Observers of Kern County's economy predict continuing job losses in the months ahead, with industries such as restaurants, hospitality and retail suffering the most, but they agree a partial recovery may not be far off depending how the COVID-19 crisis plays out and how quickly government financial assistance arrives.
Local lenders are already receiving applications from businesses and consumers looking to modify terms of their existing loans. This has come as employers in oil, retail and health care have announced layoffs officially totaling more than 1,700 jobs countywide since the start of April.
Kern's outlook is particularly challenging because of a steep drop in oil prices since late February. Disruptions in petroleum supply and demand around the world have weakened a key local sector that helped the county rebound quicker than other regional economies from the Great Recession.
There are cautious hopes that local economic activity will approach precrisis levels as soon as this summer, as consumers emerge from their homes and largely resume normal spending patterns.
A more pessimistic view is this transition won't go smoothly and that federal stimulus checks, as well as business relief programs and unemployment benefits, will get held up in bottlenecks. Both would harm the economy by limiting the amount of money in circulation locally.
More optimistic is the notion that local businesses are making necessary adjustments, such as embracing work-from-home arrangements, and that this will lead to new efficiencies and long-term improvements in the local economy.
Such adaptation is inevitable in a sense, said Nyakundi Michieka, assistant professor of economics at Cal State Bakersfield. "It’s just how long that adjustment is going to take," he said.
His colleague Richard Gearhart, also an assistant professor of economics at CSUB, laid out several possible scenarios in a written analysis provided to The Californian.
For all of March, he expects up to 15 percent of jobs were lost at Kern restaurant, entertainment and hospitality businesses, with up to 5,000 positions cut countywide.
April may see twice that many layoffs, he said, as the county's unemployment rate climbs as high as 13 percent (it was about 9 percent in February). That would reduce Kern's gross economic output by $1 billion, or about 2.5 percent, Gearhart estimated.
If the economy remained shut down through the end of June, he figures the county's restaurant and hospitality sectors would be decimated. Leisure and hospitality would shrink to a third of their precrisis employment levels, as would retail, he said, and some construction jobs would go away.
Unemployment would increase to about 17 percent under that scenario and local economic output would fall $6 billion, Gearhart suggested. By then, oil companies would have let go perhaps 400 people and real estate would have lost 2,500 jobs, he said.
What happens after that depends on factors such as how long people continue to shelter in place after COVID-19 cases peak locally, Gearhart asserted.
There may be gains in local manufacturing and supply-chain activity, he said, as the country looks to buy less from overseas trading partners. Jobs in retail, food, entertainment and hospitality would gradually return in his analysis but not to their pre-crisis levels.
He predicted the recession could end next year and Kern's unemployment rate could come in at 11.4 percent in March 2021.
Assessments offered by county lenders suggest the slowdown is already squeezing local consumers and straining the business community.
A.J. Antongiovanni, CEO of Bakersfield-based Mission Bank, said about a fifth of the borrowers he works with have taken advantage of opportunities to defer their loan payments 90 days or pay only interest for six months.
Landlords among his customers — Mission is mostly a business bank — are working with their shopping center tenants to accept rent payments late, he said. He added that construction as an industry hasn't taken much of a hit so far but that could change.
It may take a month or two to get clarity where the economy is headed, Antongiovanni said.
"I would say it’s so dependent on when we can get back to some normal activity level," he said, "and we just can’t predict that.”
Meanwhile, many local households are applying for loan modifications, skip-a-payment programs and emergency loans, said Brandon Ivie, president and CEO of Strata Federal Credit Union, which offers auto and other consumer lending.
"Hopefully it's just a short-term need," he said.
Ivie expects to see a more extended recovery as opposed to a quick rebound, just because people may choose to avoid gatherings at first. His guess is that loan losses will start picking up this summer, though he declined to predict how big of a problem that will become.
The head of Kern's largest financial institution, Valley Strong Credit Union, described the crisis as a "hard stop" to local economic activity that has displaced workers and changed how business is done.
As the credit union helps borrowers defer payments, President and CEO Steve Renock said by email, it's unclear what the slowdown's economic toll will be.
He asserted the county nevertheless has strong prospects because of its diversified industry, skilled labor force and a concerted effort to rebrand Kern as a destination of choice.
Michieka, one of the CSUB economists, said a recent deal among OPEC members to cut production rates offers hope the local oil industry will see improvement before long. He also expects workers in the sciences, arts and management to do well amid a large-scale shift to telecommuting.
The sheer magnitude of the slowdown nevertheless worries Bakersfield financial adviser David Anderson, co-owner of Moneywise Wealth Management. He noted the nation has already lost more than half the jobs it had gained since the end of the recession in February 2010.
A big question now, he said, is whether the federal stimulus will work as intended and whether unemployment benefits will be distributed efficiently.
"I’ve seen hope for success, which is what’s driven the (stock) market up," he said, "but I haven’t seen any evidence that it’s working yet.”
Valley Strong and Mission Bank noted they are working to process local customers' applications for the federal stimulus program known as the Paycheck Protection Program.
Antongiovanni noted Mission has already received approval for some $50 million in loans to about 150 individual borrowers, and that at least another $50 million in demand exists locally if there's enough money left in the program.
Moneywise CEO and co-owner Sherod Waite said he doesn't think the worst of the crisis has arrived despite the stock market's recovery of much of the value lost initially. Share prices may yet fall again, he said, if recent unemployment trends persist.
He agreed with Anderson that it'll be important to get financial assistance into the hands of consumers — and that spending that money quickly and locally has the potential to boost Kern's economy.
Wait also said there's hope that, in the end, local businesses will find new efficiencies and emerge stronger after the crisis. The local home market may even benefit if telecommuting catches on widely and Californians in higher-priced markets come to appreciate Kern's relative affordability.
"It should be good for real estate here,” he said.