Christopher Thornberg is an economist and founding partner with Beacon Economics. Screenshot of the 2021 Sequoia Regional Economic Summit.
Written by Breanna Hardy
Chatter and panic have driven economic recovery measures in the short-term, but according to economist Christopher Thornberg, policymakers need to think about the long term.
“Politics drifted towards overreaction,” Thornberg said. “There are costs to the use of fiscal and monetary policy.”
The Tulare County Economic Development Corporation hosted the 2021 Sequoia Regional Economic Summit Friday with presenter Christopher Thornberg, an economist and founding partner of Beacon Economics.
Thornberg has been presenting his economic updates and forecasts annually for the Tulare County EDC since May 2008.
“We could be a couple years away from a very, very large problem,” he said. “But nobody’s talking about it, they’re worried about the next two months.”
The economy has already recovered, he said. And it’s time to think about the long term effects of mass spending. This type of economic recession varies greatly from past recessions. This recession stocked savings accounts due to business closures and excess stimulus packages.
During the pandemic, money couldn’t be spent at restaurants or travel destinations. Instead, money went to personal savings or to paying off credit card debt. Thornberg said 80% of people who received checks from stimulus packages put it toward savings accounts, paid off credit card debt or donated it.
“Pumping money into the economy with nowhere to go creates economic turmoil,” Thornberg said. He cited spending increases on durable goods such as cars and appliances. Year-over-year retail prices grew 6.7%, with sales in sporting goods leading the way by 16.5% from February 2020 to February 2021. Retail hardware followed closely behind with a 15.3% increase in spending.
Recessions are defined by peaks and troughs, Thornberg said. There was a peak in February 2020 and a trough in April. By May the economy was on the mend. By definition, this recession was short-lived, lasting about two months in 2020. While it was the worst in history, it was also the shortest.
Last spring, there was a supply shock, making this past recession unique to others. The demand issue makes everyone suffer, but when it’s a supply shock, only certain parts of the economy do worse than others, said Thornberg.
The government has vastly over-responded, he said. He compared the government response to driving downhill with a foot on the gas pedal, full steam ahead.
“Don’t worry about the recovery anymore. That is fixed,” he said, “We need to focus on the long run.”
He said policymakers are still focused on recovery when it’s already happened.
The U.S. and China are driving the global economy, and most industries are faring well despite bumps in hard-hit sectors. While some industries like restaurants and retail have taken a hit, manufacturing in particular has skyrocketed.
Fly-in tourism in coastal cities like Los Angeles and San Francisco has tanked, but drive-in tourism to inland places like the Central Valley, Stockton, and Sacramento have seen a steady hotel occupancy.
“The job numbers are really scary, there’s no doubt about it,” said Thornberg.