HOUSTON — The novel coronavirus is sparking an economic slide that has sent governments scrambling, put people out of work and left businesses on the brink of closing, if they haven’t already.
Recommended Videos
In Texas, the economic double whammy of the public health crisis combined with the steep drop in oil prices has experts here unclear about how deeply COVID-19 will impact the state's economy.
But they are certain about the sensation it will deliver.
“It’s going to hurt,” said Julia Coronado, a financial consultant who also teaches at the McCombs School of Business at the University of Texas at Austin. “There’s the health shock and the oil shock. It’s going to be an extra hit on the state’s economy.”
As Texans limit how much they're in public as they wait out the public health crisis, many people have lost jobs or had their hours cut by businesses adapting to limited or shuttered operations. That's left unknown numbers of Texans in need of money to cover housing costs and other essential expenses. President Donald Trump's administration put together a $1 trillion economic stimulus plan, about half of which is earmarked as direct payments to individuals.
But experts warned they don’t know yet when money will arrive.
Many hope Congress can agree — quickly — on the package's details, after the U.S. Senate passed legislation Wednesday that would allow free testing for COVID-19, expand paid sick leave measures and provide financial boosts to food assistance programs.
Meanwhile, John W. Diamond, director of the Center for Public Finance at Rice University’s Baker Institute, said Texas’ 3.5% unemployment rate, barely better than the country’s 3.6% rate, likely will not last.
From March 8 through March 14, there were 19,968 unemployment insurance claims filed with the Texas Workforce Commission, 7,383 more than were filed during the same week in 2019. But those new figures don't include people out of jobs or facing fewer hours since local governments across the state banned dine-in restaurant service and shuttered bars this week. Gov. Greg Abbott is expected to make an announcement Thursday about whether he plans statewide closures of bars and a statewide prohibition on dine-in services at restaurants.
Analysts expect the state's unemployment number to go up once this week’s numbers are recorded.
“I wouldn’t be shocked if we saw unemployment levels here up to 5%,” Diamond said.
The Texas Workforce Commission, which receives unemployment insurance claim applications, expects to see a crush of submissions, but a spokesman said the agency “has over 1,000 staff helping support unemployment insurance services.”
Milena Arias, 26, moved to Austin in late February to look for jobs in mass communications. She had only been a server at Lucy’s Fried Chicken for a week and a few days when the local chain laid her off, anticipating a loss of business due to the COVID-19 crisis.
Arias has been planning to file for unemployment, but she hasn’t been able to cut through the busy phone lines at the Texas Workforce Commission. She said she understands the spike in traffic but wishes government agencies would have had a plan for the economic impacts of the coronavirus.
“That’s kind of the frustrating thing, its definitely like no one was prepared for this,” Arias said.
Larry Stuart, an employment lawyer in Houston, said employees could apply for unemployment benefits if they are laid off, they are furloughed or their hours are significantly reduced. Employers, if they’d prefer, could cut an employee’s hours but continue offering the employee work on a scaled-down, part-time basis, and the employee could still apply for unemployment, Stuart said.
Whether unemployment benefits will be enough to stem an economic slide is another question.
“There’s a good chance we’re going to go into a recession,” said Stuart, who’s also a business professor at Rice University. “And that doesn’t bode well for longer-term employment.”
Meanwhile, the state is sitting on billions in its Economic Stabilization Fund, analysts said. But the same forces hurting the economy and household finances are also battering state revenues and coffers.
The majority of the state budget relies on retail sales tax revenues and the energy sector, which saw oil prices plummet to around $22 a barrel Wednesday, down from over $60 a barrel at the beginning of the year, perhaps shaking the industry more in Texas than anywhere else.
“Texas is likely to go from pulling up the national economy, like it did last year, to pulling down the national economy this year,” said Keith R. Phillips, an economist with the Federal Reserve Bank of Dallas since 1984. “And that’s because of the sharp decline of the energy sector.”
Some form of relief, however, could come with housing — at least for some people. On Wednesday, the U.S. Department of Housing and Urban Development announced a 60-day moratorium on evictions and foreclosures for homeowners with federally backed loans.
But experts say that all homeowners and renters deserve relief during the ongoing crisis.
In Texas, housing advocates are calling for a statewide moratorium on evictions and foreclosures of mortgages that are not backed by the federal government. Abbott’s patchwork response to the virus has left Texans in different counties facing different financial fates as many workers’ abilities to earn income are undermined by the need to stop the spread of the virus.
“We have to think that this is an incredibly traumatic moment, and it is inhumane to continue pursuing evictions,” said Christina Rosales, deputy director of the advocacy organization Texas Housers.
Some counties and courts are considering evictions and foreclosures “nonessential” cases and are following the recommendations of the state judicial branch to temporarily postpone them. But, Rosales said, there isn't any uniformity.
“Some are halting them for two weeks, some for two months,” she said. “We don’t have any idea how long this will last, but ideally this needs to be uniform, and the state can accomplish that.”
A spokesman for Abbott’s office did not respond to requests for comment about what the governor’s options are or whether he is considering any moratoriums on evictions and foreclosures.
Smaller businesses have not typically received great amounts of money from large federal economic stimulus packages, as large sectors such as energy and the airlines often have. But the latest federal stimulus package does have $300 billion earmarked for such companies.
And the U.S. Small Business Administration announced updates Tuesday to its application process in hopes of expediting it, which could be a viable option for many businesses in Texas hit hard by social distancing that experts say will slow the public health crisis.
“It’s really a difficult spot for small businesses right now,” Phillips said, “because they don’t know how long this is going to last. And I wish I could tell them. I wish I knew that.”
Carrington Tatum and Juan Pablo Garnham contributed to this report.
Disclosure: The McCombs School of Business and Rice University have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.