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As coronavirus spreads, fears of taking down California's economy

As the stock market tumbled and oil prices collapsed on Monday, Gov. Gavin Newsom's top economic officials sought to project calm from the world's fifth-largest economy in the wake of the coronavirus pandemic and a Russia-Saudi Arabia oil price war.

Lenny Mendonca, the governor's chief economic and business advisor, said that California is assessing the growing economic impact of the virus, which has shut down schools, suspended in-person classes at UC Berkeley and Stanford, canceled major tech conventions such as Google I/O, and sidelined dockworkers at the Ports of Long Beach and Los Angeles.

Mendonca sought to strike a balance between reassurance and prudence.

"I want to emphasize that there will always be economic ups and downs, but people will continue to visit our state as they always have," he told a meeting of state agency heads gathered at the Capitol for an update on international trade efforts. "Our arms will be wide open when our friends from China and around the world are ready to travel again."

Agency officials all sounded the alarm on how the coronavirus outbreak might affect demand for California products from almonds to computer chips. On the same day the Grand Princess cruise ship docked in Oakland, the state's tourism bureau reported a significant hit from people taking precautions against further spreading the virus.

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Business travel has dropped and cities are hemorrhaging convention business, said Visit California president and CEO Caroline Beteta, adding that the sector is unlikely to recover this year.

California's overall tourism economy is $145 billion, but the state has been disproportionately impacted by the quarantines of millions of people in China. In 2019, California welcomed about 1.8 million Chinese visitors who spent $4 billion in the state. Instead of a projected 3% growth in Chinese tourism, Beteta said the state now is projecting a 28% drop for the year.

"It's high, high impact from that market alone," Beteta said. In response, the state's tourism arm has targeted Chinese tourists with a marketing campaign.

Up and down the coast, California's ports are experiencing a negative impact on trade and goods shipments. Last week, Gene Seroka, the executive director of the Port of Los Angeles, said 25% of the port's traffic has vanished.

Max Oltersdorf of the Governor's Office of Business and Economic Development, or Go-Biz, said that as of Monday, there have been at least 60 vessel cancellations at the ports of Long Beach, Los Angeles and Oakland.

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Port officials in Long Beach and Los Angeles report some dock workers are being paid to stay home because there's not enough work. The ripple effects will be felt by truck drivers, farmers and many other workers.

Economic forecasters say California may be better off enduring the short-term economic pain of shutting down public spaces such amusement parks and public gatherings such as conventions in order to limit virus transmission and improve the chances of a quick recovery.

"You want people to overreact right now to nip this thing in the bud," said Chris Thornberg, founding partner of Beacon Economics, an independent economic research and consulting firm. "If this thing does get out of control and starts to affect the third quarter, then we have deep, deep trouble."

Thornberg said while it may be inconvenient for businesses and their workers for a few weeks, it's a lot better than a widespread outbreak that takes down the state's economy.

As if the coronavirus news wasn't unsettling enough, an oil price war between Saudi Arabia and Russia further disrupted the world economy over the weekend, sparking a historic collapse in oil prices as traders prepared for the Saudis to flood the market with crude to regain market share.

U.S. oil prices sank to a four-year low — and shares of California-based Chevron fell with them, though by less than energy stocks elsewhere in the country, where oil companies are less diversified and less financially prepared.

Newsom's advisors note that California's state budget does have some built-in resilience. The governor has proposed a $222 billion budget, which includes $21 billion in reserves from several sources.

Workers have a safety net, too. In addition to activating an array of public health initiatives, the governor is reminding workers that state support is available to workers impacted by the virus. Employees who have or have been exposed to the coronavirus can file for disability insurance. Employees who have hours reduced or are laid off due to coronavirus can file for unemployment. And employees who are caring for a sick or quarantined family member with coronavirus can file for paid family leave.

Those benefits, however, are often unavailable to gig workers and other freelancers, leaving them choose between staying home and giving up pay or increasing their chances of exposure.

"It's so early, so fluid — it's hard to see the arch of where things are going," said Lt. Gov. Eleni Kounalakis, who is overseeing trade efforts for the state.

CalMatters.org is a nonprofit, nonpartisan media venture explaining California's policies and politics. Read more state news from CalMatters here. Judy Lin can be emailed at [email protected].

Find comprehensive coverage on the Midpeninsula's response to the new coronavirus by the Almanac, Mountain View Voice and Palo Alto Online here.

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As coronavirus spreads, fears of taking down California's economy

by /

Uploaded: Wed, Mar 11, 2020, 12:31 pm

As the stock market tumbled and oil prices collapsed on Monday, Gov. Gavin Newsom's top economic officials sought to project calm from the world's fifth-largest economy in the wake of the coronavirus pandemic and a Russia-Saudi Arabia oil price war.

Lenny Mendonca, the governor's chief economic and business advisor, said that California is assessing the growing economic impact of the virus, which has shut down schools, suspended in-person classes at UC Berkeley and Stanford, canceled major tech conventions such as Google I/O, and sidelined dockworkers at the Ports of Long Beach and Los Angeles.

Mendonca sought to strike a balance between reassurance and prudence.

"I want to emphasize that there will always be economic ups and downs, but people will continue to visit our state as they always have," he told a meeting of state agency heads gathered at the Capitol for an update on international trade efforts. "Our arms will be wide open when our friends from China and around the world are ready to travel again."

Agency officials all sounded the alarm on how the coronavirus outbreak might affect demand for California products from almonds to computer chips. On the same day the Grand Princess cruise ship docked in Oakland, the state's tourism bureau reported a significant hit from people taking precautions against further spreading the virus.

Business travel has dropped and cities are hemorrhaging convention business, said Visit California president and CEO Caroline Beteta, adding that the sector is unlikely to recover this year.

California's overall tourism economy is $145 billion, but the state has been disproportionately impacted by the quarantines of millions of people in China. In 2019, California welcomed about 1.8 million Chinese visitors who spent $4 billion in the state. Instead of a projected 3% growth in Chinese tourism, Beteta said the state now is projecting a 28% drop for the year.

"It's high, high impact from that market alone," Beteta said. In response, the state's tourism arm has targeted Chinese tourists with a marketing campaign.

Up and down the coast, California's ports are experiencing a negative impact on trade and goods shipments. Last week, Gene Seroka, the executive director of the Port of Los Angeles, said 25% of the port's traffic has vanished.

Max Oltersdorf of the Governor's Office of Business and Economic Development, or Go-Biz, said that as of Monday, there have been at least 60 vessel cancellations at the ports of Long Beach, Los Angeles and Oakland.

Port officials in Long Beach and Los Angeles report some dock workers are being paid to stay home because there's not enough work. The ripple effects will be felt by truck drivers, farmers and many other workers.

Economic forecasters say California may be better off enduring the short-term economic pain of shutting down public spaces such amusement parks and public gatherings such as conventions in order to limit virus transmission and improve the chances of a quick recovery.

"You want people to overreact right now to nip this thing in the bud," said Chris Thornberg, founding partner of Beacon Economics, an independent economic research and consulting firm. "If this thing does get out of control and starts to affect the third quarter, then we have deep, deep trouble."

Thornberg said while it may be inconvenient for businesses and their workers for a few weeks, it's a lot better than a widespread outbreak that takes down the state's economy.

As if the coronavirus news wasn't unsettling enough, an oil price war between Saudi Arabia and Russia further disrupted the world economy over the weekend, sparking a historic collapse in oil prices as traders prepared for the Saudis to flood the market with crude to regain market share.

U.S. oil prices sank to a four-year low — and shares of California-based Chevron fell with them, though by less than energy stocks elsewhere in the country, where oil companies are less diversified and less financially prepared.

Newsom's advisors note that California's state budget does have some built-in resilience. The governor has proposed a $222 billion budget, which includes $21 billion in reserves from several sources.

Workers have a safety net, too. In addition to activating an array of public health initiatives, the governor is reminding workers that state support is available to workers impacted by the virus. Employees who have or have been exposed to the coronavirus can file for disability insurance. Employees who have hours reduced or are laid off due to coronavirus can file for unemployment. And employees who are caring for a sick or quarantined family member with coronavirus can file for paid family leave.

Those benefits, however, are often unavailable to gig workers and other freelancers, leaving them choose between staying home and giving up pay or increasing their chances of exposure.

"It's so early, so fluid — it's hard to see the arch of where things are going," said Lt. Gov. Eleni Kounalakis, who is overseeing trade efforts for the state.

CalMatters.org is a nonprofit, nonpartisan media venture explaining California's policies and politics. Read more state news from CalMatters here. Judy Lin can be emailed at [email protected].

Find comprehensive coverage on the Midpeninsula's response to the new coronavirus by the Almanac, Mountain View Voice and Palo Alto Online here.

Comments

Calvin Morales
another community
on Mar 11, 2020 at 3:55 pm
Calvin Morales, another community
on Mar 11, 2020 at 3:55 pm
7 people like this

Maybe now California will consider returning to its true roots...agriculture.

Outside of POTUS45's proposed tariffs on Chinese manufactured goods, we don't havfe a problem with the folks arriving from China.

They don't work in the fields & seem to prefer the nicer communities like Palo Alto.


Tom
Portola Valley
on Mar 12, 2020 at 6:51 am
Tom , Portola Valley
on Mar 12, 2020 at 6:51 am
20 people like this

California will suffer greatly from this virus and the Trump Bear Market.

Trump bans travel from part of Europe, yet allows travel from South Korea - 2nd most cases in the world. Allows travel from Britain, who has more cases than 12 other European countries.

Promised a million tests two weeks ago, and as of the weekend delivered maybe 75,000?

The man looked horrible on TV last night. A reality-TV actor out of his depth. Asked for 2 billion, Congress told him to take 8 billion - why isn't it being spent on tests and reinforcing hospitals NOW?

We knew about the virus months ago - what are FEMA's plans? Are National Guard medical units ready to set mobile hospitals to assist regular hospitals with testing this month, and a potential deluge of patients next month?

I pray Trump didn't get the virus from his friends at CPAC. Cruz and Gaetz, too. That said, it looks like Tom Hanks will be the positive face of this epidemic. Trump appeared last night as the scared leader - too little too late? Let us pray he sees the light.

Let us pray that someone competent takes charge.


What happened to Tom Hanks?
College Terrace
on Mar 12, 2020 at 12:53 pm
What happened to Tom Hanks?, College Terrace
on Mar 12, 2020 at 12:53 pm
2 people like this

What happened to Tom Hanks?


Long Time Resident
Old Palo Alto
on Mar 20, 2020 at 6:25 am
Long Time Resident, Old Palo Alto
on Mar 20, 2020 at 6:25 am
Like this comment

Scary story.
Gun shops have seen a huge increase in sales of handguns [portion removed.]
The panic buying on toilet paper and other items got them nervous.

As someone who is now classified as elderly, high risk, and small family of 2, I don't belong to Costco.
It is too much to carry, and we have no where to store excess amounts of anything.
The last thing I would think of buying is a handgun.

[Portion removed.]


Long Time Resident
Old Palo Alto
on Mar 22, 2020 at 7:48 am
Long Time Resident, Old Palo Alto
on Mar 22, 2020 at 7:48 am
1 person likes this

Another scary story.
CalPERS retirement fund just lost a phenomenal 69 million dollars in their investments.
This will certainly impact local governments, schools, taxpayers and some state and local public workers. You can read more here in the Sacramento Bee.

Web Link?

Cities, counties and schools will have to pay CalPERS more in the years to come to help make up for the losses, putting pressure on them to raise taxes or reduce public services.

Who is their Chief Investment Officer now? What did he overly invest in?


Long Time Resident
Old Palo Alto
on Mar 22, 2020 at 8:06 am
Long Time Resident, Old Palo Alto
on Mar 22, 2020 at 8:06 am
1 person likes this

Correction: That should have been 69 billion.


Resident
Another Palo Alto neighborhood
on Mar 22, 2020 at 8:58 am
Resident, Another Palo Alto neighborhood
on Mar 22, 2020 at 8:58 am
3 people like this

I'm no economist, but I can understand that this cannot go on for long economically speaking. People need to work to earn money to live, employers cannot keep paying people who are not working to keep a business going. Money doesn't come from outer space, it is the result of people doing their work and others paying for it.

Am I wrong in wondering just where the government is going to find all this money it is being asked for in stimulus packages and handouts?

As I said, this can't go on for long.


Trump fired the national pandemic team
Greenmeadow
on Mar 22, 2020 at 9:28 am
Trump fired the national pandemic team, Greenmeadow
on Mar 22, 2020 at 9:28 am
12 people like this

> Am I wrong in wondering just where the government is going to find all this money

Same place when they gave trillions to corporations to use for stock buybacks to artificially inflate stock prices (which came crashing down in the Trump Bear Market anyway, so we got nothing but debt.)

Always funny how some get concerned about the deficit only after republicans hand money out to billionaires and corporations. Remember when Bush cut top rates and capital gains taxes? Sure, let's cut corporate taxes so Fortune 500 companies don't pay taxes!

Netflix,
Amazon,
Chevron,
Delta Airlines,
Eli Lilly,
General Motors,
Gannett,
Goodyear Tire and Rubber,
Halliburton,
IBM,
Jetblue Airways,
Principal Financial,
Salesforce.com,
US Steel,
Whirlpool, and more

"91 Fortune 500 companies paid no federal income tax in 2018" Web Link


"here, billionaires, take this - we don't care about the deficit!"

Then, a year later...

"What?!?!? Spend money to help those hurt from the Trump Pandemic responses? Are you crazy?!?!? Look at the deficit!!"


Staggering hypocrisy, combined with executive malfeasance = The Trump Pandemic Response


Resident 1-Adobe Meadows
Adobe-Meadow
on Mar 22, 2020 at 9:56 am
Resident 1-Adobe Meadows, Adobe-Meadow
on Mar 22, 2020 at 9:56 am
1 person likes this

I have to shake my head at the above responses. How old are these people? My parents went through WW2 when this state was the Pacific theatre with military bases from end to end building planes and ships. All groups got to be middle class since the manufacturing on such an extensive basis employed all people. Then we went through the cycle of closing bases so homes could be built on those properties - but wait - those bases have contaminated soil which prevents home building.

Our central valley used to be the agricultural and farming joy of abundance. Competing forces about water have changed the productivity level.

Our so-called business base is now technology oriented - we are not building products - we are creating and selling APPS. So the labor market is now truncated by they type of industry we have let dominate this area and state.

That did not happen within the last three years of the current administration - it is a many year events which started long ago.

I think our school system is not teaching US and state history - people are just reading FB and going nuts. FB only employs a limited type of expertise. It is not building the middle class.


Resident 1-Adobe Meadows
Adobe-Meadow
on Mar 22, 2020 at 1:05 pm
Resident 1-Adobe Meadows, Adobe-Meadow
on Mar 22, 2020 at 1:05 pm
3 people like this

So I went to Jiffy Lube on El Camino to take advantage of a coupon and because the work was overdue. Yes they are open and I was the only customer. A man and his son walk in and they ask if they take the Apple App. No - they take credit cards. The man did not have a credit card and they left. They took the time to drive over there, have a due date for maintenance, and have no credit card for payment. And they expect an automotive maintenance business to take the Apple App. That tells you where this economy is going, And how limited it is. How can we be the 6th biggest economy in the world when all we do is work via an APP?

And you think that is all about the current administration? Of where - the federal government or the state government? This state has a problem and it has nothing to do with the federal government.


Trump fired the national pandemic team
Greenmeadow
on Mar 22, 2020 at 2:44 pm
Trump fired the national pandemic team, Greenmeadow
on Mar 22, 2020 at 2:44 pm
12 people like this

> This state has a problem and it has nothing to do with the federal government.

Wrong.

If the Feds had provided ample testing starting back in January (when the insider-trading senators started selling their stock) we would have been able to curtail this.

If the Feds had started to ramp up supplies of key medical gear back in January (when the insider-trading senators started selling their stock) we would have been better prepared.

If the face-painted Fed had taken this seriously back in January (instead of saying 15 cases will go down to zero) we would have avoided a lot of the carnage to come.


Taking an anecdote about about an un-banked person and spinning it about the whole state? Uh, okay.


musical
Palo Verde
on Mar 22, 2020 at 3:12 pm
musical, Palo Verde
on Mar 22, 2020 at 3:12 pm
Like this comment

^ Chevron is my bread & butter. Last annual report I got is for 2018, showing global pre-tax income of $20.5 billion, and total global income taxes of $5.7 billion, or 27.8%. You can look it up, audited by Price Waterhouse. Then we pay federal and state tax on our dividends. Shareholder meeting in San Ramon is always interesting.


Trump fired the national pandemic team
Greenmeadow
on Mar 22, 2020 at 4:12 pm
Trump fired the national pandemic team, Greenmeadow
on Mar 22, 2020 at 4:12 pm
6 people like this

> total global income taxes of $5.7 billion, or 27.8%.

They don't tell you about US federal income tax?


Another study - "Key Findings:
The 379 profitable corporations identified in this study paid an effective federal income tax rate of 11.3 percent on their 2018 income, slightly more than half the statutory 21 percent tax

91 corporations did not pay federal income taxes on their 2018 U.S. income. These corporations include Amazon, Chevron, Halliburton and IBM. An ITEP study released in April 2019 examined 2018 Fortune 500 filings released to date and found 60 companies paid zero in federal income taxes. Now, all companies have released their 2018 financial filings, and this report reflects that.

Another 56 companies paid effective tax rates between 0 percent and 5 percent on their 2018 income. Their average effective tax rate was 2.2 percent."

Web Link


Resident 1-Adobe Meadows
Adobe-Meadow
on Mar 22, 2020 at 7:05 pm
Resident 1-Adobe Meadows, Adobe-Meadow
on Mar 22, 2020 at 7:05 pm
3 people like this

[Portion removed.] All of the companies listed manufacture a product(s), have supply chain management in which they buy from other companies, and huge equipment inventory. Is this person a tax expert? NO. These companies hire multitudes of people from all economic strata - it is called JOBS. JOBS for all strata of the society. All have a huge work-in-process part of their tax portfolio - all have a huge liability concerning their retirement plans, all have heavy equipment which is subject to depreciation schedules that are part of the tax portfolio. The majority of those companies listed have union workers. the unions are taking apart of those workers pay.

[Portion removed.]


@Adobe-Meadow
Mountain View
on Mar 22, 2020 at 7:34 pm
@Adobe-Meadow, Mountain View
on Mar 22, 2020 at 7:34 pm
26 people like this

Amazing to think that you actually believe what -45 and his minions put out, despite massive evidence to the contrary.

And to make matters worse, you insist that people who do not believe -45's lies are somehow mentally ill or RV dwellers.

Trust me, chuckles: On January 20, 2021, you will be in for a whole world of hurt, because your cult leader will be wearing handcuffs...


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