Report: California’s stricter COVID rules did not hurt the economy

California’s GDP shrunk less than that of Texas and Florida in 2020

By Leonardo Castañeda
Mercury News

SACRAMENTO — Regulations aimed at preventing the spread of COVID-19 did not come at the expense of California’s economy, according to a new report that found states that took a more hands-off approach to the pandemic did not see an economic boost from their limited regulation.

The findings from the UCLA Anderson Forecast are “diametrically opposed” to the narrative common among some COVID-19 regulation opponents that the public health orders undermined economic recovery, said Director Jerry Nickelsburg.

Among large states, those with strict pandemic rules performed as well and in some cases better than their laissez-faire counterparts. California’s GDP shrunk less than that of Texas and Florida in 2020, all of which outperformed the United States as a whole. Washington, which had some of the strictest pandemic restrictions in the country, had the lowest GDP loss among large states.

“In that group, you simply can’t find evidence that the economy — as measured by the shrinkage of GDP — was adversely affected by the intervention,” Nickelsburg said.

That finding was bolstered by similar data from Scandinavia, where Sweden was touted as an international model for a low-regulation response to the pandemic. Instead, the country had up to four times as many COVID-19 cases as Finland, Norway and Denmark, all of which performed at least as well economically.

The regulations may have helped offset some of the negative impacts from business closures by helping customers navigate the relative risks of going out to eat or going shopping, Nickelsburg said.

“In states with restrictions, the state is sending a signal about what is safe to do and what is not,” he said.

“In states without restrictions, individuals are making that decision and some are voluntarily withholding their demand.”

California’s economy was also helped by the fact that job losses were concentrated in industries that require a lot of human contact — leisure and hospitality, education, retail trade and health care and social services accounted for 75 percent of job cuts, according to the report.

At the same time, industries like technology where employees can work from home saw far fewer job or pay cuts, which helped insulate the state’s economy and more recently accelerated its recovery. The report found San Francisco, Silicon Valley and the East Bay all had faster job growth between December and March than the U.S. as a whole.

Having so many workers who weren’t laid off also helped keep afloat one of California’s biggest industries: housing.

“Low interest rates and the fact that higher-income earners did not generally lose their jobs meant a strong demand for housing,” Nickelsburg said. “So the construction industry did well.”

(c)2021 the San Jose Mercury News (San Jose, Calif.)

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