GOVERNMENT RELATIONS
our daily lives, and persists in affecting Califor- nia’s fiscal health for the foreseeable future. Aside from the obvious toll the pandemic is taking on public health, local and state governments are reeling from the ensuing deficits plaguing their jurisdictions. So, how long will this recession
last? And, how will it affect our construction industry? First, it is important to under-
stand that the COVID-induced recession differs significantly from the recent “great recession” that began in December 2007. Te failures resulting from lax lending standards (i.e. subprime mortgage crisis) and inter- national trade imbalances were seen as largely to blame for the last economic downturn. On the other hand, the COVID
recession is unique in that it comes as a result of direct government order; governments large and small shut down their economies in order to slow the spread of the virus to a level manageable for healthcare systems to respond to. Prior to the pandemic, the U.S. and California economies were experiencing prosperous times.
Sharp Job Loss Recessions cause high unemploy-
ment as job losses naturally track the business cycle. With consumer spending and confidence down because of the pandemic “shelter-in-
www.AGC-CA.org
How Long Will the Recession Last? T
By Felipe Fuentes, AGC Legislative Advocate
he COVID-19 pandemic has taken tens of thousands of souls from their families, changed
place” orders, demand for goods and services was effectively turned off in mid-March. In the month of April, just a
few weeks after the declaration of a COVID national emergency, the U.S. unemployment rate reached 14.7 percent. Just a month prior, the unemployment rate was 3.5 percent. For comparison, unemployment was at 10 percent nationally at the peak of the 2007 recession. Some estimates predict that at its worst, the COVID recession unemployment level may peak at 25 percent. Tat is, some forecasts currently see the U.S. economy shrinking by more than 40 percent from April to the end of this summer. It should be noted that the highest rate of U.S. unemployment in history came during the Great Depression at 24.9 percent.
DEPARTMENTS
Before the COVID crisis, Califor-
nia’s state budget had enjoyed the bounty of 119 months of continuous economic growth and a record collection of revenues. In January, Gov. Newsom proposed a $220 billion state budget and at the time, California enjoyed healthy “rainy day” reserves totaling over $17 billion. Today, the Governor and Legislature anticipate the state budget deficit to total over $50 billion. Because of the severity of the
crisis in the early months of its onset, federal and state leaders have allowed taxpayers to defer the payment of income taxes until mid-July. Te true depth and the subsequent actions by our state leaders to address the state budget deficit will not likely be fully
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