Labor, land, capital and entrepreneurship underlie all economic activity, and all four are so profoundly intertwined that when one falters, the others stumble too.

Economists refer to these as the factors of production. To understand how the COVID-19 pandemic will impact the economy, all four need examination.

More than 30 million people have filed claims for unemployment insurance since our governments began ordering businesses shuttered in March. The world has never seen the labor force contract on such an enormous scale or at such a rapid pace.

Unemployment rates will soon reach the mid-teens. The $600 a week federal supplement for workers who lost their jobs due to COVID-19 will help, but the bigger problem is those who do not qualify. They will weigh heavily on the economy.

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Land value is typically a reflection of a propertys income potential, either from commercial activity or residential use. When companies close, they struggle to pay leases. When people lose jobs, they fall short when the rent or mortgage comes due. Land values of all kinds are in trouble.

Americas pessimism shows up in the residential housing market, where new home sales are down 15 percent, and housing starts are down 22 percent, the Census Bureau reports. Construction workers are losing jobs, which contributes to the downward cycle.

Fewer people shopping for homes means sellers cut prices. Personal wealth evaporates, and people spend less.

Brick-and-mortar stores, already closing due to e-commerce, are creating even larger holes in the retail market. Nieman Marcus, JC Penney and J. Crew are among dozens of retailers considering or filing for bankruptcy.

Smart mall owners have been recruiting new kinds of tenants, such as restaurants, movie theaters and gyms. But consumers now avoid those businesses for fear of COVID-19.

More than a quarter of Houstons office space is already empty, with an astonishing 61 million square feet of available and another 3.4 million under construction, the Greater Houston Partnership reports.

San Antonio has a 10 percent vacancy rate with 1.5 million square feet under construction, according to NAI Partners, a commercial real estate firm. But more companies are moving out than moving in, according to data from the first three months of the year.

Office building tenants are also laying off workers or asking many to work from home. Companies desperate to save money will likely shrink their floor space as much as possible.

Landlords and banks are doing what they can to help struggling families and businesses. Mortgage companies have given 7 percent of their clients permission to skip a payment. Commercial landlords are providing shuttered businesses breaks on rent.

Yet such generosity has long-term effects on property values, according to MSCI, a global financial data analysis firm. When landlords see reduced income from their property, appraisers mark down its value.

We often hear that were all in this together, but that goes beyond the risk of disease. We need to remember we also share the same economy, which depends on the flow of capital.

The government and the Federal Reserve recognize that unemployment, lost rents and lower property values compound one another to worsen economic recessions. They have injected capital into the markets to prevent a death spiral.

President Donald Trump and Congress have authorized $3.6 trillion in spending, while the Federal Reserve has announced $8.6 trillion in financial support. About 95 percent of the money is going to businesses.

Stock markets rally on news of every new program because they hope the cash will spur companies to rehire workers, who will pay their rent and buy more stuff. But so far, the unemployment numbers keep climbing, lines at food banks get longer, and the economy keeps shrinking.

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If the numbers do not turn, we may discover that governments cannot spend their way out of this recession. In some places, the problems are more fundamental. If people do not resume travel, Houstons energy economy will not recover, and San Antonios tourism industry cannot restart.

The coronavirus experience is changing businesses and economies in unpredictable ways. Our fourth factor, entrepreneurship, will make the difference.

Successful entrepreneurs identify a societal problem and create a business to solve it: the more problems, the more opportunities. As COVID-19 changes our lives and presents new challenges, entrepreneurs will profit from addressing them.

The Great Recession led millions to give up wage slavery and open new businesses. Most new companies will need real estate as they grow, hire laborers and build capital.

This is, of course, the business cycle. As long as humans survive, we will be in one, and therein lies endless hope and optimism.

Tomlinson writes commentary about business, economics and policy.

twitter.com/cltomlinson

chris.tomlinson@chron.com

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Tomlinson: Business cycle is diving, but it will bounce back - Houston Chronicle