Many economists speculate that a new economic normal post-pandemic may include pandemic realities such as online shopping, working from home, and zoom meetings. It may also include long-standing changes to the tourism industry, particularly restaurants and hotels.
Throughout the pandemic, bars and restaurants saw significant revenue losses. The tourism sector struggled and didn’t see the boosts in consumer spending that helped the state’s overall sales tax revenue.
Chief Economist Michael Pakko gave some perspective on the struggles of service sectors. “There are likely to be many service-sector businesses that do not survive the pandemic. Restaurants and retail, in particular, have been subject to more consolidation as larger firms weather the storm while smaller businesses struggle to get by. Support for small business has been robust, but changes in consumer habits might be insurmountable in the end. Speculating about consumer habits and business practices, I suspect that many changes in behavior will outlive the pandemic. For example, online shopping has surged and is likely to retain a larger role in the retail sector. In the business environment, remote work arrangements and the adoption of online meetings to replace in-person meetings are also trends that have accelerated during the pandemic and are likely to retain momentum.”
Pakko estimates it will be the end of 2022 before the economy is steady again and sees pre-pandemic labor force participation rates.
“A ‘hangover’ economic contraction, occurring simultaneously with rising prices, could bring on a stagflation scenario. I’m not a chicken-little and I’m generally optimistic, but these longer-term issues have been swept under the rug during the emergency situation of the COVID-19 pandemic, and we should be thinking about how they might be addressed should they emerge,” Pakko said.
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