Economic pain will persist for US economy long after coronavirus lockdowns end

WASHINGTON (NYTIMES) – Walter Isenberg is the sort of business owner US President Donald Trump has in mind when he talks about the need to start lifting coronavirus lockdowns and reopen the American economy. Isenberg’s hotel and restaurant group in Denver has seen its revenues drop from US$3 million a day last year to US$40,000 a day now.

But Isenberg has no expectation that his company, Sage Hospitality Group, will see the quick economic “boom” that Trump has predicted, even after state officials allow his properties to begin hosting customers again.

“It’s just going to be a very long and slow recovery until such time as there is a therapeutic solution or a vaccine,” Isenberg, who has furloughed more than 5,000 of his 6,000 employees, said in an interview. “I’m not a scientist, but I just don’t see the psyche of people – I don’t see people coming out of this and rushing out to start traveling and having big conventions.”

Trump is in a rush to lift quarantines and stay-at-home restrictions that have brought an 11-year economic expansion to an abrupt end and knocked millions of people out of work. The president has predicted that once the economy restarts, it will rocket itself out of a deep recession and lead to an economic boom “perhaps like never before.”

Companies affected by the shutdowns say restarting the economy will not be that easy. So do a wide variety of economic and survey data, which suggest that the economy will recover slowly even after the government begins to ease limits on public gatherings and allow certain shuttered restaurants and shops to reopen.

The evidence suggests it is not just stay-at-home orders and other government restrictions that have chilled economic activity in the US over the past month: It is also a behavioural response from workers and consumers scared of contracting the virus.

Data shows that unemployment claims rose and restaurant reservations vanished even before the lockdown orders hit, as nervous consumers retreated into their homes. And they show consumers are unlikely to return to airports, restaurants and sporting venues en masse any time soon.

Until Americans feel confident that their risks of contracting the coronavirus have fallen – either through widespread testing or a vaccine – many economists and business owners say there will be no rapid economic rebound.

“You can’t just turn the light switch on and have everyone go back to work, as much as businesses would love to do that,” Suzanne Clark, president of the US Chamber of Commerce, said in an interview. “It’s going to be the opposite of a green light. It’s going to go from red to yellow and then green.”

The president’s desire to reopen the economy can be seen in the data: The crisis has already pushed more than 16 million people out of work in the past three weeks. Forecasters agree that a recession has already begun, with the only disagreement centered on how deep and painful it will ultimately be.

A National Bureau of Economic Research working paper released on Monday (April 13) by economists from Northwestern, Stanford, the University of Chicago and Boston University predicts that the economy will shrink by 11 per cent at year’s end from the same time the year before. That would be its sharpest contraction since 1946.

Still, many economists warn that rushing back toward normal life too quickly, without the safeguards needed to prevent a second wave of the outbreak, could simply worsen the economic damage that Trump is trying to fix. Reinfection rates climbed in China, Singapore and Hong Kong after leaders eased strict economic restrictions that had initially slowed the virus’s spread.

Uncertainty about the virus has slowed economic activity even in places without state or local restrictions on activity.

“States that haven’t yet closed businesses or put their populations on some sort of lockdown aren’t escaping enormous spikes in unemployment,” said Ernie Tedeschi, a managing director at Evercore ISI and a former Treasury Department economist. “The pain is not just deep, it’s wide. This punctuates that the fundamental problem with the economy right now is the pandemic.”

Tedeschi’s research underscores the degree to which Americans have suffered economic harm from the virus, no matter what form of restrictions their leaders have placed on business activity and travel.

Stay-at-home orders have not been evenly applied across America: Some states imposed them early, some imposed them later and some still have not imposed them at all. Yet all states have seen unemployment claims rise in recent weeks.

Tedeschi found the gap between more and less restrictive states – when comparing their normal levels of unemployment claims and current levels – has quickly narrowed. By the first week of April, claims were only about 23 per cent higher in more restrictive states than less restrictive ones, adjusted for population.

A nationwide online survey by data firm Civis Analytics over the past two weeks found more than 8 in 10 Americans support restrictions on restaurant and gym openings, and nearly as many back “shelter in place” orders.

A survey last week by Seton Hall University found that 7 in 10 Americans would not feel comfortable attending a sporting event until a vaccine for the virus was developed. New polling by the Sports and Leisure Research Group, Engagious and ROKK Solutions finds that only about a third of Americans would take a commercial flight, see a movie in a theater or visit a theme park now if they were allowed to do so. In follow-up interviews, respondents stressed two steps that would help them feel comfortable resuming those and other economic activities: reassurances from medical professionals and the development of a vaccine.

Isenberg, who began his career as a dishwasher, says he is eager to get his employees back to work. But he sees economic hardships for his industry continuing through the end of the year, at least.

Isenberg said there was a hope he holds onto.

“I have a saying,” he said, “when we woke up this morning, we were one day closer to a vaccine.”

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