Associate Margaret Glass recently attended a New Orleans Chamber of Commerce webinar titled “COVID-19 Effects on the Louisiana Economy” hosted by Peter Ricchiuti, a Tulane Freeman School of Business professor and host of the National Public Radio show “Out to Lunch.” Mr. Ricchiuti discussed a variety of factors that influence the local economy which have been impacted by the Coronavirus.
The Economic Recovery in New Orleans and Louisiana
Mr. Ricchiuti noted that while some commentators predict a “V” shape recovery, as suggested by recent stock market gains, others predict a “U” or “W” shape recovery. In any event, the impact of the virus will be particularly significant in New Orleans, a city that relies on tourism, restaurants, bars, music and festivals, which all encourage close contact between people. With respect to Louisiana in general, the oil and gas industry, which was suffering before the virus and continues to decline, presents another huge challenge for local businesses and the state budget. Mr. Ricchiuti expects consolidation in all of these industries.
Future Effects of the Pandemic on the Overall Economy and Markets
Mr. Ricchiuti predicts that the fallout from the pandemic will result in less globalization, more domestic production and simpler supply chains. This, in theory, will minimize the impact of similar worldwide crises in the future. Operating in this manner is more expensive but less volatile. With respect to financial markets, a downturn is expected based on significant pre-virus government debt as well as softening manufacturing and capital spending despite a rising stock market. Investors may want to consider investing in companies outside of the United States.
Industries likely to benefit from recent market changes include e-commerce, telehealth, e-sports and industries that are able to work remotely (which in turn suggests that office space demand is likely to decline). Investors are also becoming more interested in alternative energy and different ways of investing in energy. For example, liquid natural gas is abundant and inexpensive in the United States, and therefore, ripe for arbitrage.
Thoughts on the Future of the Local Economy
Mr. Ricchiuti predicted at least a 12-18 month pause in the local economy considering that the convention center reported 51 event cancellations (resulting in approximately 400,000 lost visitors) and that it took about 3 years for the airline industry to recover from 9/11. He suggested that we use this time to reinvent New Orleans’ marketing strategy to focus more on true local culture and areas other than the French Quarter. He noted that the ability to work remotely may enable more people who have always wanted to live in New Orleans to move to New Orleans.
Mr. Ricchiuti emphasized that he does have hope for the future, stating that millennials are more educated and more community-minded than the prior generation. He noted that the economy is 70% consumer driven, primarily by the middle class, and therefore, we need to support the middle class and make it feel confident in the future.
Learn More on Out to Lunch
If you want to learn more about how local businesses are handling the challenges of the effects of the coronavirus pandemic, listen to Mr. Ricchiuti’s radio program “Out to Lunch” on 88.9 FM (WWNO) on Thursdays at 1 p.m. and Sundays at 12:30 p.m.