By Howard Schneider
WASHINGTON (Reuters) – Garbage haulers still collect trash. Cops are on the beat. Couriers deliver food and packages. Insurance agents work from home.
The coronavirus crisis would appear to have put the entire U.S. economy on ice. Twenty-six million people have filed for unemployment in just a month, with millions more likely waiting in electronic queues at overtaxed state unemployment systems.
Still the U.S. job count stood at more than 152 million as of February. Paychecks are arriving for tens of millions of government workers, hospital, sanitation, utility and other employees deemed to be doing essential jobs; an army of employees working from home; and even chefs cooking for carry-out. For roughly 42 million retirees, and millions more with disabilities, monthly Social Security payments continue.
When the first gross domestic product reports of the pandemic era are issued Wednesday, the numbers will show a large hit from the virus-fighting efforts that began in mid-March. Forecasters expect anywhere from $2 trillion to $5 trillion of output to be wiped out by year’s end.
But in a nearly $22-trillion economy, that leaves a lot on the table, the foundation for the gradual reopening being announced by state governments to build upon.
While described as a “lockdown,” the restrictions recommended or put in place around the country have just as often amounted to a rearrangement. For tens of millions of Americans, work has shifted from office to home and moved online. Other businesses may have been ordered to close, but have hunted for ways to cope and maintain some revenue.
For some companies, the pandemic could even bring a bumper year.
Wickliffe, Ohio-based Lubrizol Corp, the specialty chemicals maker owned by Warren Buffett’s Berkshire Hathaway Corp, has avoided layoffs among its 4,700 U.S. employees. And it continues to churn out products like the gelling agent used to make hand sanitizer.
“We’ve tripled our production of that material,” Chief Executive Officer Eric Schnur told Reuters, “and we still can’t get enough of that to our customers.”
Procter & Gamble Co and Kimberly-Clark Corp both recently posted their best sales growth in years on demand for cleaning and personal hygiene products, as evidenced by shelves stripped bare of toilet paper at grocery stores nationwide.
Citrix Systems Inc, the software maker enabling millions of people to work from home, posted record sales in the first quarter.
None of this is to downplay the staggering blow the pandemic has dealt to the U.S. economy. The United States won’t thrive on teleconferencing and toilet paper, of course, and the scope of the downturn is unprecedented. It could get worse if the virus isn’t controlled or a vaccine developed. In the meantime, small entrepreneurs and those thrown out of work are depending on trillions of dollars in approved government aid to keep them afloat.
Even if the health crisis passes soon and the economic rebound is sharp, there may be lasting structural change — whether in the type of jobs available, the travel and dining habits of consumers, or the look of Main Street if small businesses collapse.
BIG GOVERNMENT, ESSENTIALS AND THE HOME OFFICE
Still, parts of the economy have been buffered.
Start with government, accounting for a steady 17.5% of U.S. gross domestic product at the combined federal, state and local levels over the past three years, or $3.7 trillion of GDP in 2019.
That includes administrators, clerical workers and technology staff running the benefits programs that other Americans now rely upon, as well as firefighters and others who maintain basic services, including teachers leading online classrooms.
Much of that employment is likely to continue, at least for now. But difficult choices loom for state and local governments as costs for their pandemic responses rise, while key revenue sources like sales and income taxes tumble. That could force layoffs.
Calls for a broad package of federal help for local governments have so far been resisted by leading congressional Republicans. However the Federal Reserve this week expanded the scope of a $500-billion lending program for state, county and local governments. That will allow the Fed to buy short-term bonds from hundreds of local government entities to help them raise money needed to pay staff wages and other bills.
The federal government, meanwhile, will borrow massively to fund nearly $3 trillion in emergency programs. A large share of that is in the form of direct payments to households and expanded unemployment benefits. Jobless families will spend much of that on food, housing and perhaps medical care. Consumer spending accounts for about two-thirds of U.S. output.
In contrast to government, the private sector has absorbed a massive blow: Roughly one of every six workers was laid off in the space of a month. Airlines have been grounded, the industry so stricken it was singled out for direct government loans. Hotels and restaurants were also among the direct casualties of social distancing edicts.
But the dramatic headlines mask what’s still going on among two large categories of workers: those working remotely and those whose occupations are deemed “essential.” The latter category encompasses an enormous swath of workers, including front-line medical personnel, public safety officers, people laboring to keep the food supply intact, those distributing goods around the country and utility workers keeping the lights on and the water flowing.
A Brookings Institution study using the Department of Homeland Security’s guidance on “essential industries” estimated that up to 62 million employees might qualify, as much as 40% of total employment before the crisis.
Searches for “telehealth nurse” increased more than 10-fold from March to mid-April on Indeed.com, the job site’s Chief Economist Jed Kolko said in a recent presentation. Online sellers and food retailers, notably Amazon.com Inc and Walmart Inc, have added tens of thousands of employees to ship goods to homebound Americans instructed not to venture out if possible.
Many of those people bunkered in their houses are still earning income. Up to 37% of U.S. jobs “can plausibly be performed from home,” according to a recent study by Jonathan I. Dingel and Brent Neiman, researchers at the University of Chicago Booth School of Business. They estimated those jobs account for an outsized 46% of U.S. wages, and include perhaps 80% of workers in the finance and insurance industries, and in scientific and professional fields.
Many of those jobs could still prove vulnerable. Architects and civil engineers, for example, could be laid off alongside bricklayers and carpenters if construction slumps. The longer a downturn lasts, the more troubles will mount for the nation’s white-collar workforce.
TOUGH RESTRICTIONS, BUT WORK GOES ON
But even in the hardest-hit industries and states, some activity continues.
Michigan, for example, has been hammered by the coronavirus, with more than 38,000 COVID-19 cases. It ranks in the Top 10 nationally both by the total number of cases and in the infection rate, estimated at roughly 3,400 infections per 100,000 people. Michigan’s automotive sector closed down early, and other industries followed under Governor Gretchen Whitmer’s March 23 stay-at-home order, considered among the strictest in the country.
(For a state-by-state breakdown of U.S. coronavirus cases, see: https://tmsnrt.rs/35oYKhr)
The unemployment rate in Michigan, among people covered by unemployment insurance, hit 17.4%, the highest in the country.
But even Michigan’s tough rules deemed 14 industries to have at least some essential workers, including financial services, communications and “critical manufacturing,” along with health and public safety.
Restaurants, bars and many retail outlets had to close to the public. But restaurants could still offer carry out, hotels could stay open if they chose, and construction on many types of projects could continue under social distancing rules.
All businesses were allowed to keep some employees on site for “minimum basic operations” such as maintaining equipment and inventory, guarding property, processing payroll or transactions, or supporting those working remotely.
An analysis of Michigan’s unemployment claims by Michael Horrigan, president of the Upjohn Institute, a labor think tank, showed the differential spread of the crisis across industries and gave some sense of the workforce still on the job.
As of mid-April, as many as 54% of workers in Michigan’s construction sector were still employed, according to Horrigan’s analysis. He compared unemployment claims filed in the industry with employment levels as of the first quarter of 2019, the most recent data from the federal government’s comprehensive Quarterly Census of Employment and Wages. For agriculture, finance and utilities the share of workers still employed could be above 90%, he said.
The numbers will no doubt change as more unemployment claims are processed and as restrictions are lifted, a process Whitmer has already begun.
Based on 2019 output levels for the state by industry, if current levels of joblessness held for a year it would cut Michigan’s GDP by perhaps 23%, knocking the state back to where it was in 2013. Nonetheless, that would still mean Michigan workers and factories would generate $422 billion in goods and services this year.
SOME ADAPT, SOME THRIVE
Across the country, firms are coping in different ways. Some are finding small bits of revenue to sustain themselves, while others are adjusting to an unexpected surge in demand.
Utah greenhouse owners Scott and Karin Pynes had built a solid events business alongside selling plants, but those gatherings vanished overnight under social distancing orders. The Pynes don’t expect to be hosting weddings or corporate events anytime soon, they said in a recent webcast seminar on business survival sponsored by the David Eccles School of Business at the University of Utah.
Their business, Cactus and Tropicals, is still taking online orders for plants and offering outdoor displays and pickups. The Pynes are holding video landscaping consultations by Skype and Zoom, and hunting for a new business model that will work as the economy reopens, perhaps under new rules to keep people more distant from each other.
Scott Pynes said the company has scaled back seasonal hiring, but kept around 85 permanent staff on the payroll with the help of a Small Business Administration loan. With the peak season starting on Mother’s Day, he has his fingers crossed.
“We feel confident we will make it through,” he said in an interview with Reuters. “We will be a bit scarred.”
Richard Schwartz, chief executive of Austin, Texas-based Pensa, faces the opposite challenge — keeping up with a burgeoning workload.
Schwartz’s firm offers automated inventory tracking to retailers so they can plan orders, detect shortages and let manufacturers know to ramp production up or down accordingly. It does that with the help of artificial intelligence software and drones that prowl the aisles of stores to count items on shelves.
Pensa’s flying checkers, he said, were a “sleepy” part of the wholesale-to-retail supply chain before coronavirus hit. Many stores were content to use human workers to jot down inventory on clipboards.
With virus-panicked shoppers emptying shelves and manufacturers struggling to keep pace, robots offer a fast way to keep track of inventory and ordering needs. Schwartz says potential customers now are poised to adopt in a matter of months technology they might have rolled out over years.
Technology “normally goes in fits and spurts,” he said.
Coronavirus, Schwartz said, “is one of those accelerators where it shines a light on a problem.”
(Reporting by Howard Schneider; Additional reporting by Ann Saphir and Timothy Aeppel; Editing by Dan Burns and Marla Dickerson)
Calm before the storm for Japan suicides as coronavirus ravages economy – National Post
TOKYO — The phones at the Tokyo suicide hotline start ringing as soon as it opens for its once-weekly overnight session. They don’t stop until the lone volunteer fielding calls from hundreds of people yearning to talk signs out early the next morning.
Both operating days and volunteer numbers at the volunteer-run Tokyo Befrienders call center have been cut to avoid coronavirus infection, but the desperate need remains.
“There are so many people who want to connect and talk to somebody, but the fact is we can’t answer all of them,” center director Machiko Nakayama told Reuters.
Health workers fear the pandemic’s economic shock will return Japan to 14 dark years from 1998 when more than 30,000 people took their lives annually. With the grim distinction of the highest suicide rate among G7 nations, Japan adopted legal and corporate changes that helped lower the toll to just over 20,000 last year.
Worried the current crisis will reverse that downward trend, frontline workers are urging the government to boost both fiscal aid and practical support.
“We need to take steps now, before the deaths begin,” said Hisao Sato, head of an NGO that provides counseling and economic advice in Akita, a northern prefecture long known for Japan’s worst suicide rate.
National suicides fell 20% year-on-year in April, the first month of the country’s soft lockdown, but experts said that was likely due to an internationally recognized phenomenon in which suicides decrease during crises, only to rise afterwards.
“It’s the quiet before the storm, but the clouds are upon us,” Sato said.
Prevention workers see echoes of 1998 when a sales tax hike and the Asian economic crisis first drove annual suicides above 30,000, then to a peak of almost 34,500 in 2003.
Economic circumstance is the second biggest reason for suicides, behind health, according to 2019 police data, which also shows that men are nearly three times more likely to kill themselves than women, and most are in the 40-60 age group.
The current crisis, which is forecast to shrink Japan’s economy 22.2 percent this quarter, is especially dangerous for cash-strapped small and medium-sized businesses for whom government subsidies might not arrive in time.
“It’s tough. A lot of people are really worried,” said Shinnosuke Hirose, chief executive of a small human resources firm that has lost nearly 90% of its business. “It’s like waiting at the execution grounds to see if they survive or not.”
A Health Ministry official in charge of suicide policy told Reuters his department planned to ask for more money from a $1.1 trillion central government stimulus package to help fund measures such as extra hotlines. The official, who declined to be named as he was not authorized to speak on the record, added there were limits to central government action and local efforts were crucial.
Some believe the steps taken in recent years to bring down the suicide rate will hold firm through the current crisis, but others are not so sure.
Kyoto University’s Resilience Research Unit has predicted 2,400 more suicides for each 1% rise in unemployment. If the virus subsides in a year, unemployment could peak at around 6% by March, lifting annual suicides to around 34,000, it estimated. If pandemic conditions persist for two years, a rise to 8% unemployment by March 2022 would see suicides spike over 39,000.
“Of course social support is important … but they won’t be able to ramp this up suddenly,” said unit director Satoshi Fujii. “Preventing bankruptcies will start helping immediately.”
At the Tokyo Befrienders call center, the phones continue to ring. The formerly nightly service now opens on Tuesdays only, with one volunteer a shift instead of four, although it plans to reinstate another day in June.
“Everyone has tried hard to get through lockdown, but now they’ll reflect and think ‘why was I doing it? What hope do I have?’” Nakayama said. “At that time I think a lot could choose death.” (Reporting by Elaine Lies; editing by Jane Wardell)
Nova Scotia's stimulus plan a good start in rebuilding devastated economy, economist says – TheChronicleHerald.ca
HALIFAX, N.S. —
A $230-million stimulus program expected to employ 2,000 Nova Scotians and rebuild important infrastructure assets is a needed emergency measure to rebuild an economy devastated by the COVID-19 crisis, but there’s plenty of pain still to come, warns a Halifax economist.
“For a province like Nova Scotia, $230 million of debt is significant but on the other hand we’re still focused on containing the economic pain that’s been caused by COVID-19 and I think that’s the first matter of focus,” said Melvin Cross, a Dalhousie University economics professor. “If you have 2,000 people otherwise unemployed and have them doing something that will add to the assets of the province then such a program is worth considering.”
Premier Stephen Mcneil unveiled the provincially funded plan on Wednesday when he announced the province’s economy would completely reopen on June 5. The provincial monies will pay for projects across the province, such as roads, bridges, school repairs and museum, courthouse, and hospital renovations. Statistics Canada reported earlier this month that 50,000 jobs were lost in Nova Scotia in April.
The professor said the program is a reasonable first response in addressing “the economic pain we see people experiencing.”
“Will we have more discussions about the details of this program and have some dissatisfaction with it, probably. That doesn’t mean the concept is unsound.”
Cross said there’s a possibility that the Bank of Canada would pony up cash to pay a portion of the stimulus program, much better than the alternative, he added.
“It would be unwise to increase tax rates in the economy that’s already lumbered with unemployment and businesses struggling to deal with the consequences of COVID19.”
Scotiabank released a report earlier this month predicting Nova Scotia could feel less economic pain caused by COVID-19 compared to other provinces.
The report said besides Saskatchewan, Nova Scotia is the only province likely to avoid record deficits in the 2021 fiscal year. Yet it predicts Nova Scotia will have a roughly $970-million deficit.
While the government has a key role to play in assisting businesses and rebuilding the economy there’s a limited pot of money available, said the professor. He likened the province’s predicament to fighting a raging fire with only a limited water source available.
“If we drained too much water out of the lake and you have to stop, well do you have the fire controlled yet?” said Cross. “Well, you say at what point do you decide it’s not appropriate to use water to put out the fire?”
The Chronicle Herald inquired with the province about the economic consequences of the stimulus plan, including whether it’s now in a deficit and if money has to be drawn from other government departments to pay for the program, but did not get answers to those questions.
Cross said as long as there’s no effective treatment for COVID-19, the province and country can expect to feel significant economic pain.
“We might get a bit of relief this summer If COVID-19 acts the way better understood flu viruses act but the epidemiologists tell us that we must be prepared to manage a second wave of COVID.”
Patrick Sullivan, CEO of the Halifax Chamber of Commerce, said he was pleased with the province’s decision to reopen those businesses closed during the lockdown, including restaurants, hairdressers and gyms. A $25-million Small Business Reopening and Support Grant was also announced on Wednesday for eligible businesses, nonprofits, charities and social enterprises to open safely. That amounts to $5,000 grants to businesses to purchase public health equipment necessary to reopen their business; money that’s badly needed and appreciated, said Sullivan.
“But there’s still concern restaurants will only be reopening at 50 per cent capacity and there will likely be reduced tourism this summer. We appreciate the need to operate safely because we don’t want this to happen again. “
Because of restrictions on international travel, tourism operators in the province face a daunting summer season. He’s encouraging Nova Scotians to choose a staycation to support the sector and advocating for the government to introduce a $2,000 accommodations tax credit to incentivize people to stay home.
He said businesses are in need of plenty more support but said there are still assistance programs available to small businesses through ACOA and Community Business Development Corporation. Sullivan said the federal Canada Emergency Commercial Rent Assistance Program, offering to cover 75 per cent of rent for small businesses, is flawed and has limited uptake largely because it’s optional for landlords. He said financial assistance should be made available to the tenant, not the landlord.
In the end, he couldn’t predict how many businesses in Halifax might be forced to close.
“I don’t know and don’t think anyone does right now I think the majority of businesses have tried to get their way through this to get a reopening day.”
As economy falters, restaurateurs look back at oil boom that gave rise to fine dining – CBC.ca
It was 2012 and times were good in Newfoundland and Labrador.
Oil was flowing offshore, and expensive bottles of wine were flowing in restaurants around St. John’s.
Jeremy Bonia remembers the days when a barrel of oil sold for $120, and a bottle of wine could easily fetch more.
“I mean, we were doing well,” he said with a smirk while standing in front of his restaurant, Raymonds, on Water Street in St. John’s.
The booming economy paved the way for new possibilities on the city’s food scene — high end dining for people with money to spend, and corporations looking to impress potential clients.
There was as much business being done at the dinner table as the boardroom table, and people like Bonia used the influx of riches to build their dream restaurants.
Those places are empty now, as a pandemic and plummeting oil prices have wreaked havoc on the already fragile economy in Newfoundland and Labrador.
Bonia and co-owner Jeremy Charles were forced this spring to lay off about 100 staff members between Raymonds and their other restaurant, The Merchant Tavern, with no idea if or when they could bring everyone back.
Everything is changing
High-end restaurants depend on tourism to make money in the summer months, and are kept afloat throughout the offseason by major industry players, like oil and gas companies.
But when it comes to the symbiotic relationship between oil and restaurants, most of the damage was done before the world knew about COVID-19.
The riches of 2012 were followed by a crash at the end of 2014. The yearly average price for a barrel of oil plummeted from $98.97 to $53.03, and the big players on the Grand Banks started slashing.
“We started to see companies scale back either office sizes, or team sizes, and expense accounts as well,” Bonia said.
“Just the amount of meetings and physical people on the ground started to scale back quite a bit.”
Without a strong economy to prop up the restaurant industry throughout the offseason, Raymonds closed its doors for the winter this year. The decision was made before COVID-19 was on anybody’s radar.
In the historic Quidi Vidi Village, chef Todd Perrin knows all about the rise and fall of oil prices at Mallard Cottage.
Oil had been the catalyst to exploring the world of fine dining with traditional cuisine — places where concoctions of wild game and locally-sourced vegetables could fetch a pretty penny.
“It made it possible to operate a restaurant and be able to pay the bills,” Perrin said. “At the beginning of my career, it was a tough market. When oil really hit, and St. John’s was full of people attached to the oil industry with expense accounts, it made a big, big difference.”
By the time the expense accounts shrunk, places like Raymonds and Mallard Cottage already had reputations bolstered by profiles in publications like The New York Times to help carry them through the leaner years.
Those international awards and glowing reviews meant tourists were flocking to get in during the summer seasons.
Now, with no tourists due to COVID-19 restrictions, Bonia said he knows they’ll have a hard time continuing the way they had for a decade.
While other restaurants are relying on locals eating out to keep them afloat, he said that’s not likely with a place like Raymonds — especially with more than 30,000 jobs lost in the province since March.
“Fine dining is a niche thing. It’s not something we expect people to come out and do once a week, once a month even,” he said.
“Raymonds will definitely feel it more than other restaurants.”
How oil will affect the next generation of chefs
But it’s not just local restaurants that are feeling the effects of the downturn in oil.
Roger Andrews, an advanced cooking instructor at the College of the North Atlantic, said he can look at his students on the first day of class, and pick out the ones who aspire to be the next celebrity chef.
He makes it his goal to give them the advice they need to hone their skills, but to also open up their minds to more realistic pathways.
With a downturn in the economy, students can expect fewer restaurants taking people in for internships, but that doesn’t necessarily mean a lack of options.
“Where they’re actually going to go is the big thing,” Andrews said.
“Perhaps we’re not teaching them for the restaurant setting as much as we would for the old age home.”
Another perk of the offshore oil boom was an uptake in the college’s marine cooking program.
People that grew tired of working in the volatile world of restaurant kitchens were returning to upgrade their education and head offshore. Oil companies handed lucrative salaries to cooks, who were ditching meagre pay onshore to head out on the rigs and supply vessels in the North Atlantic.
“They have families, want something more stable, or they go chasing money,” Andrews said.
“You’ve got big oil offering up someone $100,000 a year — people are going to take that.”
Newfoundland and Labrador’s offshore has lost at least one oil platform for up to two years, and public figures from the premier to the president of Memorial University have called on the federal government to support the industry to prevent further losses.
Andrews expects the restaurant industry will thin out, too, with the combination of pains being inflicted on the province from all sides — Muskrat Falls in the north, offshore oil in the east, and a lack of tourists entering the province from the west.
“It’s a dog-eat-dog world, where you have to be very unique, and interesting and different,” he said.
“I can foresee with a bit of a change in the economy, the number of those restaurants will have to drop down a little bit, unfortunately.”
Jeremy Bonia hopes that won’t include Raymonds. To save his neck, he’s willing to alter the formula that made the restaurant a hit with critics around the world.
“We look forward to the day we can go back to what we were doing before,” he said.
“I’m sure we’ll open Raymonds, it just may be a different capacity, maybe as a different concept for a little bit.”
Bonia and Charles have had offers thrown at them before to leave behind their home province and start new ventures on the mainland, but they’ve resisted those — and Bonia said, they will resist more.
“We’re not here for the weather and we’re not here for the money. We’re here because we love living here,” he said.
This coverage is part of Changing Course, a series of stories from CBC Newfoundland and Labrador that’s taking a closer look at how the COVID-19 pandemic is affecting local industries and businesses, and how they’re adapting during these uncertain times to stay afloat.
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