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It will probably get worse before it gets better

The COVID economy, even in Contra Costa County, will probably get worse before it gets better.

Weekly unemployment throughout the state have plateaued above 200,000, the same steady-state since May. This is a roughly five-fold increase over the previous year.

We see it here in Lamorinda. In downtown Walnut Creek, we lost Uniqlo, Pier 1, and Gap. Clothing and general retail were dealt a terrible hand in the pandemic as shopping instantaneously shifted online. Meanwhile, between March and September 2020, Amazon's stock price increased by 50%, from roughly $2,000 per share to over $3,000. In fact, economists worry that the pandemic will drive a huge wedge between large corporations and small businesses. The former have thrived while the latter suffered, and in wood-paneled board rooms across America, corporate strategists are eagerly looking to acquire weakened competitors.

Even before the pandemic hit, the 2017 Tax Cut and Jobs Act helped nonfinancial business hoard over $4 trillion (yes, trillion with a "T") in cash. Apple alone has nearly $200 billion in cash on hand. Alongside its continuously compounding stock, Apple could purchase almost any company in the S&P.

So what does this all mean for local entrepreneurs? A few things:

Historically low mortgage rates will elevate home prices and bring in new families with purchasing power. This is great for homeowners who watch their Redfin home value estimates improve, not so great for renters who will have constant worry about rent hikes. Still, more well-heeled local shoppers should help small businesses.

There's a lot of latent venture capital. I hear from my friends in the industry that the VC market is frothy as ever. After holding back for months when the shutdowns first happened, funds need to make up for lost time and move capital out into the field at faster rates. This is great if you're a tech entrepreneur, and neutral to negative if you're not.

Commercial rents should plateau or drop. The square footage of available commercial sublets has tripled compared to this period last year. San Francisco has seen a 20% drop in rent prices as workers flee the city. On the commercial, everyone from Pinterest to Dropbox and Stripe are downsizing their massive offices.

Restaurants won't catch a break. The thing that worries me most, though, is restaurants. As the weather gets cooler and rain returns to the forecast, many will face an impossible choice: make it work with 50% capacity (or lower) or shut down. I don't think our county's infection rates will markedly improve going into the winter. The scientists say it will get worse until the Spring, when we'll finally break through (perhaps with the aid of a vaccine.)

The next few months are a mixed bag. Great if you're Amazon, probably okay if you're another tech business, and probably not great if you own any other brick and mortar business, but especially not good if you run a restaurant. I'm afraid that's the hard look as we roll into winter here in Lamorinda.

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