The Whistle Stop Diner in Birmingham’s Rail District is one of the many restaurants doing its best to keep business going while indoor dining is restricted by the Michigan Department of Health and Human Services. The diner can be found at

The Whistle Stop Diner in Birmingham’s Rail District is one of the many restaurants doing its best to keep business going while indoor dining is restricted by the Michigan Department of Health and Human Services. The diner can be found at

Photo by Tiffany Esshaki

Chamber’s economic forecast sees brighter days ahead, if COVID-19 is contained

By: Tiffany Esshaki | Birmingham - Bloomfield Eagle | Published January 12, 2021


BIRMINGHAM — It was a year ago that Paul Traub, a senior business economist with the Federal Reserve Bank of Chicago/Detroit, stood before members of the Birmingham Bloomfield Chamber of Commerce with an ominous projection: 2020 could bring about an economic recession.

Traub wasn’t reading tea leaves, but rather a yield curve inversion that showed long-term bonds had lower earnings than short-term bonds. He said 9 out of 10 times, that inversion is an indicator of a coming recession — but only if an external shock occurs to trigger a crisis.

He cited war or government upheaval as potential triggers for such a recession. But as it turns out, a global pandemic would do the trick, too.   

On Jan. 7, the chamber hosted its annual Economic Forecast but moved the event online to keep with social distancing recommendations. Traub again was one of the presenters at this year’s forecast, along with Todd Witmer, the senior vice president of the southeast market for Mercantile Bank.

The two took a look back at the deep dive the economy took last year and looked ahead at what the business community can expect in 2021. The takeaway was largely positive: financially speaking, the COVID-19 pandemic could’ve been a lot worse, and we’re well on our way to recovery.

Full shopping bags, empty dining rooms
“The GDP (gross domestic product) took quite the fall, 34%, in the second quarter. But it bounced back,” Traub explained during his presentation.

Of course, that bounceback is just numbers — an average of how the country is doing. But a closer look reveals a different story, Traub said. There are communities and industries that were hit especially hard by prolonged lockdowns and job losses, and they’re still hurting.

“You’ve heard a lot about this V-shaped recovery, but it’s more of a K shape. Some people are doing really well. Like me, I’ve kept my paycheck, I’ve kept working through all this and I have fewer expenses. But others have lost their job.”

Those jobs were largely lost in service and entertainment, as restaurants, movie theaters and other venues were closed off to guests in hopes of containing the virus. In Michigan, the initial lockdown from mid-March to late-May was a total closure of dining and entertainment, followed by a strict 50% capacity restriction for the duration of the year, until another shutdown was initiated during the holiday season.

Shutdowns also impacted the auto industry, which closed plants for weeks in the spring to mitigate spread but bounced back to pre-pandemic numbers soon after reopening.

Which industry never suffered in 2020? Ask any package carrier or grocer, and they’ll tell you that retail was booming all year long.

“It reminds me of the 2000 recession. We never lost a tick in consumption,” Traub said of the era also known as the dot com recession, caused by massive growth — and the eventual burst — of internet startups. “That was helped by the stimulus. People who were working got checks (too), and we spent it. That’s what a stimulus is supposed to be all about.”

It’s no secret that essential workers and white collar workers were impacted the least. Black households have been found to be most severely impacted by job loss and financial hardship in 2020 at 60%, as opposed to 36% of white households that report similar impact, according to the National Community Reinvestment Coalition.

Women of all races reportedly left the workforce at higher-than-normal rates, likely in order to stay at home to homeschool their children during the extended shutdowns.

Housing is hotter than ever
Speaking of staying home, the pandemic kept a lot of families in place during 2020, leaving the housing market with a dwindling inventory of existing homes for sale. New housing starts and permits climbed way up, despite the fact that mortgage sales declined.

“Existing home sales are back, back to 2005 levels, and they’re rising quickly,” Traub said. “There’s just not that inventory there. So if you have a good home in the right price range, it will sell immediately at or above asking.”

Between the labor market’s speedy bounceback, the Federal Reserve’s actions to preserve financial markets — like the moratorium on foreclosures and student loan interest — and of course not one but two stimulus packages, the U.S. is on a road to success and could potentially see pre-pandemic economic numbers within the year.

But that’s provided the virus doesn’t throw any more surprises our way, Traub said.

“The use of masks has risen, but it’s still not enough. People still don’t want to social distance, and (many) are saying they won’t get the vaccine,” he said. “We’ve been losing people equivalent to a couple of jumbo jets falling out of the sky every day. And we could get back to a pre-pandemic economy this year, but it all depends on controlling the virus.”

Small banks filled a big hole
Witmer jumped in to boast about how it wasn’t necessarily the Fed that saved the day in 2020, but rather smaller banks that stepped up to help small businesses.

“Ninety percent of banks in Michigan participated in the PPP (Paycheck Protection Program). Fifty percent of those loans were from banks who held less than 25% of the deposit base in the state, which speaks volumes for what the smaller and community banks did,” he said.

Nearly all of the PPP loans issued in the state were under $2 million, averaging around $125,000, further illustrating the industry’s focus on helping small and mid-sized companies stay above water.

And now, because of that, he said, 2021 is looking like it could be a better year.

“There’s a record level of capital, so we could not be in a better position,” he said. “And asset quality is very strong.”

In Witmer’s mind, that could potentially mean that clients, investors and business owners could possibly be making some acquisitions in 2021, which would really boost the local economy.

Traub agreed, adding that those who were able to keep their jobs in 2020 likely worked from home, which meant they kept their income and reduced costs.

So a crippling pandemic is what it takes to motivate Americans to build a savings.

Witmer echoed Traub’s speculations about the real estate scene and said top prices and low inventory should continue into the new year for residential properties.

For commercial spaces, he said he’s seeing a lot of interest in the industrial warehouse sector.

Are cubicles a thing of the past?
He’s not so sure what’s up next for office spaces, though.

“With the advent of working from home, will businesses keep the square footage they have and rotate who comes in on what days?” Witmer said. “It’s just my opinion, but I think we’ll see a combination of in-office and at-home flexible scheduling.”

Witmer himself said he’s a traditional guy and doesn’t love being stuck at home. He’d rather meet with clients and coworkers face to face. It’s because of that he suspects that, as soon as it’s safe, dining and entertainment will be back with a vengeance.

Traub agreed, saying there’s a “pent-up demand for restaurants, entertainment and travel” that will come to a lucrative head.

But again, they both warned, that all depends on what happens with the virus.

A new era
Will inaugurating a new president into the White House impact the economy much? A member of the chamber asked about how global markets might respond to a Joe Biden presidency. The question came less than 24 hours after supporters of President Donald Trump stormed the U.S. Capitol building. The world watched as insurrectionists breached the historic building’s walls amid the certification of Electoral College votes that would certify Joe Biden the president elect, but the stock market closed at record highs that evening.

Both experts predicted there won’t be any major hiccups and the transition of power should go smoothly — at least for the economy.

If anything, Traub said, the change of leadership could be a good thing. Not because of politics, but rather because of predictability.

“You might not agree with his policies, but one of the things that’s going to happen is less uncertainty,” he explained. “I’ve never talked to a business leader that loves chaos as much as the current administration does. The trade wars were disastrous. The uncertainty — just eliminating that (will be a positive).”

Traub also said the Biden administration could give a shot in the arm to the auto industry, which will be encouraged to move more quickly toward electric vehicle technology.

“The current administration did everything it could to eliminate electric vehicles, but it’s going to happen. And a new administration will spur that more quickly,” he said.

And that’s good, because growth in the auto industry has somewhat reached a plateau, Traub explained. New vehicles are accessible to an increasingly narrow demographic: the average age of a new car buyer in the U.S. is 53 years old, making an average of $80,000 annually, according to the National Automobile Dealers Association. Baby boomers in general account for 62% of new car sales nationwide.

There’s also a lack of urgency for people to get their driver’s license, since ride-sharing apps are easy to use and a lot cheaper than growing registration and insurance fees. Oh, and younger families are having fewer children, which means they don’t need large vehicles for toting them around.

A government investment in infrastructure and technology to bring EV vehicles to market would be good for auto manufacturers, too.

But again… you guessed it… it all depends on what happens with the virus, both experts said.

So are there any things in the economy to keep an eye on that aren’t COVID-19? Well, sort of, Traub mused.

“State and municipality funding. That’s going to be a problem after the virus,” he said. “They can’t run at a deficit like the feds can. How are smaller municipalities going to rebound after this?”

To watch the 2021 Economic Forecast, or to learn more about the Birmingham Bloomfield Chamber of Commerce, visit