above, 140,000 jobs the CalChamber Board meeting via Zoom on
in Mobility chart measures the amount were added to the state’s economy in September 11.
W W W. C A L C H A M B E R A L E R T. C O M
CALIFORNIA CHAMBER OF COMMERCE SEPTEMBER 18, 2020 • PAGE 12
Disability Access Group Offers Tips for Businesses Operating Outdoors
The California Consideration” is available on the CCDA advises businesses to contact their local
Commission on website under the “Resources” tab at building department, or a Certified
Disability Access www.CCDA.ca.gov. Access Specialist (CASp).
(CCDA) has CCDA notes that the document is not Business owners also can refer to
released access intended to be all-inclusive and should be the Americans with Disabilities Act as
guidance for used as a starting point for businesses to well as the California Building Code for
businesses to refer to for general guidance. specific technical requirements to facili-
consider when setting up outdoor dining tate compliance.
and curbside pickup locations. Other Resources Questions or comments about the tip
The tip sheet on “Open-Air Dining For further consultations regarding document can be directed to the CCDA at
and Curbside Pickup Disability Access accessibility compliance, the CCDA (916) 319-9974, email ccda@dgs.ca.gov.
Face Mask and Safe Distancing
Reminders for Your Workplace
COVID-19 still remains a very real threat to everyone’s
health and safety.
Use CalChamber’s eye-catching posters and floor decals
to remind employees, customers, and visitors to always
wear masks and keep at least 6 feet away from each other.
Spread the word to stop the spread of coronavirus. Let’s
help keep California open for business.
Preferred and Executive members receive their 20 percent
member discount.
PURCHASE TODAY at calchamber.com/staysafe or call (800) 331-8877.
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