Economically, the Coachella Valley has been reeling since the cancellation of several of the region’s biggest events in the spring of 2020. At the time, the fear was that the region’s small businesses would experience greatly reduced sales during the busy spring event season, thereby rolling into the slower summer months with less cushion to get them through until fall.
If only the voluntary cancellation of major events had been the end of it. Instead, California issued a statewide shelter-at-home order and temporarily shut down thousands of businesses in the process. Since March, Californians have endured a lot: significant COVID hotspots in some parts of the state; several different iterations of reopening plans; rapidly changing guidance; and in many cases, navigating the practical and psychological turmoil of what it means to be a non-essential business or employee.
The State’s current color-coded blueprint for reopening is based on metrics that place the Coachella Valley – as part of Riverside County – teetering between the very restrictive red tier and the most restrictive purple tier. Based on recent and current infection and testing trends, it could be many more months before the Coachella Valley’s small businesses are permitted to reopen at anything close to capacity. This would be a problem just about anywhere, but when taking into consideration the composition of the Coachella Valley’s demographics and business community – coupled with the impracticality of carrying out permitted outdoor operations in the desert heat – the problem is magnified.
Experts predict permanent closures
Depending on the source, academic and industry experts predict that between 25-50% of restaurants and hotels will close permanently due to COVID-19. Though that is a wide range, either end of the range is more than enough to devastate the Coachella Valley economy. Local experts believe that if capacity restrictions remain in place through the end of the year, Coachella Valley restaurants and hotels are facing closure rates at the high end of that estimate – near 50% — due to the uniquely tourism-dependent mix of businesses here.
Retail is also at high risk of suffering permanent damage. Small and specialty retailers have been deemed non-essential and have been subject to closures or reduced capacity, and even many major chains have faced bankruptcy and store closures since the pandemic’s start. Leading retail forecasters predict that as many as 20% of brick-and-mortar retail shops will face permanent closure, with COVID-19 rapidly accelerating the already-underway shift to online shopping.
Nearly 17,000 jobs could be permanently lost
In pure numbers, this means the permanent loss of over 650 local restaurant and accommodation businesses, and 310 retailers. These businesses employ an estimated 16600 people, or 11% of total jobs in the Coachella Valley. If shutdowns and capacity restrictions remain in place and these scenarios become reality, these jobs will be permanently lost. Because employment is so personal, job loss numbers are worrisome even without additional context. But consider also that restaurant, accommodation, and retail sales make up 1/3 of the Coachella Valley’s total annual revenue.
Adding to predictions which aim to warn us of what might happen are the facts and figures reflecting that which has happened so far. Los Angeles Economic Development Corporation (LAEDC) analyzed California unemployment claim data from mid-March through July 25 to identify demographic patterns among claimants. As it has been reported elsewhere, LAEDC found that distinct subsets of workers have been disproportionately affected, particularly: women; individuals aged 16-24; Hispanics; and those with a high school education or less.
Hispanic workers, young workers, and women disproportionately affected by shutdowns
The Coachella Valley has high percentages of these subsets. Just how disproportionate are the effects of business shutdowns on these groups? Of California workers with a high school education, 56.6% filed an unemployment claim during the studied period; of those with less than a high school education, nearly 1 in 4 filed for unemployment. Those with high school equivalent or less comprise 42.7% of the Coachella Valley population.
In the Coachella Valley, the 16 to 24 age group represents 11.8% of the population; over 40% of those in this cohort filed an unemployment claim. Similarly, Hispanics make up 51.6% of the Coachella Valley’s population; and 1 in 4 Hispanics filed an unemployment claim during the studied period. While not unique to the Coachella Valley, where just over half of workers are women, the impacts on women as a group have been among the most profound, with 51.6% of all women filing an unemployment claim during the period.
The issues of lockdowns, business closures, and unemployment are felt in every Coachella Valley city and community. In fact, the Valley’s most affluent cities have seen some of the most significant impacts to their small business communities. A recent study by Opportunity Insights highlighted this trend in a study of small business revenue from March 25 to May 26 as compared to January 2020. In more affluent areas, consumers are more prone to staying at home, reducing their typical small business spending at favorite local spots. For instance, small business revenue has fallen by 80% in Palm Springs’ 92262 zip code, and 55% in 92264. Small business revenue in Indian Wells has fallen by 73%, and in Palm Desert it has fallen by 48%. In sharp contrast, zip codes in Coachella and Bermuda Dunes have seen a 2% rise in small business revenue, as there are a concentration of home improvement and essential businesses in these areas.
Big hits to tourism and retail business
Residents of Coachella Valley cities have just begun to see the dramatic effects of diminished tourism and retail revenues. City budgets have already been cut: vacant positions are being left unfilled; departments have been reduced in size. Even the appearance of some municipally-owned landscapes is beginning to suffer as watering and maintenance schedules are reduced to save costs. Police and fire positions receive a great deal of publicity when they are considered for cuts. But there are dozens of less-visible positions which equally contribute to the quality of life in our cities. Code enforcement, planning, economic development, and engineering departments all provide critically important services to residents and businesses. Continued reductions in any of these departments will cause a degradation of the beauty that draws tourists here, a reduction in public safety; and protracted processes for those who wish to start or expand a business. It is a downward spiral that is difficult to escape.
This inevitable downward spiral of business closures and unemployment reaches beyond commerce and into daily life. According to a 2013 report by the Urban Institute, those facing long-term unemployment of 6 months or more face wide-ranging negative effects related to physical and mental health: breakdown of existing family structures; reduced future earning potential; declining performance of children in school; increased criminal activity; and more. For small businesses and the unemployed, government grants and stimulus packages offer a temporary stay. But they can never replace a once-thriving business or meaningful work, nor can they repair damage to families and health.
Businesses can’t survive this “new normal”
When new city budgets were approved in June, leaders largely hoped that by fall, business shutdowns would be coming to an end and that “normal” would return. Instead, as we creep further into fall, the region is facing the very real possibility of watching nearly 17,000 people lose their jobs and livelihoods permanently. The ability of Coachella Valley businesses to reopen at full or very near capacity in the short term will be the difference between a recovery that takes mere months and one that takes many years. A robust small business community and the availability of productive, rewarding employment are cornerstones of a healthy community. The Coachella Valley has been closed for 7 months and the impacts have been severe. Continued shutdowns will profoundly weaken not only the financial security of Coachella Valley residents, but their physical and emotional health as well.
Note: A version of this article, which was jointly written by David Robinson and Laura James, originally appeared in the Fall 2020 Voice of Business Magazine, published by the Greater Coachella Valley Chamber of Commerce.