Proper Recovery Will Occur after Vaccine Dissemination, Says GSU Economist
Georgia State Forecaster Says “Proper” Recovery Will Occur Only After Full Vaccine Dissemination
ATLANTA–With vaccine rollout underway and picking up steam concurrent to emerging virus variants, Rajeev Dhawan of the Economic Forecasting Center at Georgia State University’s Robinson College of Business said recovery remains “an economic tango led by the virus. Reaching a sustained recovery by early 2022 is contingent on the speed and efficacy of vaccinations by mid-2021.”
“There is light at the end of the tunnel but it will take time, with ‘proper’ benefits to come as more people are vaccinated successfully,” Dhawan said. “We must relearn to walk before we can run again. This major biological shock rattled economic foundations.”
Assessing the past impact of stimulus payments, the forecaster pointed out that consumers spent them “rationally.”
“The most vulnerable who had to spend the checks last spring and this winter did so. Others who could afford to save, banked the funds or timed purchases to smoke out retailer incentives spurred by a Covid-19 sales slump in November and December.”
Consumer spending is beginning to return, with away-from-home food purchases up 4.4 percent, and sales of used cars and trucks up 10 percent year-over-year. Also rising: sales of watches and jewelry, which dropped 50 percent during the first two months of the pandemic. Today, watch and jewelry sales are up 20 percent over this time last year.
“Who’s buying all these watches and jewelry? We don’t know. But couples who have been confined together at home and perhaps postponed weddings, may be spending money they saved on peace offerings,” said Dhawan.
Proposed federal-level spending, immaterial of amount, will boost consumer spending for only a short while, followed by an inevitable reversion to the mean in subsequent quarters as stimulus funds run out.
“Real recovery will depend on people feeling comfortable interacting with each other – eating out, attending meetings, going to movies and concerts, and sightseeing,” said Dhawan.
Georgia and Atlanta did not take as hard a job-loss hit as the nation overall when the coronavirus shut down the economy in spring 2020. U.S. employment plunged 14 percent, compared to an 11 percent drop in Georgia. The area’s recovery also has been faster than the nation’s, which Dhawan attributed to Georgia’s relatively brief shutdown compared to the rest of the nation (notably California and Northeastern states).
“Today, the U.S. economy is down six percent by the employment metric, compared to only two percent in Georgia,” Dhawan said at a Feb 25 conference. “That sounds good until one takes a closer look at the performance of the state’s catalyst sectors of well-paying jobs, which is where job growth starts and the multiplier effect fuels downstream activity.”
The forecaster explained that the crucial catalyst sectors – corporate jobs, information technology, business services, manufacturing and transportation – experienced the same sharp eight percent drop in jobs in Georgia as experienced in the U.S. And when it came to recovery, Georgia has not outpaced the nation in this critical income generating category.
“Net-net, the overall job recovery deficit may be only 20 percent. But for high paying jobs it is close to 50 percent. Quality of jobs is a metric by which recovery still lags in the state,” said Dhawan.
One area where economic forces seem to be immaterial at the moment is homebuying, with more purchasers opting to buy single family homes further out instead of high-rise condominiums in the city’s core. How long this change in preference, or demand shock, will last is unknown.
“The rocket recovery of the stock market last spring that has continued into 2021, in conjunction with sharply falling mortgage rates, has helped consumers purchase homes.”
The Federal Reserve dropped its benchmark rate to near zero in March 2020, with subsequent quantitative measures to help shore up the mortgage market, making clear it will not raise rates until recovery fully takes hold.
“The Fed will stand pat until at least until 2023 or even later. But mortgage rates will start rising this year as the long-bond yield climbs in coming quarters. This is not just due to mild inflationary conditions expected from the consumer binge due to additional fiscal stimulus,” said Dhawan.
“The reason for a rise in bond yields is classic demand and supply of investable funds when looked at from a global perspective,” Dhawan said. “As we recover, and so does the rest of the world, rising demand for capital expenditures/investment spending by corporations that is a precursor to job growth will put upward pressure on mortgage interest rates.”
“Whether or not the housing boom continues and outlasts the coronavirus crisis hinges on stock market performance, which is a random factor in this recovery story,” said Dhawan.
Highlights from Rajeev Dhawan’s Economic Forecast
Nation
- Overall GDP growth will be 4.9 percent in 2021, 3.9 percent in 2022 and 2.9 percent in 2023.
- Investment growth will be only 7.2 percent in 2021, 5.4 percent in 2022 and 6.1 percent in 2023. Monthly job gains will be 298,000 in 2021, rise to 414,000 in 2022 and moderate to 202,900 in 2023.
- Housing starts will average 1.474 million in 2021, 1.339 million in 2022 and 1.272 million in 2023. Vehicle sales will average 16.7 million in 2021, 17.0 million in 2022 and 17.4 million in 2023.
- CPI inflation will be 2.3 percent in 2021, rise to 2.6 percent in 2022, and then moderate a bit to 2.4 percent in 2023. The 10-year bond rate will average 1.6 percent in 2021, 2.2 percent in 2022 and 2.6 percent in 2023.
Georgia and Atlanta
- Georgia will add 68,900 jobs (13,200 premium jobs) in 2021, gain a better 100,000 jobs (33,700 premium) in 2022 and increase by 77,100 (19,700 premium) in 2023.
- Nominal personal income will grow 4.0 percent in 2021, moderate to 0.6 percent in 2022 and rise 4.2 percent in 2023.
- Atlanta will add 54,000 jobs (11,900 premium positions) in 2021, grow by 86,600 jobs (29,400 premium) in 2022 and a further 64,900 jobs (17,000 premium) in 2023.
- Atlanta housing permitting activity will increase by 5.8 percent in 2021, decline mildly by 0.6 percent in 2022, then rise by 3.0 percent in 2023.
Buying and Selling Businesses in a Pandemic: GABB Feb. 23
Despite the challenges posed by the pandemic in 2020, many Georgia business brokers continued to sell more than a million dollars worth of businesses. GABB board member Tanya Nebo and six members of the GABB Million Dollar Club offered a wide variety of advice on Tuesday, Feb. 23, during a panel discussion of how to buy and sell businesses during a pandemic.
To view their comments on how they prospered in 2020, watch this video posted on GABB’s new YouTube channel.
Among the 2020 members of the GABB’s Million Dollar Club who will be on hand on Feb. 23 are Jefffery Merry, senior business analyst at the BUSINESS HOUSE, inc.; J. Snypp, Vice President of Preferred Business Brokers, Inc.; Matt Wochele, founder of Preferred Business Brokers, Inc.; Rob Margeton, an M&A Intermediary with Ryco Advisors, LLC; Brian Judson, a business broker with Best Business Brokers; and Jon Roman, business intermediary, franchise consultant and developer at Transworld Business Advisors.
Ms. Nebo is both a business broker and an attorney. Her law practice, real estate agent and business brokerage services focus on commercial real estate, franchising and general business matters (including joint ventures and equity participation models). She is a graduate of Columbia University in New York and the University of Virginia School of Law.
The GABB is the state’s premier association of professionals who help in the purchase and sale of businesses. GABB is committed to promoting professionalism, education and high ethical standards in the profession of business brokering.
For more information, contact GABB President Judy Mims at 404-842-1997 or judy@childcare.properties, or Ms. Loupe at diane.loupe@gabb.org or 770-744-3639.
Read MoreSBA Improves First Draw Paycheck Protection Program Loan Review
WASHINGTON – The U.S. Small Business Administration is taking steps to improve the First Draw Paycheck Protection Program loan review so that small businesses have as much time as possible to access much needed PPP funds. The Biden-Harris Administration is focused on ensuring small businesses receive the support they need to keep their doors open and continue to employ millions of Americans across the country. The Administration is working with the Agency to identify immediate solutions to address eligibility, compliance, integrity, and promote transparency.
While reviewing the initial draw of PPP loans, anomalies – mostly data mismatches and eligibility concerns – were identified in approximately 4.7% of the lender-submitted data. These concerns will require follow-up between the lender and the borrower so that borrowers can access a second round of loans.
The SBA is committed to working with lenders and eligible borrowers to provide the necessary information for follow-up and help get small businesses back on track so that they’re able to receive another round of PPP loans swiftly. The SBA encourages borrowers and lenders to work together as quickly as possible to resolve the issues. The SBA will automatically move favorable decisions to approval. During the newest round of PPP, the SBA has already approved over 400,000 loans for approximately $35 billion.
“Prior to this newest PPP round, the SBA supported 5.2 million PPP loan borrowers, providing more than $525 billion in economic relief to small businesses and other eligible entities,” said SBA Acting Administrator Tami Perriello. “The Agency is committed to making sure compliance checks are executed on the front-end. The SBA is also committed to addressing issues more efficiently moving forward, to ensure fair and equitable access to small businesses in every community.”
The SBA is immediately addressing the PPP loan review to allow for Second Draw PPP loan applications to be processed in an efficient manner by:
- Hosting a national call to brief lenders on the Platform’s additional detailed information that will assist in the resolution of First Draw PPP loan review and potential holds that impact Second Draw PPP loan application approvals.
- Equipping the Agency’s field team of lender relations specialists with information so they can provide support to lenders and borrowers in understanding the issues and facilitating the appropriate responses to resolve
- Providing additional guidance to PPP lenders on the review and resolution process.
Many Affiliate members of the Georgia Association of Business Brokers are working with the SBA and the PPP program. Find a GABB SBA loan expert here.
Through SBA’s 68 district offices, the Agency will work in close partnership with the Administration to further leverage its resource partner network and expand on multilingual access and outreach about the PPP. Updated PPP information, including forms, guidance, and resources is at www.sba.gov/ppp and at the U.S. Treasury Department’s www.treasury.gov/cares.
How to Resolve First Draw PPP Loan “Unresolved Borrowers” and Hold Codes: PPP Procedures Webinar Slide Deck
Read More
SBA Bankers Discussed New Small Business Aid at Jan. 26 GABB Meeting
Bankers with expertise in handling SBA loans talked about applying for the next round of Paycheck Protection Program (PPP) funding at the Jan. 26 virtual meeting of the Georgia Association of Business Brokers.
A recording of the meeting is linked here.
GABB Affiliate Representative Kim Eells , Senior Vice President of SBA Business Development at Georgia Primary Bank, spoke along with Thomas Rockwood, Senior Vice President of SBA Lending at Atlantic Capital Bank and Cadence Bank Vice President and SBA Banker Ryan Stoll.
Here’s some PPP background from Kim Eells’ bank, Georgia Primary.
Thomas Rockwood’s bank, Atlantic Capital’s link, has this information.
Ryan Stoll’s bank, Cadence Bank, has posted this information.
SBA links to various Coronavirus Relief Options.
The Paycheck Protection Program (PPP) reopened the week of January 11 for new borrowers and certain existing PPP borrowers, according to the U.S. Small Business Association. This round of the PPP continues to prioritize millions of Americans employed by small businesses by authorizing up to $284 billion toward job retention and certain other expenses through March 31, 2021, and by allowing certain existing PPP borrowers to apply for a Second Draw PPP Loan, the SBA says.
PPPSD Revenue Reduction Documentation_2021_01_19
The SBA says a borrower is generally eligible for a Second Draw PPP Loan if the borrower:
- Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses;
Has no more than 300 employees; and - Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.
- The GABB is the state’s premier organization devoted to buying and selling businesses and franchises, and operates the state’s only real estate school dedicated to business brokering.
For more information about GABB, please email diane.loupe@gabb.org or call or text 770-744-3639, or contact GABB president Judy Mims at judy@childcare.properties or 404-842-1997.
Read MoreSBA and Treasury Announce PPP Re-Opening; Issue New Guidance
SBA and Treasury Announce PPP Re-Opening; Issue New Guidance
The U.S. Small Business Administration, in consultation with the Treasury Department, announced today that the Paycheck Protection Program (PPP) will re-open the week of January 11 for new borrowers and certain existing PPP borrowers.
To promote access to capital, initially only community financial institutions will be able to make First Draw PPP Loans on Monday, January 11, and Second Draw PPP Loans on Wednesday, January 13.
The PPP will open to all participating lenders shortly thereafter. Updated PPP guidance outlining Program changes to enhance its effectiveness and accessibility was released on January 6 in accordance with the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act. The SBA also extended the deadline to apply for the Economic Injury Disaster Loan (EIDL) program for the COVID-19 Pandemic disaster declaration to December 31, 2021.
This round of the PPP continues to prioritize millions of Americans employed by small businesses by authorizing up to $284 billion toward job retention and certain other expenses through March 31, 2021, and by allowing certain existing PPP borrowers to apply for a Second Draw PPP Loan.
“The historically successful Paycheck Protection Program served as an economic lifeline to millions of small businesses and their employees when they needed it most,” said SBA Administrator Jovita Carranza. “Today’s guidance builds on the success of the program and adapts to the changing needs of small business owners by providing targeted relief and a simpler forgiveness process to ensure their path to recovery.”
“The Paycheck Protection Program has successfully provided 5.2 million loans worth $525 billion to America’s small businesses, supporting more than 51 million jobs,” said Treasury Secretary Steven T. Mnuchin. “This updated guidance enhances the PPP’s targeted relief to small businesses most impacted by COVID-19. We are committed to implementing this round of PPP quickly to continue supporting American small businesses and their workers.”
Key PPP updates include:
- PPP borrowers can set their PPP loan’s covered period to be any length between 8 and 24 weeks to best meet their business needs;
- PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures;
- The Program’s eligibility is expanded to include 501(c)(6)s, housing cooperatives, destination marketing organizations, among other types of organizations;
- The PPP provides greater flexibility for seasonal employees;
- Certain existing PPP borrowers can request to modify their First Draw PPP Loan amount; and
- Certain existing PPP borrowers are now eligible to apply for a Second Draw PPP Loan.
- A borrower is generally eligible for a Second Draw PPP Loan if the borrower:
- Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses;
- Has no more than 300 employees; and
- Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.
The new guidance released includes:
- PPP Guidance from SBA Administrator Carranza on Accessing Capital for Minority, Underserved, Veteran, and Women-owned Business Concerns;
- Interim Final Rule on Paycheck Protection Program as Amended by Economic Aid Act; and
- Interim Final Rule on Second Draw PPP Loans
For more information on SBA’s assistance to small businesses, visit sba.gov/ppp or treasury.gov/cares.
SBA Georgia District Office
233 Peachtree Street NE, Suite #300
Atlanta, GA 30303
Phone: (404) 331-0100
www.sba.gov/ga