The pandemic is giving Modesto an opportunity to attract new residents. Here’s how.
To succeed in a post-pandemic world, Stanislaus County needs to focus on the quality of life it can offer to current and prospective residents as movement out of more expensive regions accelerates, local experts said last week.
The Oct. 1 webinar event, titled “From Wall Street to Main Street,” was hosted by the Stanislaus Community Foundation and featured speakers from a variety of industries, as well as financial experts. The speakers provided an overview of the global and local impacts of the coronavirus crisis on Stanislaus County, and pointed to ways the region can move forward as recovery begins across the region.
The Central Valley will be most impacted by changes in how people work, said Jeffrey Michael, the executive director of the Center for Business and Policy Research at the University of the Pacific.
As millions of Americans are working from home, areas like Stanislaus County and the North San Joaquin Valley — which are more affordable than bigger hubs — are able to attract new residents and retain commuters who work in places like the Bay Area. Daily flow to and from the Bay Area grew from 61,000 to 86,000 in five years, Michael said. Bay Area workers earn nearly $100,000 on average, and present a lucrative group of residents for Stanislaus County.
In order to attract and retain new residents, as well as new employers, Michael and a group of panelists, including Michael Frantz, the president of Frantz Wholesale Nursery, and David Darmstandler, the CEO and co-founder of Datapath, a local IT company, agreed that adaptation is crucial to making the county a lucrative place to live.
“The effect of the government’s response to the pandemic has been very positive for the real estate marketplace,” said Michael Zagaris, the CEO of PMZ Real Estate. “The arrival of the pandemic has also had an effect on people’s perceptions and behaviors that we’re now just picking up on.”
Zagaris said the government’s response to the COVID-19 pandemic and subsequent lowering of interest rates heavily affected the housing market, making it much cheaper to buy a home and kick-start a wave of home refinancing. Coupled with an inventory shortage, Stanislaus County’s housing market is moving quickly and attracting buyers to properties they may not have been able to afford before.
There’s also been an increased “flight” of people from more urban to less urban areas, opening a window of opportunity for regions like the North San Joaquin Valley to attract new residents. Zagaris said though much of this movement is currently happening to cities like Sonora, Modesto could also profit from this trend.
He stressed the pandemic isn’t the only factor causing people to move, but that a “degradation” of quality of life in more urban areas, coupled with the coronavirus crisis, might prove the tipping point for many who had considered relocation.
“I don’t think this trend is going to go away,” he said. “It appears to be gathering steam.”
Zagaris said the region’s educational attainment, which has created a large crop of workers who are either unskilled or working in jobs that do not require a college degree, has created a “generational problem” and prevented Modesto and Stanislaus County from attracting new companies to the area.
With the increase in work-from-home options, however, and the subsequent decrease in commuting, he said it’s possible for Modesto and the county to position themselves as “attractive” and affordable places to live.
“The opportunity that exists here is for the residents of Stanislaus County and the leadership of Stanislaus County to recognize the importance of doing everything we possibly can to improve the quality of life circumstances here,” he said. “This crisis brings this all to our attention.”
Effects on every industry
The COVID-19 pandemic has thrown the global economy into a tailspin, and ushered in a new economic recession in the United States. The current financial crisis has been driven in large part by a decrease in consumer spending, Michael said.
Californians have pulled back more in their spending than people in other states, Michael said, with dips in expenses happening in concert with statewide closures and stay-at-home orders. As of August, total spending by all consumers in California decreased by 12.2% compared to January, while the national decrease was 7.3%, according to data from Opportunity Insights, a non-partisan research and policy institute based at Harvard University.
However, Stanislaus County spending for the same period only decreased by 8.9%, according to the same data. Michael said this can be traced to less “non-essential” spending by county residents than those in richer areas, like Silicon Valley, whose spending habits changed more as the pandemic hit.
Overall, Michael said, the economy in the North San Joaquin Valley has been helped by its low dependence on travel and tourism and its high share of essential industries — like agriculture and manufacturing. However, the area also has a high share of COVID-related health risks, including a smaller subset of the population that works from home, and a large number of essential, high-risk workplaces — like food processing plants and warehouses.
Frantz said that as the local agriculture industry was deemed “essential,” the impacts “to our sector writ large have not been as consequential.” Still, he said, certain producers who rely heavily on export markets — like walnuts and almonds — have been negatively affected by international restrictions curtailing exports to countries like India and China in a year with large crop yields.
“We have a big supply and less demand,” Frantz said. “There are parts of the (agriculture) economy that have certainly been negatively impacted.”
There’s been a broad disparity in impact among different producers, he said, from dairy farmers experiencing “yo-yo” pricing to gains for produce and plant growers like himself.
Still, unemployment in Stanislaus County spiked in April at 17%, and though it’s declined since, Michael has predicted that a full recovery won’t be possible until 2021 or 2022.
Looking at the global-scale impact
Since March, the coronavirus pandemic has caused a cumulative U.S. gross domestic product reduction of 10.2% over the course of only a few months. The 2008 financial crisis, by comparison, resulted in only a 4% GDP reduction, said Jennifer Ellison, a chief financial analyst at Bingham, Osborn & Scarborough, a San Francisco-based wealth management firm.
Typically, smaller scale economic recessions result in a GDP reduction in the 2% to 3% range, she added. The only two financial crises to have caused steeper GDP reductions in recent history are the years post-World War II (-13.5%) and the Great Depression (-26.3%), according to data from Oxford Economics and the U.S. Bureau of Economic Analysis.
Ellison pointed to large-scale federal efforts to revitalize the economy in the wake of the pandemic — from stimulus checks and lowered interest to weekly unemployment support and loans for small businesses — that quickly found billions of dollars to aid Americans as much of the country was headed into an economic shutdown.
“There’s a very small part of the market that has recovered,” she said. “The trends that we’re experiencing right now won’t necessarily go on forever. There’s a lot of uncertainty of where we will head in the future and how we will emerge out of this, post-election and into next year when we have a vaccine.”
Additionally, the coronavirus crisis has caused a nationwide spike in unemployment, which currently in August sat at 8.4%. In Stanislaus County, the current unemployment is 10.9%. Ellison said the fact that the country had a very low unemployment rate pre-pandemic is helping on the road to recovery, but the more lasting effects of the current numbers are still unclear.
“Some of that (unemployment) might be permanent,” Ellison said. “We just don’t know yet.”
This story was produced with financial support from the Stanislaus Community Foundation, along with the GroundTruth Project’s Report for America initiative. The Modesto Bee maintains full editorial control of this work.
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