Baird: Expect Waves of Positives and Negatives in the Economy

Baird: Expect Waves of Positives and Negatives in the Economy

R.W. Baird launched the second quarter economic survey for tED magazine on Thursday, March 26. Based on recent events surrounding COVID-19 and its impact on economies all over the world, it might be the most important survey it has ever done for tED.

Before results started coming in, Quinn Fredrickson, a Research Associate for R.W. Baird, talked with tED about the upcoming survey and some expectations in the short and long term for the economy.

“Even if we see businesses opening in the next few weeks,” Fredrickson said, “small businesses will still struggle because people don’t want to go out.” Fredrickson added he is monitoring unemployment numbers, especially since last week’s historic number of filings. With people not wanting to go out, he expects that number will climb much higher. “The unemployment number is a lagging indicator to what is going on with the real economy. By all accounts, even the most optimistic reports say we will have a few more weeks of social distancing.”

The construction economy is where the waves begin. While some regions are more severely impacted by COVID-19 due to construction being deemed “non-essential”, other parts of the country are keeping their operations open and running. “The second quarter, with these shutdowns, will be severely impacted, and we will see some significant declines,” Fredrickson believes. “People are optimistic that the activity will return in the second half of the year. Big jobs that take multiple years like sports stadiums and airports are supporting the industry, and they are not going to stop those jobs on a dime. There could be some rebound into the back half of the year and actually some growth.” Fredrickson says there is enough work right now on existing projects to keep up activity for several quarters.

But, as the current jobs wrap up, 2021 might show another drop. Backlogs that were once full will start to disappear. “If someone is making a decision that they want to start a new project, but unemployment is still high and markets are still struggling, there might not be an investment in major construction projects,” Fredrickson believes. He adds that he will be tracking single-family starts and Harvard’s leading indicator on remodeling activity on the residential side, and he will keep track of the Dodge Report on the commercial side.

But for now, the concern for many economists and electrical distributors is the unknown. No one really has any solid answers to what the economy will do over the next 60 days because it’s so hard to track when COVID-19 will start to ease. Fredrickson believes distributors will feel the impact of COVID-19 before data is provided. But, he adds, “You can still use it as a guide to look for a bottoming trend and then if things will rebound.”

The R.W. Baird survey for tED magazine should be available by the end of April. If you want to participate, contact tED magazine Publisher Scott Costa at scosta@naed.org so you can be added to the email list.

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