By Richard L. Gaw

Staff Writer

Paraphrasing the opening paragraph of Charles Dickens’ novel A Tale of Two Cities, a leading economist told several hundred Chester County economic stakeholders last week that while the U.S. economy is still navigating its way through what he called “a natural disaster,” it is weathering the COVID-19 storm and is showing clear signs of an optimistic 2021. 

James Glassman, managing director and head economist for commercial banking at JP Morgan Chase, was joined by Patti Brennan, president and chief executive officer at West Chester-based Key Financial, Inc. at the Chester County Economic Development Council’s (CCEDC) 17th annual Economic Outlook online presentation, “Impacts of COVID-19 on a Post-Election Economy,” held on Jan. 8.

Glassman, a former senior economist at the Federal Reserve Board, called the national economy the equivalent of a “best of times, worst of times” scenario, assessed not from the standpoint of a business cycle, but the means by which it is recovering from the economic impacts of COVID-19. Before the pandemic arrived last March, Glassman said that the U.S. economy was strong, anchored by the news that unemployment rates had dropped to a 50-year low. While subsequent lockdowns and shutdowns after the pandemic’s arrival in March wreaked havoc on the small business community – 40 million of those who worked in small business had lost their jobs and 10 million small businesses closed up – Glassman said that the next several months saw unprecedented growth in various areas of the economy.

Referring to recent studies and economic indicators, he said that by the end of 2020, the overall national economy had almost returned to where it was at the start of the pandemic last March. By December, the overall U.S. economy had recovered to about 98 percent of where it was before the lockdowns began in March.

“Real estate activity soared, manufacturing activity went back to pre-crisis levels, unemployment began to plunge by May and continues to creep lower,” he said. “Indications of financial stress didn’t come close to pessimistic assumptions, and state and local finances didn’t take it on the chin like many thought they would.”

Moreover, he said, the stock market -- a major indicator of the nation’s financial health – continued to churn along, and by the end of the year, had finished with record highs.

He said the strong year-end numbers have continued so far in 2021, buoyed by the optimism seen in the rapid development of two major COVID-19 vaccines – with more scheduled to be introduced – that are expected to vaccinate millions of Americans over the next several months.

One of the most prominent lights at the end of the tunnel of the coronavirus, Glassman said, has been the use of alternative technology, measures that keep the wheels of business spinning and our lives easier and safer.  

“We began to recognize that the innovation being done in the last few decades would help businesses and people transition from working in the office to working at home, shopping on line and communicating virtually,” Glassman said. “We are able to do so much more in so much less time because of this innovation, and it is crises like these that tell us how we are able to adapt to the new norms.

“It’s not until you’re in a crisis and you need to learn how to survive that you fully embrace this technology – such as transitioning to digital platforms in the time of the first lockdowns.” 

U.S. economy revived by ‘lifelines’

The U.S. economy was also revived, Glassman said, by the roll out of several federal   “lifelines” that included the Payroll Protection Plan (PPP), the Coronavirus Aid, Relief and Economic Security (CARES) Act and the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 – all of which have provided provide fast and direct economic assistance for American workers, families and small businesses.

Glassman distinguished the economic downturn as the victim of “a natural disaster,” and not the result of a normal business cycle. In defining the difference, he made a reference to the impact Hurricane Katrina had on New Orleans, and how the city recovered.

“The storm comes in and rips the place up and the nation mobilizes resources to help get New Orleans back on its feet, and within two years, employment there was right back to where it was before the storm,” Glassman said. “If we make the effort to give people the income, it’s going to help people get back to normal.

“The support that the federal government is giving is really helping to replace lost income. It’s not a stimulus, it’s a lifeline, and it’s going away the moment that people get back to their jobs or have a job and don’t need the help of fiscal contributions.”

A key strategy to continue to drive the economy forward, Glassman said, will be to reform the nation’s immigration system, an effort that will fill the projected 6.5 million to 7 million jobs that are currently available due to a shrinking workforce that is seeing an increase in those at or nearing retirement age.

Another way to get the economy moving faster, he said, will be to invest in infrastructure – creating better transportation systems and moving goods and services and faster, using online technology.

“We’re keeping our fingers crossed about 2021, but I think the picture looks a lot clearer, because what we have been waiting for has been a medical answer, and now we have one,” Glassman said. “It’s going to allow us to lift restrictions on the economy and allow people to get back to their lives. You don’t need a lot of imagination to believe that this will be a decent year for the economy.

“Markets are telling this. Medical science has been telling us this. Consumers have been telling us this.”

‘Coming to the rescue’

Like Glassman, Brennan equally praised the federal government for “coming to the rescue” with its stimulus package, and while she said that the U.S. economy is not out of the proverbial woods yet, its prospects for 2021 seem good.

“This economic downturn has been a real doozy,” she said. “We all needed our federal government to provide massive liquidity, to not only help us psychologically but put food on tables, to help families throughout America who had lost their jobs. It was critical and effective.

“Compared to other recessions the nation has experienced, this most recent downturn was massive and quick, and our economy had turned on a dime, but it was the result of several stimulus packages that have led to a faster economic recovery than had been originally anticipated.”

The comeback of the U.S. economy confounded several economic prognosticators, Brennan said, who predicted that 2020 would end with an unemployment rate of 11 percent, and shrink to 10 percent in early 2021. In reality, the economy is up and running again and the nation’s unemployment rate stands at 6.7 percent. Close to home, unemployment in Pennsylvania stands at 7.3 percent, while unemployment rates in Chester County are currently at 4.9 percent.

Brennan, who was named by Barron's as one of the Top 250 Women Wealth Advisors in America in 2020, said that the first signs of the nation’s economic recovery began soon after the Cares Act was introduced, that led to increased spending that in effect kick-started the economy.

“When it comes to those stimulus checks, more than half of that stimulus went to paying down debt, into savings, and the rest went into spending,” she said. “The government needed us to spend money to create income for other people, and we also needed to invest it in order to create opportunities to increase standards of living for the future, as well as helping others’ futures.”

Going forward, Brennan suggested that investment portfolios should be in alignment with improving one’s standard of living in the future – and not fluctuate dramatically according to the rise and fall of the economy.

“When you’re hearing about all of the drama, focus on the longer-term trajectory, and when you hear all of the hype, that’s the worst time to be doing anything [in terms of investment],” she said. “In fact, turn the tube off. It’s not good for your stress levels and your levels of happiness.

“This is the year for each and every one of you to think about getting your [financial] house in order. Optimize your income and your assets. By doing so, you will have a wonderful feeling of being organized and in control, and ultimately, that will lead to peace of mind.”

Michael Grigalonis, chief operating officer and executive vice president of the CCEDC, provided an update about how the agency has assisted county businesses through COVID-19.

He said the CCEDC has been active in partnering with the county to develop and implement the Main Street Grant Program that has provided $5 million in grants to 248 small businesses in the county, as well as distributed nearly 600 PPP loans that have totaled $58 million. Now in the second round, the program will soon distribute an additional $10 million throughout the county’s business community.

Grigalonis said that the CCEDC will soon turn its focus on VISTA 2025, a long-term economic and growth strategy for Chester County that it released in 2015.

“We’re five years into [VISTA 2025], so we think it’s time to refresh that, particularly in light of everything that’s happened because of COVID-19 and the trends that have emerged, like working from home, telemedicine, our increased use of online shopping and reduced business travel,” he said.

“We need to think about how those trends will impact Chester County as a region and what we need to do in order to succeed in the new economy.”

To contact Staff Writer Richard L. Gaw, email [email protected].