The country has been hit hard by the pandemic, and San Diego is no exception. Ray Major, chief economist and chief data and analytics officer with SANDAG, spoke about the San Diego economy, unemployment and the recovery during the most recent digital CREW San Diego event last week. According to his presentation, San Diego is forecasted to see a 7.1% drop in GDP this year, wiping out the gains from the last two years and outpacing national GDP loss.

"San Diego may experience a 7.1% loss in 2020 and a rebound of 4.7% in 2021," Major said during the event. "That forecast is based on that there will be some type of a vaccine and we will be to return to normal. But, again, any gains that we have had in the economy over the last two years will be wiped out by this event." By contrast, the nation is forecasted to contract 6.9% in 2020, also wiping out gains for the last two years and even into 2017, according to Major.

The impact of the contraction will have a significant impact throughout the local economy, starting with sale tax revenue, which is expected to fall 35%. "This is a phenomenal decrease in sales tax revenue," said Major. 'We would be expecting decreases of 5% to 10% during a recession. We are looking at decreases of 35%. This is going on for three months, and it is going to significantly impact the region's ability to provide services. What will end up happening is 2021 is extremely lean."

Unemployment is another major effect of the economic contraction. San Diego unemployment hit a peak in May at 25% before falling in last June to 14.3%. "These are rates that haven't been seen since the great recession," said Major. However, unemployment is falling, and during the brief reopening of the local economy, there was a surge in activity. "This tells me that the economy wants to open up again and people want to go back to work; however, with the more recent shut down orders, I expect unemployment rates to go back up again," added Major. Retail transportation and food and beverage have all seen declines in activity, while construction supply sales have increased during the pandemic, likely attributable to home improvement projects.

In terms of the recovery, Major looked at 50 different forecasts as well as his own data, and determined that the recovery will be a deep V-shape or a long U-shape. A standard V-shape has already been ruled out because we are too deep into the recession already. "There is not going to be any type of recovery until there is a vaccine," said Major. "In my opinion, there is going to be a long V or a long U-shaped recovery. That means that we are going to be pushing out the recovery until 2023 or 2026, depending on how businesses can get back to full capacity. The long-term ramifications are going to be felt for the next several years."

So far, commercial real estate has weathered the storm, but the industry will be affected. "This will eventually impact the real estate industry significantly. In terms of commercial, I think there are going to be ramifications," added Major. "There are a lot of businesses that are going to realize that they don't need as much office space as the previously had. That is going to impact leasing. I do see that this is going to be a long-term disruption."