Starting America’s Long Hard Path Back to Normal
Forever lockdown has lost…
at least for now. Voices that have been advocating for extending the most extreme virus-mitigation policies have not been able to prevent several major U.S. states from beginning their reopening processes.
Georgia has been out of lockdown for two weeks, and still hasn’t seen the widely predicted “second wave” of infections. California, Texas, and a whole slew of other states are also in the first phase of economic awakening and appear to be doing well.
It’s about time. The lockdowns have gone on far too long.
The startling unemployment numbers have played no small role in shifting public sentiment on the reopening timelines. More than 33 million Americans have lost their jobs since the start of the COVID-19 pandemic, with millions more losses expected this week. We managed to take the best jobs numbers in our history and turn them into our worst in a matter of weeks.
Even the usually sanguine Treasury Secretary, Steven Mnuchin, has talked about “permanent” economic damage if the governors don’t lift their shelter-in-place orders and allow for economic activity to resume, with sensible precautions and limits in place to prevent avoidable spread of the virus.
“Permanent” losses – of businesses, jobs, and financial stability – have not been getting much attention in the early stages of this crisis. Polling from just last week showed that 77% of laid-off or furloughed workers expected to get their jobs back once the lockdown orders are removed. This may end up being a far too optimistic view for many of them… Much of the self-inflicted damage here is on a time delay.
Furloughed employees understandably expect that since they are on payroll, they’re going to just slide right back into their old job, in their old workspace, and return to corporate status quo. For laid-off employees, there’s certainly more immediate anxiety, although the federal government’s Paycheck Protection Program has softened the blow for many workers who would otherwise be going entirely without income.
Sitting at home watching Netflix and eating ice cream for months is one thing while there’s money coming in, but it’s entirely another when someone has an empty bank account. It has cost trillions of dollars, but the government has bought time (with future generations’ money).
Unfortunately, while the reopening is a positive move, we may all be in for a rude awakening as states get going. Sure, more productive activity in sectors like manufacturing and retail will be a much-needed relief to employees and business owners who have been suffering. The level and speed with which these and other businesses come back, however, is going to lead to a lot of frustration and disappointment for weeks, if not months, to come. We are heading for a “swoosh” recovery now at best, as the Wall Street Journal calls it, not a “V-shaped” one.
Texas, for example, is leading the way among states… with many businesses allowed to open as of late April. They are at such diminished capacity – 25% occupancy for restaurants, for example – that they’re no longer profitable enterprises (or even close to it). They also have far fewer customers because of virus-exposure fears.
It’s going to be the same story for small businesses across the country. I spoke with a friend earlier this week who owns a gun range and a BBQ restaurant in Memphis, Tennessee. He said that his margins in good times were only in the 6% to 8% profit range, and now he is only allowed to have 25% of his customers in the restaurant at any time. Even with the increased demand for delivery and takeout, there’s simply no way that he can run his business like this for long. The model doesn’t work.
These are just some of the huge variables ahead. How much will demand come back once these sectors of the economy open up? What companies will be able to adjust to the new work environment requirements? Which industries are changed or done forever?
If massive office buildings in midtown Manhattan require desks to be socially distanced, the implications for the commercial real estate industry could be extreme. If restaurants require staff to wear face masks and guests to be at least six feet apart, those cozy neighborhood Italian joints with diners pressed shoulder-to-shoulder could go the way of drive-in movies (which may, paradoxically, make a comeback).
Just because businesses open doesn’t mean they’ll have enough customers to stay that way.
This country is about to get a very difficult economic lesson in resilience and adaptation. Just because businesses open doesn’t mean they’ll have enough customers to stay that way. Service economy jobs that seemed steady could go away for months, or even years. Concert venues and Broadway theaters are in for a rough ride ahead.
The Trump administration’s reopening guidance establishes “phases” for the individual states to return to economic normalcy. Even if they all take big steps toward reopenings in phase 1 now, it will be weeks before we know the full extent of the damage done to businesses, and months before we know whether we can really turn this economy around without suffering massive and lingering economic pain.
It’s not going to be easy… The good news is, America has finally realized we don’t have a choice.
Buck Sexton is host of the nationally syndicated talk radio program, The Buck Sexton Show, heard on more than 100 stations across the country. He’s also a former CIA and NYC police department intelligence officer.