22MM total out of 157MM working Americans ~14%. More lost than have been added since 2008. Does anyone have a good idea about the actual prospects of a V shaped recovery?
The hypothetical V shape recovery that everyone was touting back in March was baseless- it was under the way out of touch assumption that lock downs would last only a month and business would be allowed to open as if it were an on/off switch. Basically, it assumed 0 secondary effects to recovery.
While it won't magically solve problems people having confidence in a speedy recovery and behaving accordingly is likely going to speed up the recovery. It is certainly not going to slow down recovery. It's like the inverse of getting a recession because people expect a recession and behave accordingly causing a recession.
So maybe taking a look into capital cost of starting up, capital lost in lockdown, and cash flow and/or financing needed to regain that lost capital?
Because, to your point, a restaurant can't just rehire all the chefs and cooks and waitstaff and go buy food and pay all of its overhead on day 1 with out some sort of influx of cash and guarantee of cashflow to service debt. And I'm assuming that model scales to larger industries as well.
I’ve owned a restaurant before so I can speak to this: you’re right about chefs- they’re very hard to find. What I imagine happening in the long run is a lot of restaurants shutting their doors 6-12 months from now. Stimulus and PPP will keep them afloat for a big, but the damage will be done, and chefs (who were way underpaid to begin with) will command slightly higher pay when all these restaurants start hiring again.
So there are a few things to think about with respect to the recovery. Disclaimer: I am not an economist.
One thing is that to a certain extent an economy is psychological. Yes, certain things are physical realities (such as crop yields) or political realities (e.g. states of war) or legal realities (like regulations against selling homemade beer), but a lot else is purely based on sentiment. And it doesn’t matter how good reality is if people think it’s bad: they won’t act in the market more than they must to survive, and it will actually be a bad market, even if the fundamentals justify a good one — at least for awhile, until enough contrarians seek to take advantage of good prices (a kind of sentiment arbitrage, I suppose).
But something I worry about even more is well-intended interventions which make things worse and prolong the poor economy. There’s precedent for this in history: the Smoot-Hawley Tariff Act was intended to alleviate the Great Depression but instead exacerbated it. Specifically, I can think of laws against so-called ‘price-gouging’ (which is a myth: no-one in all of human history has ever paid more for something than he felt it was worth to him at the time he bought it, because whenever anyone feels the all-in price for something is more than the all-in value … he doesn’t buy it): by interfering with the price mechanism which is the fundamental method for economic actors to bid for their needs and desires to be met, it will result in less-efficient allocation of resources (capital and labour) across the entire market. This misinvestment will by definition lead to a poorer economy than would otherwise be the case.
You're laying on the operating table in the ER with a heart attack. Surgeon says, "OK before we put you under, in compensation I want 70% of your income for the rest of your life, or I'm not doing this. Deal?"
> (which is a myth: no-one in all of human history has ever paid more for something than he felt it was worth to him at the time he bought it, because whenever anyone feels the all-in price for something is more than the all-in value … he doesn’t buy it)
Ah, so you believe that medical care should bankrupt an individual every time they use it because it is priceless.
While I mostly agree with your overall comment, price-gouging is 100% a thing for certain items. Insulin is one of the big ones. It’s extremely marked up and the decision is life or death. Is it a choice when death is the alternative?
IMHO, that's not how it works. For better or worse companies are reluctant to fire in good times. There's a lot of people employed at jobs that aren't really needed. Things like the project they got hired for was canceled and they were just stuck somewhere. Projects that accomplish their goal still tend to drag on adding inconsequential features. And, of course, there's just the slackers skating by.
When an economic crisis comes along they get canned and the business realizes that they weren't actually needed. When the good times come back they don't hire those employees back. They continue operating with a smaller staff and pocket the extra profit.
Zero. No way such massive companies can swing all of a sudden.
- There's not enough tests still
- People are scared of doing anything even if stores open up
- Most importantly, sales just don't magically appear with the snap of your fingers, takes time to ramp up again
- Companies are still heavily on only essential spending, that doesn't change overnight
They're talking no public events til 2021 now. I think the realization is that this isn't just a 1-2mo ordeal. It's going to be a 1-2yr shift.
>I think the realization is that this isn't just a 1-2mo ordeal.
This is what happens when captains of the industry ignore pretty much any pandemic model that has been release in the last 50 years. Unless everyone catches it instantly and the whole process is over quick (which leads to massive death and long term economic impact), that it always takes a year or two of massive public change and a vaccine to get beyond the pandemic.
Essentially the rest of the world has caught up with where the epidemiologists were in January.
This is an unpopular opinion, but I think it's worth considering that most of these people are probably hourly wage earners, and so when things open up again, they will probably be hired back very quickly. The people aren't going anywhere, and they haven't been deleted from society. When businesses reopen this number will probably drop substantially. The businesses themselves (restaurants, retail, etc) haven't gone anywhere, they're just not operating. Yes there will be some bankruptcies, but those companies will restructure, assets will be sold, and something else will pop up in place.
If someone has a strong case for why this isn't true, I'd love to hear it, but it's my current working thesis and I haven't been convinced otherwise. I know it's unpopular because of politics and such, but I'm optimistic about recovery.
You’re getting downvoted but I fully agree. Most people are talking as if the virus will be gone in a month or so. The lockdowns are not going away. We are going to have new hotspots popping up every week once lockdowns start releasing.
Even if it does, and I don’t know if it’ll ever go away, there’s not going to be a single date when it’s cool for us to go back to normal. Even a vaccine will take weeks or months to manufacture and distribute to the entire planet, if we even had one.
There won’t be a clear end date, even in retrospect.
There are 115 vaccines in development now, in four very broad categories. This is a well-understood process and will very, very likely lead to several viable vaccines.
Further, inoculation can occur much sooner. That is, introducing antibodies obtained from recovered folk, into vulnerable folk. This is nearing deployment right now.
We don’t even know yet that people who have been previously infected have gained immunity. It’s fine to be optimistic, but there are no guarantees here.
It’s not at all odd, Antibodies aren’t forever. Chances are you’ve been reinfected with something you built up antibodies for dozens of times in your life.
For reasons currently unknown to science, exposure to some diseases confers lifelong immunity (chickenpox) but does not for other diseases (Flu, coronavirus, various types of common cold).
We’re actually starting to see the first reinfections of COVID-19 patients.
In addition to the sibling comment, there’s also the unlikely dengue scenario where getting infected once actually makes the next time worse.
Let’s hope we solve this virus (for whatever definition applies; we’re not particularly good at solving viruses) and apply some of that same effort to dengue before the world gets much warmer and it spreads.
I'm not trying to be a wet blanket, I'm just refraining from pretending I can predict the future. That seems like a useful skill now more than ever. The virus could mutate and become less potent. Populations could gain herd immunity relatively quickly. We could have a vaccine in a record-breaking time, defying all projections. Or none of that could happen, and we are forced to adapt our healthcare systems to handle COVID-19 the same way we handle so many other illnesses, and accept the associated fatalities.
There's plenty of possible outcomes and I see no reason to assume any given one is more likely than any other at this point.
Sure you do. Some of those scenarios are vastly more likely than others. Kind of the definition of a 'wet blanket', to keep bringing up unlikely negative outcomes like they might really happen.
Yes, yes, they might happen. But the likely scenario is, with 1M people working on a dozen fronts, that modern intelligent educated humans will defeat this. Not on just one front, but on several simultaneously. In a couple of months we'll be planning exactly how we'll proceed.
Dear heavens I hope not. That would mean people haven’t learned a damned thing, and would also mean we’d be back in lockdown quickly (or would regret not doing so).
I don't think right away. There will be segments of the population still wary to go out into public places where you're shoulder to shoulder with others. It'll take time for people to get comfortable with this (or a vaccine is developed).
edit: Sure there will be groups where this will be the case but not enough to cause packed bars.
Restaurants were closing or limiting business before official lockdowns in pretty much every jurisdiction that has had a lockdown. You need to look a week or two before official lockdown dates to see the start of declining business.
The same thing happened with the 2008 housing and financial crisis, millions lost jobs, lost their houses, almost any major city can tell you about the explosion of homelessness during that time and has never been addressed.
A lot of small businesses have a much harder time "just not operating"; it will probably be a long time until local small businesses can come back. It's also unlikely that people will immediately go out as soon as it is deemed safe to do so. Our habits will have changed by then and we already know not to trust the (US) government's ability to accurately tell us when it's safe.
Yeah I think this is a bit of an artificial recession in that demand hasn't declined for any of the normal reasons, but because people are being forced not to consume.
My guess is that means recovery will be quicker because all of the pent up demand will explode once the restrictions are lifted.
I could be wrong though. I could see a situation where people are skittish and decide to increase their savings long term--less travel, less eating out etc...
Right. I've been noticing on my walks how many Amazon delivery trucks there are, how many Amazon boxes are sitting outside in the trash piles. While people certainly aren't spending money dining out, they're still going HAM with their online shopping.
There's so much doom and gloom in the news, but when I look at the real data I'm not seeing anything that supports the apocalypse predictions.
>> Yeah I think this is a bit of an artificial recession in that demand hasn't declined for any of the normal reasons, but because people are being forced not to consume.
> Right. I've been noticing on my walks how many Amazon delivery trucks there are, how many Amazon boxes are sitting outside in the trash piles. While people certainly aren't spending money dining out, they're still going HAM with their online shopping.
I don't think that observation indicates what you seem to think it does. Amazon's has been scheduling delivery for "non-essential" items far out to April 30th for some time now, and many people have been attempting to shift their retail shopping for essentials to delivery services in order to socially distance to avoid the coronavirus. Those boxes might have had things like toothpaste and diapers that people need to buy, recession or no.
This lockdown has also forced a lot of people to dig into their savings just to pay rent, which is going to be savings they are not going to have coming out of this. Consumer demand may take longer to recover due to this alone in order to rebuild their savings as you mentioned.
There won't be pent-up cash reserves? Because, unemployed for weeks/months. So folks will have to delay purchases. There will be a big bubble following this, which normally is called a recession.
Things are costing more too. And there are extra purchases now. On the other hand, fewer opportunities for discretionary spending. Few are out buying lattes or seeing movies.
Short term, that is mostly the theory. However, there are businesses that will have closed permanently, and the number of them grows day by day. Many restaurants survive on razor thin margins, and a few weeks without revenue can shut them down for good. Additionally, people are getting less money right now and so when things reopen you have a bit of a chicken-and-egg problem where restaurants don't get that many people because people need jobs to go there.
However, the stock market largely shares your optimism at this point.
>a few weeks without revenue can shut them down for good
But what does shut down really mean? They've laid off all their staff, they aren't buying food, so their only major expense is rent.
The hardest thing about opening a restaurant is staying open long enough for people to find out about them, so it's in the landlord's best interest not to evict restaurants that will likely do ok once the restrictions are lifted.
Curiously, I've heard that small-business folks have stopped paying rent! My sister's shop is in a strip mall, and she's the only one who paid the landlord this month. Even the Breugger's Bagel place didn't pay (apparently by corporate decree?!)
It's happening all over my town. Tenants paying 1/2 or nothing.
So folks instantly capitalize on that, by stiffing the landlord? It would never have occurred to me.
One I talked to was even militant about it. "I tried to call him to negotiate something, but he wouldn't answer his phone! So I sent a check for half, and wrote 'paid in full' on it!" Wow.
I know my employer stiffs paying bills, well past net 30, so I can see others doing it. The worst you have to do is pay back-rent. Nothing to lose. In fact, better to delay it and take advantage of the bailout money that can be used for rent and payroll.
It's not like the landlord can just get a new tenant in the current situation.
The market value for retail real estate has collapsed to nearly zero for the short term. As the owner of the property, the landlord is the one who was bearing the risk.
As a businessperson, you can pay full rent on a property you may never be able to reopen, or you can try to keep from being evicted and wait to see what happens later.
If you’re going to fail soon anyway, which I suspect most small businesses are afraid of, you want to minimize your losses.
> The hardest thing about opening a restaurant is staying open long enough for people to find out about them, so it's in the landlord's best interest not to evict restaurants that will likely do ok once the restrictions are lifted.
Have you ever started a restaurant business? You seem to have an overly simplistic view of how things actually work.
Restaurants are really hard to run, 90%+ of them fail in the first year and profits are very slim.
What you are saying is technically true, but is so simplistic that it's absurd. How does this sound? "the hardest part of starting a saas company is staying open long enough for people to find out about them".
Also, rent is usually by far the biggest expense of a restaurant. Current government aid programs don't cover rent (sure 25% of PPP may be used towards rent, but that's a pittance that won't make a difference). Restaurants are going out of business in droves because they can't pay rent.
Can't restaurants file for Chapter 11, restructure their debt (i.e. late rent) and continue operating? Airlines do it all the time. Is the legal expense too high? Will their landlords evict them? Some will, but then they need to find new tenants. Many landlords will probably be willing to work out a deal.
Most landlords are not being open to working out deals as they are holding on to the same optimistic sentiments expressed in so many comments here. They think their properties are very valuable and that they'll find new tenants without too much trouble.
Technically any business can file for chapter 11, but it costs about $100k+ minimum in legal fees (at least in California). Most small businesses cannot afford that.
It will certainly be interesting to see how long it takes landlords to realize that there's about to be a ton of retail space on the market and that trying to absorb a couple months of not collecting rent from their businesses may make them more money in the long run than forcing a business to close and enduring 8/12/24 months of having an empty storefront.
Well, that's exactly what a recession looks like. Almost everyone will be worse off, it's going to be really hard for millions of people and businesses. Even for the large companies that are getting bailed out now.
>What you are saying is technically true, but is so simplistic that it's absurd.
Of course it's simplistic, but it's the primary factor if your choice as a landlord is between forgiving rent for a few months for a proven restaurant, or evicting them and looking for a new unproven tenant.
>Restaurants are going out of business in droves because they can't pay rent.
Again, landlords can forgive rent, and in this situation, it's in their best interest to do so. Sure not all of them, but the smart ones will.
Very true. But in that case it moves up the chain to the bank to forgive mortgage payments, or for the government to hold off on collecting property tax. The same logic holds for them as it does for the landlords. Better to deal with people who are proven to pay in all but the most extreme circumstances.
Fair enough, my assumption has always been that we'll start opening back up in May. If this drags on much longer than that, then who knows. Things could certainly fall into a depression, and that's the pessimistic view.
In the UK we've made considerable changes to NHS community health care in order to release capacity to work on covid-19 in inpatient hospital settings. These changes are expected to last until at least 31st July.
Optimism is essential, though so is pragmatism. Why do you think "we'll start opening back up in May."? And do you think it will be 100% of businesses or a slow and select approach? (assuming US / western region here).
Some politicians have been suggesting we could open up in May, notably the US president. Others have announced extended closures. In the US it's a state by state matter.
> However, there are businesses that will have closed permanently
Businesses might close, but the demand will still return and new businesses will come back. Of little comfort to those who lose their business, but should let workers know that they'll still be demand for their job under another company if not their current.
There will also be some changes in demand that would change businesses, but even then there should be new demand elsewhere.
>demand will still return and new businesses will come back
Elasticity.
The question is when. Is that a month from now, is that 4 months from now? How fast will new businesses be able open. How fast will existing businesses be able to expand into the demand. I think I great many people are thinking the systems are able to grow much faster than they will actually be able to. And this is also making the assumption that the demand will return. When 20% of your population is unemployed and not making an income at all, I don't see them buying much when the floodgates are opened.
I don't see all of the retail jobs coming back. Small stores will go under, maybe even some big chains, and there will be a further shift to online shopping as millions more Americans become accustomed to it.
Retail has been dying for a while, but that just opens up opportunities elsewhere. It's kind of like the nail salon boom: retail has been dying, but nail salons have been booming (pre-shutdown)[0]. I've been noticing for a while in NYC there's a huge supply glut of ground level retail. Lots of for lease signs in vacant spaces (pre-shutdown). In my apartment building, the ground floor space has been vacant with a for lease sign for 3 years (and I live on 5th Ave in NoMad, which is prime retail).
Interesting. Also a noticeable supply prime CRE empty for a long time before CV19 in my neck of the 'prime location' woods.
That asset class has been totally inflated beyond bubble in the past 5 years IMO and will never return to the same levels of occupancy (or $/sf rates).
A common theme is that crisis just accelerate what's already happening. Old school retail has been slowly dying for awhile and the death has been accelerated. Things like restaurants have been growing in popularity so when the lockdown ends I expect those to do well again. Even on the personal level, there are more babies born and divorces post crisis.
One that I haven't figured out yet is the NFL. I know they have been making record money, but head injuries has slowed down the feed of talent. If sports are canceled until next year, does this accelerate a move to a different nationally popular sport? Unlikely, but something I've been thinking about.
The only thing I've casually observed is how non-essential professional sports actually are in America. Sure, public sporting events are part of the fabric by now, but just like entertainment and celebrities are low this list of what actually matters when push comes to shove (and is worth paying attention to).
I enjoy playing sports, but watching them is not a requirement for me. But, I have friends who were/are devastated that March Madness didn't happen. And I have an overlapping other set of friends who will feel the same way if college football doesn't start in the fall.
Are they essential like food? No, but probably essential like socializing is after awhile.
We will see a sharp uptick in new business failures - all those that opened into this climate with empty showrooms and blank customer lists. They won't be hiring.
Even some big companies will retool around automation I imagine - to survive. Those jobs will never come back.
Anyone looking for a job after this is 'over' will be shoulder to shoulder with 20M other people doing the same thing. Its going to be rough.
"Even some big companies will retool around automation I imagine - to survive. Those jobs will never come back. Anyone looking for a job after this is 'over' will be shoulder to shoulder with 20M other people doing the same thing. Its going to be rough. "
Wholly agree - automation/robotics/AI is a net winner in the end; wage suppression for those jobs that may return caused by increased (abundant?) labor supply.
Most creative/dev freelancers I know who are getting work are not systematically increasing their rates like they used to be only a month or so ago, instead flat at best, and worse, competing more now which drives rates down.
I'd like to be optimistic about the recovery but for those locations that do go under (retail, restaurants, etc) there will be replacements but I have a feeling new tenants will take a long time to fill those empty locations. I think people will be wary to put their money into a new business not knowing what the next year will look like.
You start paying someone's unemployment the second you hire them, because most states require unemployment insurance by law. You don't suddenly get a new bill when someone is let go, You've already paid.
“Nevada uses the "Reserve Ratio" formula to determine previous experience, which is the method used by a majority of the states. The Employment Security Division maintains a permanent "Experience Record" for each employer, consisting of accumulated taxes paid, accumulated benefits charged to his account, and average taxable payroll for the prior 3 years. Each year, the employer's reserve ratio is calculated from his experience record to determine his tax rate under the schedule in effect.”
>You don't suddenly get a new bill when someone is let go
The link you provided mentioned that an employer may/will have to pay a higher percentage of unemployment payroll insurance/tax after more former employees collect unemployment. Their rate goes up based on how many employees they lay off.
I realize this isn't exactly what the comment you were applying to was talking about, but I thought it was interesting. I knew there was some reason that employers don't want their ex-employees to receive unemployment.
The problem is this assumes that the businesses that employ these hourly workers can snap their fingers one day and Tada, be open.
The problem is that businesses can only be operating if the businesses they depend on upstream and downstream are open. Restaurants can't open until they get their food restocked, but restaurant suppliers haven't been stocking at their previous levels because they haven't had customers. Restaurants also may not be able to go back to 100% capacity in order to spread people out, which means the restaurants won't make enough money to warrant the number of servers and cooks they had previously. Restaurants may not even be able to afford to re-open or pay the same number of staff even if business warrants it because of built up backpayments on rent and accounts payables.
This isn't just a food service industry problem. What about movie theaters? Theaters attendance had heavily declined before shelter in place directives caused them to close. They aren't going to open to full capacity and need the whole staff they originally had.
Have an IT consulting shop? I know several who had their services (both commercial and residential) dry up because companies didn't want to incur extra expenditures and house holds were scared because of unemployment and getting less PC problems diagnosed or buying less hardware. The IT shop can't staff back up until their customers starts coming back.
Hotels won't need to rehire a lot of their cleaning crews until their occupancy rates go back up. Same with airline and airport staff, and indications do not show that people will be willing to travel immediately once lock downs are gone.
etc...
Every part of our economy is dependent on each other, and even if we had everyone vaccinated today there would still be significant spin-up time until we even halve the unemployment rate.
Instead of a V recovery, think of it as a flipped check mark. Once lockdown ends there will be quick partial recovery (we've already seen some of that in the stock market), and then we'll find out fully which industries are not coming back for awhile if ever (brick and mortar, commercial RE, etc...)
Good point. Something I mentioned in another post was that crisis accelerate what's already happening. Is this move to service/pick up a pivot that can save brick and mortar? At some point Amazon will adjust though. It's interesting to watch happen.
1) most Americans can’t afford an unexpected $400 expense. This multi-month lockdown will be much more than that. I doubt landlords will simply forgive rent, so any Americans will owe several months of rent without any revenue. That will mean several months of no disposable income to go spend at a bar or a restaurant. That means small businesses like those will suffer longer than essential staples like grocery stores.
2) Travel And tourism are dead and will be dead until a vaccine is available. Are you going to risk getting sick in a foreign country, especially when travel insurance likely won’t cover pandemics anymore? Tourism is definitely a large source of revenue for bars and restaurants will be a huge impairment on revenues as well.
3) People aren’t necessarily going to come back to the same jobs post-coronavirus. They might flock to jobs that pay better or have better health benefits. There might be a significant delay in getting staff up and running or they may need to pay higher wages.
4) more to point 1, many people have multiple part time jobs to afford to live. Losing even one of those jobs will affect them deeply. If they can’t replace their income or get those same number of jobs post-coronavirus, their spending will also be curtailed.
All of these contribute to lower revenues for business owners once the economy “starts back up”. I don’t think it will be a fast recovery. A lot of people will be financially hurt for a while. Owners will need some very thick skin and deep pockets to wait out for revenues to come back. Some may see impaired revenues for months longer, which probably isn’t enough to keep the business afloat.
Except: The actual statistic is that when asked if they could cover an unexpected 400$ bill - 40% of Americans responded that they would sell something to pay it OR couldn’t pay it
Secondly the survey itself admits that it had an, “oversample of individuals with a household income less than $40,000 per year”
Even your source says a minority of Americans (even though it again, cherry picks from that study).
The actual statistic is that when asked if they could cover an unexpected 400$ bill - 40% of Americans responded that they would sell something to help pay it OR couldn’t pay it.
Secondly the survey itself admits that it had an, “oversample of individuals with a household income less than $40,000 per year”
1) source on that? AFAIK the number just means how much americans have in liquid cash.
2) Why would Tracel Insurance not cover pandemics? Mine did and will continue to cover it.
3) What's your logic with that the delay? This is over 5M people unemployed, and the extra stimulus will end at some point. If they want to keep their lifestyle they can't afford to wait for a higher paying job
1) doesn’t say most Americans and doesn’t even cite the full response (nor does it provide context for the question in the survey).
The actual statistic is that when asked if they could cover an unexpected 400$ bill - 40% of Americans in this survey responded that they would sell something to help pay it OR couldn’t pay it. We don’t know how many said they couldn’t and we don’t know why those who said they would sell something said that.
Secondly the survey itself admits that it had an, “oversample of individuals with a household income less than $40,000 per year”
Did you read your own link?
>Four in 10 adults, if faced with an unexpected
expense of $400, would either not be able to cover
it or would cover it by selling something or bor-
rowing money.
So exactly like I said, 40% don't have liquid cash of over 400$ consistently on their bank accounts.
That means it's not bound to be an I come problem, but might be a symptom of the ease of debt/credit in modern times.
"Travel And tourism are dead and will be dead until a vaccine is available."
I don't understand the emphasis so many people place on a vaccine (which may never be created). SARS ended without a vaccine. MERS never crippled international travel. Both are coronaviruses and vaccines could not be developed for either. The Spanish Flu, which was vastly more devastating than even our worst projections for COVID-19, ended without a vaccine.
Vaccines for SARS were not developed because grants dried up because the virus died off so researchers stopped working on a vaccine. By all accounts, a vaccine for coronavirus is probable since it doesn’t mutate that quickly.
The world was not nearly as interconnected as it is now. So the virus spreads faster and disrupts supply chains and economies much easier. Tourism is also a much bigger part of economies now.
People keep comparing this to the Spanish flu, but there was a big difference between this and the Spanish flu: most people who died from Spanish flu actually died from bacterial infections and other complications. Back then, antibiotics weren't really a thing yet.
I don't like the comparisons to the Spanish Fly either, but we need to keep in mind that a vaccine is one speculative way this could end. People increasingly refer to it as inevitability.
I think the major miscalculation you’re making here is that business will magically return to these places as soon as things open back up.
People are not going to patronize restaurants and bars as long as the risk of infection remains high. If half of people stay home due to Covid and the other half don’t care, most businesses won’t be able to sustain. A quick recovery is completely dependent on full economic participation, particularly by those lucky enough to still have jobs.
The US still has no scalable testing system, despite being promised one over a month ago, and we still don’t yet know if Covid can reinfect people. Opening back up without testing puts small businesses at risk by asking them to start spending money to open back up with no guarantee business will come back. If that happens, the government will have more people to bail out.
Our governor talks of opening restaurants with fewer tables. That's pretty much a no-go, they rely on filling all the tables and then its thin margins. Running half a restaurant with full overhead? Nope.
If you pay rent on your building you pay the same rate all the time, even if you're not open.
If you open up, the cost of powering your appliances, lighting, heating, etc. is all essentially the same whether or not you feeding 100 people a day or 1000.
"If you pay rent on your building you pay the same rate all the time, even if you're not open."
You are correct that the rate is constant, but it can be constantly low to the point that it's feasible to only be open during select hours/times. Plenty of restaurants are only open for one course each day, say breakfast or dinner. And in the future, when it comes to 'reopening' - many restaurants which were previously 'full service' will have no choice but to scale back and start small again.
"If you open up, the cost of powering your appliances, lighting, heating, etc. is all essentially the same whether or not you feeding 100 people a day or 1000."
It is not essentially the same at all. These are variable energy costs than can and will fluctuate based on usage tied to controls such as hours of operation and number of customers served during said time.
Obvious examples are gas as a cooking source that varies a lot depending on whether cooking for 100 or 1,000. Others, like electrical, can vary based on which physical sections of a restaurant are open (or not). On a slow day, it's not uncommon for a portion of an establishment to be closed off to conserve energy resources like HVAC.
Most service establishments operate on razor thin margins that sustain only on regular business activity, so being forced to pay the same amount of rent while doing only half of one’s normal business is not typically feasible.
I’m not really sure what is subjective about that.
"Big assembly-line restaurants don't work with half the kitchen staff missing."
Sure they can, I've experienced it firsthand circa 2007-2009.
"Little diners can't hire half a cook."
In the 'little diner' scenario, often times the host is the server is the cook is the owner - sometimes its equivalent to 25% cook.
"There is some wiggle room. Fewer waitstaff, but they're the least paid anyway. So maybe not full overhead, but near enough to make no difference."
There's double-digit wiggle room.
I'm not suggesting that any of the above is ideal or easy, but it can and will be done by those who want to succeed given the opportunity. Some Restaurateurs are among the best entrepreneurs around.
I would imagine opening a restaurant and filling half the tables is better than a closed restaurant and no tables. Yea, margins are thin even when all tables are full but I'm sure they could negotiate on overhead costs + the loans from the government can help. In many cities I would be a lot of people would be willing to go out to eat once the ban is lifted - one for the experience, two so they don't have to cook anymore, and three to support their local businesses.
> People are not going to patronize restaurants and bars as long as the risk of infection remains high.
It's not even that. People's spending habits have and will change drastically (those who still have incomes). And those who were put out of work will be playing financial catch-up once they obtain new employment and are very unlikely to patronize bars, etc at the same rates they used to.
We also have to consider that people who do keep their jobs already are or will likely be supporting family members and friends in need with their excess cash for a while (the cash they would typically spend at the bar, etc).
Additionally, those with jobs who can are going to continue saving their money at higher rates than before (which is currently happening despite the risk of inflation and/or low negative interest rates). At least, this is how I've changed my habits.
I'm in Virginia right now (near DC) and most people appear to be going about their lives like nothing happened. I'm also not worried, I think the whole thing is largely mass hysteria and blown wildly out of proportion.
There's a doomsday pandemic narrative that some people are trying to push, but I think there's a significant portion of the population that simply does not care and isn't worried.
Of course, trying to have a real discussion about this on the internet is hopeless because people downvote anything they dislike or don't agree with. Facts don't matter, and this whole virus mania is the greatest example of facts not mattering I've ever witnessed.
You very well may be correct, but I'd like to point out that for a broader sense of "doomsday narrative", living in or near DC while the rest of the US crumbles would be a lot like living in Rome when the Germanic tribes were overrunning the Empire's frontiers. DC is the absolute best place to be during an American empire collapse - until, of course, the very end.
I actually live in NYC, I'm just in DC for a few weeks (have already been here a while). When I left NYC it was very quiet, not at all like it is here. I left before things got really crazy.
Idk, haven't been on freeways, but stopped by Home Depot today for some plumbing parts (curbside pickup) and I've never seen it so busy in my entire life.
fwiw, my wife's uncle is now on a ventilator due to covid, and he has traced it back to going to our local Home Depot. He also believed it was "blown out of proportion". ymmv.
I'm genuinely confused how anyone in tech can honestly believe that this is only effecting hourly workers. That was certainly true for the first week but if my linkedin is any indicator last week was a blood bath for many startups. I can easily name 5 companies in my area that had greater than 20% layoffs just last week.
Google is already making the call to slow down hiring. Each week from here on out we are going to continue to see this impact more and more people in more secure jobs become effected. This will remain true even as the pandemic eases up.
Startups being the key word. There's much more to tech than startups, and the picture outside of them is significantly more mixed. Google has slowed, but Facebook has accelerated. Etc.
Obviously things will differ greatly from industry to industry and company to company, but you're lying to yourself if you think this is going to end at startups. It takes a bit of time for dominoes to fall, but as the various factors such as consumer spending, B2B spending, supply-chain issues, etc. begin to ripple out the waves will effect more and more companies.
I unfortunately disagree with this. Restaurants operate on thin margins. They are currently closed so all of the food, etc is likely waste. On top of that they are going to be months in arrears on rent and fees to their vendors. Many of those vendors are going to be months in arrears to their own employees, vendors etc. In order to open back up, pay rent / vendors and employees they are going to each need a large cash infusion. They cant just open, and hope that customers come back, if they do that they wont be able to pay the employees on payday. Many of them are likely done for good. Not to say other things wont replace them.
Regarding most of these people being hourly, I think that is not correct. Lots are but there are tons of startups, unicorns and publicly traded companies laying off 20+ % of their employees. Travel companies are slashing their backend salaried work force. Many of these companies are going to learn they can operate painfully but still operate with a greatly reduced workforce, boosting the bottom line and increasing share holder value. The remaining employees will be tasked to do work previously done by several employees and will not receive additional compensation for it.
On top of that, until we have a vaccine, many people are simply not going to go out and spend money in public.
I appreciate your optimism though and very much hope you are right. I could be completely wrong though, stock market seems to think I am. Every 5 million people laid off is a 5% rally on the S&P.
Personal opinion: We have tilted business too far towards 'share holder value' and C-suite compensation and away from treating employees like real people with lives. The cycle will continue until this changes. We are berating individuals for not having savings but giving these massive corporations a pass and massive bailout. I think we need to fundamentally change what it means to be a publicly traded company in this country.
Opinion note 2: A monthly efficient, meaningful and importantly, universal government injection of cash into households for the next several months could spur a massive recovery and is likely the best solution.
Require a % of stocks be distributed to employees.
Allow them to vote as a shareholder block.
Limit C-suite pay to a multiple of employee pay.
Eliminate golden parachutes.
Tie C-Suite compensation to some metric measuring employee quality of life.
The impact changes in consumer behavior will have on business models that employ hourly wage earners is unknown and difficult to model especially in the absence of a vaccine. The value in sharing a car ride to go out for the evening, attending a concert or sporting event, or living in large, (formerly) convenient, densely populated areas is being reevaluated by consumers no matter how much money the federal reserve puts into circulation to bolster these potentially antiquated practices.
The thought of dying, being intubated or having long term respiratory problems that elevate your risk for future medical complications is part of the calculation now.
The upside I see is the amount of money people who are working are saving now that there is much less to consume, though this changes behavior as well.
I like your idealism and hope you're right but have a feeling we've quarantined ourselves AND our economy. When things open back up again it's going to be brutal.
"it's worth considering that most of these people are probably hourly wage earners"
I'll consider your unpopular opinion because it's healthy to think about a range of scenarios...though curious to know why your optimism operates on this premise?
It's usually easy to hire/train hourly employees because they are less specialized. Hiring someone to wait tables is much easier than hiring a software engineer.
> The businesses themselves (restaurants, retail, etc) haven't gone anywhere, they're just not operating. Yes there will be some bankruptcies, but those companies will restructure, assets will be sold, and something else will pop up in place.
I personally know of dozens of small businesses that have closed for good. You can also go on Reddit and check the small businesses subs for a reality check. Small business owners and employees are hurting really bad and government aid has pretty much failed them.
It also seems you are thinking of small businesses as if they were large corporations that can file for chapter 11 and simply restructure. Small businesses and their owners cannot afford that, they usually close down out of court or file for chapter 7, which implies a total shut down and liquidation of their business at a loss. The business owners will be ruined and most likely won't be able to start a new business for years, if ever. And in these uncertain times, it's very doubtful anyone will want to take their place for a while.
Honestly it seems to me you are so far removed from these people, businesses and their actual lives, that you are out of touch with reality. I find your lack of empathy appalling.
This supply side argument could also be made for the great recession and great depression. But obviously those still happened.
Historically when lots of companies file for bankruptcy and large swathes of the work force are laid off we enter a recession/depression. And they've all been stickier than your comment suggests.
A lot of this is timing on reopening and how consumers are doing. If you just naively assumed a 1:1 fire to rehire ratio on some time window, there's still an extreme amount of friction involved in rebalancing that to previous levels. Spending is not going to magically bounce back to normal as anyone who had their mortgage or rent frozen is going to have to pay that back in a few months. Or just pay down credit card debt that they racked up. There's a lot of good data out there showing that savings rates (that has a massive effect on consumer spending) go way up during recessions/depressions and I wouldn't expect that to be any different.
I also wouldn't assume that there won't be further layoffs later in the year that hit salaried workers. Airlines are almost certainly going to do massive layoffs as soon as their federal programs expire in October and a huge portion of those people are going to be competing for hourly jobs.
Then think about how many people are going to get laid off after their employer starts monitoring VPN traffic and fully realizes that a good 20-30% of their workforce does nothing all day.
And those are just the people who filed for unemployment. Based on my experience of being a young person looking for work around the 2008 crash, I imagine there are millions of young people who want to work but won't find any, so they will simply move in with mom and dad. The total "unemployment" is almost certainly much higher than 14%.
I understand from the perspective of competence why the US wasn’t able to freeze mortgages/rents and absorb payrolls as other countries have, but it really seems like they missed their shot to save Capitalism.
Millions upon millions of unemployed people, many watching their friends and family die from disease, a psychotic, entrenched politics, that caters primarily to corrupt elites...
Historically, things don’t go very well from here.
Save capitalism? I think that is a great over reaction, the Great Depression, crash of 87, nor of 2008 stopped it. So I am quite certain this will be but a hiccup when we look back 10 years from now.
We’re heading beyond Great Depression territory and that was only stabilized by massive social democratic interventions in the form of the New Deal. People like to forget how popular both fascism and communism became in the US during this period.
The CARES Act has a provision regarding mortgage payments that basically requires that federally backed mortgages be frozen for up to 6 months, should the payee request it and claim to be impacted by COVID-19.
>absorb payrolls as other countries have
CARES Act has $350 Billion set aside for small business payroll expenses. There are separate provisions for Airlines, other specific industries.
Furthermore, the CARES Act has extended and expanded unemployment benefits to anyone impacted by COVID, and has temporarily grown the benefit by $600/week, meaning that unemployment benefits are now total wage replacement (or better) for the median American.
...and go read about how all of that is being dispersed and implemented. Unemployment systems overwhelmed, the SBA fund is running dry and many still not know how to get over the bureaucratic hurdles, most mortgages are not federally-backed.
It would’ve been more efficient and avoided the disastrous consequences of poor implementation to just do blanket payments and freezes.
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[ 3.0 ms ] story [ 195 ms ] threadDead cat bounce and then stagflation?
Because, to your point, a restaurant can't just rehire all the chefs and cooks and waitstaff and go buy food and pay all of its overhead on day 1 with out some sort of influx of cash and guarantee of cashflow to service debt. And I'm assuming that model scales to larger industries as well.
One thing is that to a certain extent an economy is psychological. Yes, certain things are physical realities (such as crop yields) or political realities (e.g. states of war) or legal realities (like regulations against selling homemade beer), but a lot else is purely based on sentiment. And it doesn’t matter how good reality is if people think it’s bad: they won’t act in the market more than they must to survive, and it will actually be a bad market, even if the fundamentals justify a good one — at least for awhile, until enough contrarians seek to take advantage of good prices (a kind of sentiment arbitrage, I suppose).
But something I worry about even more is well-intended interventions which make things worse and prolong the poor economy. There’s precedent for this in history: the Smoot-Hawley Tariff Act was intended to alleviate the Great Depression but instead exacerbated it. Specifically, I can think of laws against so-called ‘price-gouging’ (which is a myth: no-one in all of human history has ever paid more for something than he felt it was worth to him at the time he bought it, because whenever anyone feels the all-in price for something is more than the all-in value … he doesn’t buy it): by interfering with the price mechanism which is the fundamental method for economic actors to bid for their needs and desires to be met, it will result in less-efficient allocation of resources (capital and labour) across the entire market. This misinvestment will by definition lead to a poorer economy than would otherwise be the case.
You're laying on the operating table in the ER with a heart attack. Surgeon says, "OK before we put you under, in compensation I want 70% of your income for the rest of your life, or I'm not doing this. Deal?"
Ah, so you believe that medical care should bankrupt an individual every time they use it because it is priceless.
When an economic crisis comes along they get canned and the business realizes that they weren't actually needed. When the good times come back they don't hire those employees back. They continue operating with a smaller staff and pocket the extra profit.
- There's not enough tests still - People are scared of doing anything even if stores open up - Most importantly, sales just don't magically appear with the snap of your fingers, takes time to ramp up again - Companies are still heavily on only essential spending, that doesn't change overnight
They're talking no public events til 2021 now. I think the realization is that this isn't just a 1-2mo ordeal. It's going to be a 1-2yr shift.
This is what happens when captains of the industry ignore pretty much any pandemic model that has been release in the last 50 years. Unless everyone catches it instantly and the whole process is over quick (which leads to massive death and long term economic impact), that it always takes a year or two of massive public change and a vaccine to get beyond the pandemic.
Essentially the rest of the world has caught up with where the epidemiologists were in January.
I don't feel safe.
If someone has a strong case for why this isn't true, I'd love to hear it, but it's my current working thesis and I haven't been convinced otherwise. I know it's unpopular because of politics and such, but I'm optimistic about recovery.
There won’t be a clear end date, even in retrospect.
Further, inoculation can occur much sooner. That is, introducing antibodies obtained from recovered folk, into vulnerable folk. This is nearing deployment right now.
Don't be a wet blanket. Its not all bleak.
Other coronaviruses, which are seasonal, have a reinfection rate of 30%.
More studies are needed, obviously, but dismissing real risks as “wet blankets” is extremely foolish.
A reinfection rate of 30% seems bad. How does that translate to an R0 I wonder.
For reasons currently unknown to science, exposure to some diseases confers lifelong immunity (chickenpox) but does not for other diseases (Flu, coronavirus, various types of common cold).
We’re actually starting to see the first reinfections of COVID-19 patients.
Let’s hope we solve this virus (for whatever definition applies; we’re not particularly good at solving viruses) and apply some of that same effort to dengue before the world gets much warmer and it spreads.
There's plenty of possible outcomes and I see no reason to assume any given one is more likely than any other at this point.
Yes, yes, they might happen. But the likely scenario is, with 1M people working on a dozen fronts, that modern intelligent educated humans will defeat this. Not on just one front, but on several simultaneously. In a couple of months we'll be planning exactly how we'll proceed.
edit: Sure there will be groups where this will be the case but not enough to cause packed bars.
The US had a > 90% decline in bookings by March 18. California was one of the more aggressive places with issuing a statewide lockdown, but that didn't happen until March 19: https://abc7news.com/timeline-of-coronavirus-us-coronvirus-b...
Uh, not to get too dark here, but that's definetly happening to some people.
The same thing happened with the 2008 housing and financial crisis, millions lost jobs, lost their houses, almost any major city can tell you about the explosion of homelessness during that time and has never been addressed.
My guess is that means recovery will be quicker because all of the pent up demand will explode once the restrictions are lifted.
I could be wrong though. I could see a situation where people are skittish and decide to increase their savings long term--less travel, less eating out etc...
There's so much doom and gloom in the news, but when I look at the real data I'm not seeing anything that supports the apocalypse predictions.
> Right. I've been noticing on my walks how many Amazon delivery trucks there are, how many Amazon boxes are sitting outside in the trash piles. While people certainly aren't spending money dining out, they're still going HAM with their online shopping.
I don't think that observation indicates what you seem to think it does. Amazon's has been scheduling delivery for "non-essential" items far out to April 30th for some time now, and many people have been attempting to shift their retail shopping for essentials to delivery services in order to socially distance to avoid the coronavirus. Those boxes might have had things like toothpaste and diapers that people need to buy, recession or no.
They still have many non-essential items available for delivery in a few days, and you be surprised what is considered essential.
I know several service industry people who are making more on unemployment now thanks to the extra federal money than they were while working.
Add to that the fact that they aren't eating out, traveling etc... and their savings are doing better now than they were.
This definitely isn't the same everywhere, and higher income people will be making a lot less. But lower income spend faster anyway.
I guess we'll see.
However, the stock market largely shares your optimism at this point.
But what does shut down really mean? They've laid off all their staff, they aren't buying food, so their only major expense is rent.
The hardest thing about opening a restaurant is staying open long enough for people to find out about them, so it's in the landlord's best interest not to evict restaurants that will likely do ok once the restrictions are lifted.
It's happening all over my town. Tenants paying 1/2 or nothing.
One I talked to was even militant about it. "I tried to call him to negotiate something, but he wouldn't answer his phone! So I sent a check for half, and wrote 'paid in full' on it!" Wow.
The market value for retail real estate has collapsed to nearly zero for the short term. As the owner of the property, the landlord is the one who was bearing the risk.
If you’re going to fail soon anyway, which I suspect most small businesses are afraid of, you want to minimize your losses.
Have you ever started a restaurant business? You seem to have an overly simplistic view of how things actually work.
Restaurants are really hard to run, 90%+ of them fail in the first year and profits are very slim.
What you are saying is technically true, but is so simplistic that it's absurd. How does this sound? "the hardest part of starting a saas company is staying open long enough for people to find out about them".
Also, rent is usually by far the biggest expense of a restaurant. Current government aid programs don't cover rent (sure 25% of PPP may be used towards rent, but that's a pittance that won't make a difference). Restaurants are going out of business in droves because they can't pay rent.
Technically any business can file for chapter 11, but it costs about $100k+ minimum in legal fees (at least in California). Most small businesses cannot afford that.
Of course it's simplistic, but it's the primary factor if your choice as a landlord is between forgiving rent for a few months for a proven restaurant, or evicting them and looking for a new unproven tenant.
>Restaurants are going out of business in droves because they can't pay rent.
Again, landlords can forgive rent, and in this situation, it's in their best interest to do so. Sure not all of them, but the smart ones will.
I'm still optimistic.
https://mcusercontent.com/69607e85dd2b3ddde59bac2b6/files/72...
Maybe the US has enough beds to cope with opening things up as early as the end of May, but I find that surprising.
Businesses might close, but the demand will still return and new businesses will come back. Of little comfort to those who lose their business, but should let workers know that they'll still be demand for their job under another company if not their current.
There will also be some changes in demand that would change businesses, but even then there should be new demand elsewhere.
Elasticity.
The question is when. Is that a month from now, is that 4 months from now? How fast will new businesses be able open. How fast will existing businesses be able to expand into the demand. I think I great many people are thinking the systems are able to grow much faster than they will actually be able to. And this is also making the assumption that the demand will return. When 20% of your population is unemployed and not making an income at all, I don't see them buying much when the floodgates are opened.
[0]: https://fee.org/articles/the-salon-boom-is-actually-good-for...
That asset class has been totally inflated beyond bubble in the past 5 years IMO and will never return to the same levels of occupancy (or $/sf rates).
One that I haven't figured out yet is the NFL. I know they have been making record money, but head injuries has slowed down the feed of talent. If sports are canceled until next year, does this accelerate a move to a different nationally popular sport? Unlikely, but something I've been thinking about.
Are they essential like food? No, but probably essential like socializing is after awhile.
Even some big companies will retool around automation I imagine - to survive. Those jobs will never come back.
Anyone looking for a job after this is 'over' will be shoulder to shoulder with 20M other people doing the same thing. Its going to be rough.
Wholly agree - automation/robotics/AI is a net winner in the end; wage suppression for those jobs that may return caused by increased (abundant?) labor supply.
Most creative/dev freelancers I know who are getting work are not systematically increasing their rates like they used to be only a month or so ago, instead flat at best, and worse, competing more now which drives rates down.
edit: spelling
https://smallbusiness.chron.com/employee-files-unemployment-...
“Nevada uses the "Reserve Ratio" formula to determine previous experience, which is the method used by a majority of the states. The Employment Security Division maintains a permanent "Experience Record" for each employer, consisting of accumulated taxes paid, accumulated benefits charged to his account, and average taxable payroll for the prior 3 years. Each year, the employer's reserve ratio is calculated from his experience record to determine his tax rate under the schedule in effect.”
http://ui.nv.gov/ESSHTML/ui_information.htm
The link you provided mentioned that an employer may/will have to pay a higher percentage of unemployment payroll insurance/tax after more former employees collect unemployment. Their rate goes up based on how many employees they lay off.
I realize this isn't exactly what the comment you were applying to was talking about, but I thought it was interesting. I knew there was some reason that employers don't want their ex-employees to receive unemployment.
The problem is that businesses can only be operating if the businesses they depend on upstream and downstream are open. Restaurants can't open until they get their food restocked, but restaurant suppliers haven't been stocking at their previous levels because they haven't had customers. Restaurants also may not be able to go back to 100% capacity in order to spread people out, which means the restaurants won't make enough money to warrant the number of servers and cooks they had previously. Restaurants may not even be able to afford to re-open or pay the same number of staff even if business warrants it because of built up backpayments on rent and accounts payables.
This isn't just a food service industry problem. What about movie theaters? Theaters attendance had heavily declined before shelter in place directives caused them to close. They aren't going to open to full capacity and need the whole staff they originally had.
Have an IT consulting shop? I know several who had their services (both commercial and residential) dry up because companies didn't want to incur extra expenditures and house holds were scared because of unemployment and getting less PC problems diagnosed or buying less hardware. The IT shop can't staff back up until their customers starts coming back.
Hotels won't need to rehire a lot of their cleaning crews until their occupancy rates go back up. Same with airline and airport staff, and indications do not show that people will be willing to travel immediately once lock downs are gone.
etc...
Every part of our economy is dependent on each other, and even if we had everyone vaccinated today there would still be significant spin-up time until we even halve the unemployment rate.
1) most Americans can’t afford an unexpected $400 expense. This multi-month lockdown will be much more than that. I doubt landlords will simply forgive rent, so any Americans will owe several months of rent without any revenue. That will mean several months of no disposable income to go spend at a bar or a restaurant. That means small businesses like those will suffer longer than essential staples like grocery stores.
2) Travel And tourism are dead and will be dead until a vaccine is available. Are you going to risk getting sick in a foreign country, especially when travel insurance likely won’t cover pandemics anymore? Tourism is definitely a large source of revenue for bars and restaurants will be a huge impairment on revenues as well.
3) People aren’t necessarily going to come back to the same jobs post-coronavirus. They might flock to jobs that pay better or have better health benefits. There might be a significant delay in getting staff up and running or they may need to pay higher wages.
4) more to point 1, many people have multiple part time jobs to afford to live. Losing even one of those jobs will affect them deeply. If they can’t replace their income or get those same number of jobs post-coronavirus, their spending will also be curtailed.
All of these contribute to lower revenues for business owners once the economy “starts back up”. I don’t think it will be a fast recovery. A lot of people will be financially hurt for a while. Owners will need some very thick skin and deep pockets to wait out for revenues to come back. Some may see impaired revenues for months longer, which probably isn’t enough to keep the business afloat.
This is just not true despite the fact that a few media sources twisted a statement from the reserve board a while back.
Here is a fact that may help provide some context: The median net worth of a us household is $97,300.
Secondly the survey itself admits that it had an, “oversample of individuals with a household income less than $40,000 per year”
https://www.federalreserve.gov/publications/files/2017-repor...
https://www.cnbc.com/2019/07/20/heres-why-so-many-americans-...
The actual statistic is that when asked if they could cover an unexpected 400$ bill - 40% of Americans responded that they would sell something to help pay it OR couldn’t pay it.
Secondly the survey itself admits that it had an, “oversample of individuals with a household income less than $40,000 per year”
https://www.federalreserve.gov/publications/files/2017-repor...
2) Why would Tracel Insurance not cover pandemics? Mine did and will continue to cover it.
3) What's your logic with that the delay? This is over 5M people unemployed, and the extra stimulus will end at some point. If they want to keep their lifestyle they can't afford to wait for a higher paying job
2) travel insurance started to deny pandemic claims. Your travel insurance might have covered it now, it won’t cover it by next year.
https://www.aarp.org/travel/travel-tips/safety/info-2020/ins...
3) I don’t know how your point contradicts mine. Also it’s 22M unemployed now, not 5M.
The actual statistic is that when asked if they could cover an unexpected 400$ bill - 40% of Americans in this survey responded that they would sell something to help pay it OR couldn’t pay it. We don’t know how many said they couldn’t and we don’t know why those who said they would sell something said that.
Secondly the survey itself admits that it had an, “oversample of individuals with a household income less than $40,000 per year”
https://www.federalreserve.gov/publications/files/2017-repor...
The same survey also found:
“74 percent of adults said they were either doing okay or living comfortably in 2017“
So exactly like I said, 40% don't have liquid cash of over 400$ consistently on their bank accounts.
That means it's not bound to be an I come problem, but might be a symptom of the ease of debt/credit in modern times.
I don't understand the emphasis so many people place on a vaccine (which may never be created). SARS ended without a vaccine. MERS never crippled international travel. Both are coronaviruses and vaccines could not be developed for either. The Spanish Flu, which was vastly more devastating than even our worst projections for COVID-19, ended without a vaccine.
The world was not nearly as interconnected as it is now. So the virus spreads faster and disrupts supply chains and economies much easier. Tourism is also a much bigger part of economies now.
People are not going to patronize restaurants and bars as long as the risk of infection remains high. If half of people stay home due to Covid and the other half don’t care, most businesses won’t be able to sustain. A quick recovery is completely dependent on full economic participation, particularly by those lucky enough to still have jobs.
The US still has no scalable testing system, despite being promised one over a month ago, and we still don’t yet know if Covid can reinfect people. Opening back up without testing puts small businesses at risk by asking them to start spending money to open back up with no guarantee business will come back. If that happens, the government will have more people to bail out.
Why would you assume that they would have full overhead upon re-opening?
If you open up, the cost of powering your appliances, lighting, heating, etc. is all essentially the same whether or not you feeding 100 people a day or 1000.
You are correct that the rate is constant, but it can be constantly low to the point that it's feasible to only be open during select hours/times. Plenty of restaurants are only open for one course each day, say breakfast or dinner. And in the future, when it comes to 'reopening' - many restaurants which were previously 'full service' will have no choice but to scale back and start small again.
"If you open up, the cost of powering your appliances, lighting, heating, etc. is all essentially the same whether or not you feeding 100 people a day or 1000."
It is not essentially the same at all. These are variable energy costs than can and will fluctuate based on usage tied to controls such as hours of operation and number of customers served during said time.
Obvious examples are gas as a cooking source that varies a lot depending on whether cooking for 100 or 1,000. Others, like electrical, can vary based on which physical sections of a restaurant are open (or not). On a slow day, it's not uncommon for a portion of an establishment to be closed off to conserve energy resources like HVAC.
I’m not really sure what is subjective about that.
And what's subjective are these concepts like "hard" or "easy" - a lease agreement is definitely an objective instrument by design.
Little diners can't hire half a cook.
There is some wiggle room. Fewer waitstaff, but they're the least paid anyway. So maybe not full overhead, but near enough to make no difference.
Sure they can, I've experienced it firsthand circa 2007-2009.
"Little diners can't hire half a cook."
In the 'little diner' scenario, often times the host is the server is the cook is the owner - sometimes its equivalent to 25% cook.
"There is some wiggle room. Fewer waitstaff, but they're the least paid anyway. So maybe not full overhead, but near enough to make no difference."
There's double-digit wiggle room.
I'm not suggesting that any of the above is ideal or easy, but it can and will be done by those who want to succeed given the opportunity. Some Restaurateurs are among the best entrepreneurs around.
It's not even that. People's spending habits have and will change drastically (those who still have incomes). And those who were put out of work will be playing financial catch-up once they obtain new employment and are very unlikely to patronize bars, etc at the same rates they used to.
We also have to consider that people who do keep their jobs already are or will likely be supporting family members and friends in need with their excess cash for a while (the cash they would typically spend at the bar, etc).
Additionally, those with jobs who can are going to continue saving their money at higher rates than before (which is currently happening despite the risk of inflation and/or low negative interest rates). At least, this is how I've changed my habits.
We're completely ignoring the higher order effects of what the pandemic is doing and I think we do so at our own peril.
There's a doomsday pandemic narrative that some people are trying to push, but I think there's a significant portion of the population that simply does not care and isn't worried.
Of course, trying to have a real discussion about this on the internet is hopeless because people downvote anything they dislike or don't agree with. Facts don't matter, and this whole virus mania is the greatest example of facts not mattering I've ever witnessed.
Google is already making the call to slow down hiring. Each week from here on out we are going to continue to see this impact more and more people in more secure jobs become effected. This will remain true even as the pandemic eases up.
Regarding most of these people being hourly, I think that is not correct. Lots are but there are tons of startups, unicorns and publicly traded companies laying off 20+ % of their employees. Travel companies are slashing their backend salaried work force. Many of these companies are going to learn they can operate painfully but still operate with a greatly reduced workforce, boosting the bottom line and increasing share holder value. The remaining employees will be tasked to do work previously done by several employees and will not receive additional compensation for it.
On top of that, until we have a vaccine, many people are simply not going to go out and spend money in public.
I appreciate your optimism though and very much hope you are right. I could be completely wrong though, stock market seems to think I am. Every 5 million people laid off is a 5% rally on the S&P.
Personal opinion: We have tilted business too far towards 'share holder value' and C-suite compensation and away from treating employees like real people with lives. The cycle will continue until this changes. We are berating individuals for not having savings but giving these massive corporations a pass and massive bailout. I think we need to fundamentally change what it means to be a publicly traded company in this country.
Opinion note 2: A monthly efficient, meaningful and importantly, universal government injection of cash into households for the next several months could spur a massive recovery and is likely the best solution.
What would you change?
The thought of dying, being intubated or having long term respiratory problems that elevate your risk for future medical complications is part of the calculation now.
The upside I see is the amount of money people who are working are saving now that there is much less to consume, though this changes behavior as well.
Children begging in the streets brutal.
I'll consider your unpopular opinion because it's healthy to think about a range of scenarios...though curious to know why your optimism operates on this premise?
I personally know of dozens of small businesses that have closed for good. You can also go on Reddit and check the small businesses subs for a reality check. Small business owners and employees are hurting really bad and government aid has pretty much failed them.
It also seems you are thinking of small businesses as if they were large corporations that can file for chapter 11 and simply restructure. Small businesses and their owners cannot afford that, they usually close down out of court or file for chapter 7, which implies a total shut down and liquidation of their business at a loss. The business owners will be ruined and most likely won't be able to start a new business for years, if ever. And in these uncertain times, it's very doubtful anyone will want to take their place for a while.
Honestly it seems to me you are so far removed from these people, businesses and their actual lives, that you are out of touch with reality. I find your lack of empathy appalling.
Historically when lots of companies file for bankruptcy and large swathes of the work force are laid off we enter a recession/depression. And they've all been stickier than your comment suggests.
I also wouldn't assume that there won't be further layoffs later in the year that hit salaried workers. Airlines are almost certainly going to do massive layoffs as soon as their federal programs expire in October and a huge portion of those people are going to be competing for hourly jobs.
Then think about how many people are going to get laid off after their employer starts monitoring VPN traffic and fully realizes that a good 20-30% of their workforce does nothing all day.
Millions upon millions of unemployed people, many watching their friends and family die from disease, a psychotic, entrenched politics, that caters primarily to corrupt elites...
Historically, things don’t go very well from here.
> So I am quite certain this will be but a hiccup
> ignoring the mass death of WWII
It's not about saving capitalism, it's about saving people from terrible outcomes.
The CARES Act has a provision regarding mortgage payments that basically requires that federally backed mortgages be frozen for up to 6 months, should the payee request it and claim to be impacted by COVID-19.
>absorb payrolls as other countries have
CARES Act has $350 Billion set aside for small business payroll expenses. There are separate provisions for Airlines, other specific industries.
Furthermore, the CARES Act has extended and expanded unemployment benefits to anyone impacted by COVID, and has temporarily grown the benefit by $600/week, meaning that unemployment benefits are now total wage replacement (or better) for the median American.
It would’ve been more efficient and avoided the disastrous consequences of poor implementation to just do blanket payments and freezes.