Remote work, distance learning: What stays in Orange County’s pandemic recovery?

Orange County is emerging from the impacts of the coronavirus pandemic, although some changes wrought by the health crisis are expected to linger, according to a report released Thursday, Sept. 16.

Following a year of rising unemployment, decreased economic output and optimism, and falling student performance, the Orange County economy showed signs of a rebound this past spring. The post-recovery world, however, isn’t likely to resemble life before COVID-19.

“Our view is we’re not returning to the pre-COVID status quo, but we’re adapting to this next normal,” said Wallace Walrod, chief economic adviser to the Orange County Business Council, a co-author of the 2021-22 Orange County Community Indicators report. We’re adapting “in terms of a new economy, different labor markets, and workplaces obviously are going to be quite a bit different in most cases.”

The report — an annual accounting of the county’s performance in key areas — said lasting change is expected in at least three key areas: remote working, long-distance medical care or “telehealth” and e-commerce.

The pandemic accelerated changes that already were underway, and numerous forecasts predict remote working will persist at elevated levels into the foreseeable future.

“While the experience of working at home during the crisis may not have been ideal as whole families sheltered in place, it (gave) people a taste of what could be,” Kate Lister, president of Global Workplace Analytics, wrote in a recent article cited in the report. Lister’s firm forecast 25-30% of the workforce will be working from home several days a week by the end of 2021.

“The genie is out of the bottle,” she wrote, “and it’s not likely to go back in.”

Pandemic’s impact

The Community Indicators report is the latest in a series of annual studies dating back to 2010. In addition to the business council, sponsors include the Orange County United Way, the Orange County Community Foundation, First Five Orange County and CalOptima.

This is the first year the indicators report has data quantifying the pandemic’s impact on Orange County’s economic and social life.

The county’s unemployment rate, for example, surged to 14.9% in May 2020, with its “world-famous” hospitality and tourism industry hardest hit. The county’s economic output — measured by its gross regional product — decreased by $47 billion to $262 billion in 2020. That’s down 15% from $309 billion in 2019.

Remote learning also took a toll on reading and math performance across all grades, the report said.

Median rankings for math, for example, fell from the 55-60 percentile range for grades 3 through 8 in the fall of 2019 to around the 50-percentile level in the fall of 2020.

“From elementary school to graduate school, students have been displaced, isolated and forced to adapt to an entirely new way of learning,” the report said.

While Orange County students returned to in-person learning sooner on average than in the state as a whole, low-income school districts had more students staying home as more low-income households had family members with COVID-19.

The pandemic also was a contributing factor to a population drop last fall, as 8,300 more people left the county than moved here, a California Policy Lab analysis showed. While 42,540 people moved to Orange County in the fourth quarter of 2020, 50,573 left.

This population loss — which coincided with California’s first population decrease in more than a century — was due to such factors as COVID-19 deaths, a search for more affordable housing and decreased immigration, the report said.

Childcare became more challenging as at least 123 daycare centers shut down – not counting the closure of small, family providers.

Poverty rates had been declining in the year before the pandemic hit, with 9.4% of Orange County residents living in poverty as of 2019, down from 10.5% in 2018. Childhood poverty levels also decreased one percentage point in 2019 to 14.2%. Data showing the pandemic’s impact on poverty levels is not available, although the report noted that federal pandemic assistance helped keep families afloat throughout the crisis.

Signs of renewal

There were significant signs of economic recovery in the battered tourism, restaurant and hospitality sectors. Declining unemployment, increased numbers of visitors and a full recovery in air travel nudged the local economy closer to normal.

The county’s unemployment rate fell by more than half this summer. But even at 6.3% as of July, unemployment remains higher than before the pandemic began. Walrod predicted the rate won’t get under 5% until next year and won’t get to the 3-4% range until 2023.

Hospitality and tourism revived this past spring as COVID-19 cases declined and travelers again felt safe to book vacations, the report said.

The county saw 30-45% annual gains in the number of visitors from San Diego, Los Angeles County, Bakersfield and Palm Springs, while visitor numbers decreased from San Francisco, Sacramento, Monterey and most out-of-state locations, the report stated.

“I think there’s so much pent-up demand out there to travel and to buy goods,” Walrod said, noting visitor levels are highest in areas reachable by car.

Air traffic levels rebounded this past spring as well. After falling to a low of 25,313 passengers in April 2020, John Wayne Airport traffic hit 890,185 in July — the most for any month since December 2019.

Business executives surveyed as part of Cal State Fullerton’s Business Expectation Index showed renewed optimism for economic expansion as well. After dropping to an index value of 22.7, it’s now back to a value of 96.4. Anything above 50 indicates expected expansion.

Lasting change

From online grocery shopping and food delivery apps to virtual doctor’s visits, the COVID-19 pandemic has transformed consumer and worker behavior, the report added. Demand is up for some goods and down for others. Some of these changes may stick around.

For example, there’s a growing preference for remote work. The report cited a national survey showing more than half of employees prefer to work from home at least three days a week. The mainstreaming of remote work will have long-term implications for employment, tax revenue, residential and commercial real estate, transportation infrastructure and workforce development.

For example, a PwC survey found that nearly 80 out of 128 U.S. business executives plan to consolidate their offices, and around 75 out of 128 said they plan to open different kinds of offices, such as satellite offices in the suburbs.

“A key issue for (employers) right now is to get that balance right,” Walrod said. “Employers that are requiring employees to work at their workplace all the time are having a harder time attracting and hiring right now, and are losing some employees who are going to employers that have more of a hybrid approach.”

Patients’ usage of and interest in telehealth has also increased, the report said. In Orange County, CalOptima reported telehealth visits increased to 191,002 in the third quarter of 2020, up from 13,505 in the first quarter.

Reliance on e-commerce boomed during the lockdowns and these habits are expected to last well into the future, causing vacancies to rise at Orange County shopping centers. E-commerce providers like Amazon and Walmart have been ramping up their capacity at a dramatic pace since late 2019, expanding their delivery capacity.

“There will be ongoing impacts on our brick-and-mortar retailers,” Walrod said. “I can’t tell you the number of Amazon and UPS trucks that drive by my house every day.”

Some of Orange County remains unchanged by the pandemic. It continues to have crime rates well below regional and national averages and it has a relatively well-educated population. Four in 10 adults have a bachelor’s degree or higher, compared with an average of three in 10 elsewhere in Southern California.

And the county still has the highest home prices in the region, which plays a significant role in driving 25- to 44-year-old workers to more affordable markets in the Inland Empire or out of state.

“We just don’t have enough housing units here,” Walrod said. “Cities are going to have to be more and more creative in how they meet (state housing) goals.”