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Fact check: Is Gavin Newsom right that 70 percent of California's economy is reopening?

Sacramento Bee logoSacramento Bee 5/15/2020 By Andrew Sheeler andDale Kasler, The Sacramento Bee

California is moving through the second phase of Gov. Gavin Newsom’s reopening plan, and according to the governor, a majority of the economy is open with modifications now.

“If we move through Phase Two, that’s roughly 70 percent of the economy. That may sound significant, but modifications are real restrictions in terms of commerce, and the biggest restriction of course is customer confidence,” Newsom said at a press conference last week.

He expanded on that claim during Tuesday’s press conference, when he said that 21 sectors of the state’s economy were now able to operate.

“You go industry by industry, sectors that never closed, construction and the like. And each one of those categories, you add them all up, you’re now north of 70 percent,” Newsom said.

Newsom was referring to sectors such as retail and office workspaces, which recently have been allowed to resume operations with changes to protect workers from the coronavirus.

But is it fair to say 70 percent of the state’s $3 trillion-a-year economy is reopening now? Sung Won Sohn, a business economist at Loyola Marymount University in Los Angeles, questioned Newsom’s analysis.

Take the restaurant industry, for example. Sohn said the restaurants where he lives are open for takeout, but their business probably is off 90 percent. The same with car dealers, another major segment of the economy.

All told, consumer spending accounts for at least two-thirds of all economic output, and with spending being decimated, the economy has been staggered.

“What the governor is saying is technically true but in economic terms is somewhat misleading,” Sohn said.

Spending by businesses, another big sector of the economy, is also suffering. “Would you want to spend money buying expensive equipment? Would you add to your warehouse? Businesses are not going to do that,” he said.

The list of sectors that are open and able to operate, according to the state’s COVID-19 website, includes:

Agriculture and livestock

Auto dealerships

Child care

Communications infrastructure

Construction

Delivery services

Energy and utilities

Food packing

Hotels and lodging

Limited services

Logistics and warehousing facilities

Manufacturing

Mining and logging

Outdoor museums

Office workspaces

Ports

Public transit and intercity passenger rail

Real estate transaction

Retail

Newsom’s claim also was dismissed by prominent economist Chris Thornberg.

“I don’t know what he’s talking about,” said Thornberg, founder of Beacon Economics and a business forecaster at UC Riverside.

Thornberg said that there is no way to fact-check the statement because it was an empty one.

“It’s 70 percent of what?” Thornberg said.

Looking at the state’s gross domestic product, only around 12 percent of the economy was ever totally shut down, he said.

“He’s justifying very important public policy on the basis of a completely empty statement,” Thornberg said.

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©2020 The Sacramento Bee (Sacramento, Calif.)

Visit The Sacramento Bee (Sacramento, Calif.) at www.sacbee.com

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