On the Record: Jeff Fuhrer, former Boston Fed analyst, looks at 2021 after a turbulent year
Courtesy / Jeff Fuhrer
Jeff Fuhrer, former senior policy analyst at the Boston Fed, will be the keynote speaker for the Mainebiz “Five on the Future” event, which will be Feb. 25.
Economist Jeff Fuhrer, a former executive vice president and senior policy analyst at the Federal Reserve Bank of Boston, has for the past several years been the keynote speaker at the Mainebiz “Five on the Future” event. He is now executive vice president and chief strategy officer at MassDevelopment, the finance and development agency for Massachusetts. Mainebiz caught up with him to ask him for his outlook for 2021.
Mainebiz: How early last year did economists start to see trouble signs with COVID-19?
Jeff Fuhrer: There were of course some early rumblings about the coronavirus in late 2019 and early 2020. But almost no one saw the pandemic coming, let along the economic upheaval that it ultimately caused. Looking ahead, the jury is still out on how long that recovery will take — and indeed, on how much damage the second surge will do. My sense is that by mid-2021, with the vaccine becoming widely distributed, confidence will begin to return, and spending on the hardest-hit sectors will gradually return. But no “light switch” — it will take time to build trust and adjust to the new reality of a lingering virus, until most are vaccinated.
MB: Maine’s unemployment rate has hovered in the mid-single digits, at 5.8% for November. How does the job recovery compare to the recession of 2008-2009?
JF: This whole recession is like nothing we’ve seen before. The number of jobs lost within a couple of months exceeds anything since the Great Depression. While it’s great to have had a partial recovery, by most measures, we are still at a point comparable to the low point of a run-of-the-mill recession. I hope that a significant recovery in demand in 2021 will spur great progress on the employment front, but most economists don’t see us returning to full employment until late 2021 or early 2022 at best. Remember that before the pandemic, our unemployment rate stood at 3.5%!
MB: How will the demand for real estate change in 2021 and beyond?
JF: As imperfect as it is, working remotely has worked pretty well for those who are able to do so. My sense is that Zooming is not a perfect substitute for in-person meetings, especially when the work to be done is uncertain, new, strategic and interactive. So many of us will need to continue gathering in office space to accomplish our work. But it seems reasonable to assume that there will be less demand for conventional office space in center cities than prior to the pandemic. There will likely be demand for equipment — computers, network connection, office chairs and furniture — that better facilitates at-home work, as it is likely to be with us for the long haul. That will partially substitute for commercial real estate construction in the aggregate, but some builders may see a dip in demand. We’ll see!
MB: What types of retailers are best poised to do well in 2021?
JF: It’s likely the same categories that have remained healthy during the pandemic — any business with a significant online presence, businesses that cater to at-home activities like home improvement and groceries, and to some extent businesses that provide outdoor recreational activities, appropriately modified for social distancing. Over time, perhaps later in 2021, restaurants, museums, air travel and mall shopping will return.
MB: How does the increased awareness of racial injustice affect the evolution of the economy?
JF: I hope that it makes a significant difference over time. We have far too many families of color who do not benefit from economic recoveries, and who have been left behind dramatically in terms of wealth accumulation. Our nation needs to face the institutional, policy-based sources of these discrepancies squarely, and figure out how to bring all willing citizens firmly into the economy. Similar challenges exist for many poor white families, for whom the economic system also works poorly. But the racial dimension significantly compounds the problem for families of color. Ignoring this problem will mean another generation of lost economic and human potential.
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