Covid-19 lockdowns test the economic endurance of desperate Americans

American workers and businesses face a months-long survival test until Covid-19 vaccines become widely available as spending plunges with record daily cases prompting a sudden return to lockdowns.

More than 1 million US virus cases were reported in the past week, leading states including Michigan, New Mexico and California to set tighter rules on movement and commerce. A wide swath of businesses — restaurants, hotels, retail shops, bowling alleys and theatres — will confront a devastating winter, if they are able to remain open at all. Many workers face the holidays with food and shelter in doubt.

“I’m looking for a sign of life,” said Jon Forman, founder and president of Cleveland Cinemas, an operator of four independent theaters in the metropolitan area that dismissed 90% of the staff. Two locations are closed entirely and ticket sales are scant at the others, making survival less than certain: “We will not stay open through thick and thin.”

Ohio Governor Mike DeWine on Tuesday set a 10 p.m. curfew, a hindrance to late-show audiences. Even if DeWine doesn’t close theaters, as Michigan Governor Gretchen Whitmer recently ordered, the business might not be able to weather the pandemic without more federal stimulus, Forman said.

President-elect Joe Biden called on Congress this week to pass a $2.4 trillion bill to shore up the economy, in which more than 10 million workers will lose unemployment benefits by December, according to economists at Deutsche Bank and Evercore ISI.

Programs such as the Paycheck Protection Program aiding small business have expired, and US companies in the hardest-hit services sector are cutting back hours or firing workers.

“The intensifying pandemic poses a serious threat to the fragile economic recovery, particularly given the fading prospects of any additional fiscal support,” said Mark Zandi, chief economist at Moody’s Analytics. “Small businesses, who are already reeling, will have trouble surviving.”

Frustrated by the standoff in Washington, Colorado Governor Jared Polis on Tuesday called a special session of the legislature to provide “prompt and direct” aid to small business and families facing eviction. In Oregon, Governor Kate Brown announced the state will commit $55 million in financial assistance to businesses affected by Covid-19 restrictions.

Consumer spending, which accounts for 70% of the US economy, is likely to fall 3.5% in December and another 1% in January, said ING Chief International Economist James Knightley. That could lead to a contraction of economic growth in early 2021, the first since the pandemic accelerated this spring, he said. Deutsche Bank estimates the end of unemployment benefits alone will cut US growth in the first quarter by 1 percentage point.

The new wave of lockdowns darkens the outlook further. This week, Philadelphia set some of the nation’s tightest safety rules to stop the pandemic’s winter surge, closing high schools, colleges and museums and ending indoor restaurant dining. Even before that, 25% of residents reported falling behind on mortgage or rent payments, and 40% who were employed when the pandemic began said they had lost their jobs or had hours or pay cut, according to a Pew Charitable Trusts poll.

Almost half of those surveyed had problems paying for food.

“We’ve had a huge number of people calling,” said Melody Keim, executive director of the Greater Philadelphia Coalition Against Hunger.

Quiet Lanes

North Bowl and South Bowl in Philadelphia, a pair of bowling alleys with restaurants that appeal to hipsters, after-work crowds and families alike, has shrunk staff to about 20 employees from 65 full-time, said founder Oron Daskal.

As infections ticked up, “I told my managers not to order any food for the coming week, and not to order any alcohol until we know what’s happening,” Daskal said.

What’s happening is that people are staying home, along with their money. Spending by 30 million JPMorgan Chase credit cardholders fell 7.4% in the week through Nov. 9 from a year earlier, economist Jesse Edgerton wrote in a note to clients.

While many businesses — and President Donald Trump — blame shutdown orders for hurting economic growth, economists say most losses are more closely related to consumers’ fears of going out.

“The lockdowns were not what killed the economy. People’s fear of getting sick did,” said Austan Goolsbee, a University of Chicago economist who has advised Biden and served under President Barack Obama. The new wave of infections “threatens the recovery, without question.”

Renewed lockdowns and diners’ fears are a double blow, said Cameron Mitchell, who rose from dishwasher to become chief executive officer of a Columbus, Ohio-based restaurant group that bears his name. Dining at US restaurants was down 47% in the week ended Nov. 14, according to OpenTable’s tracking.

“We’re seeing mounting losses,” said Mitchell, who got only five full nights of sleep in the first 50 days of the pandemic when the future of his 36-restaurant, 4,500-employee empire was on the line. He’s preparing for another round of insomnia if DeWine goes beyond the curfew order and prohibits dine-in service at restaurants and bars.

“State unemployment is paltry and not really enough to cover anybody’s rent and expenses,” Mitchell said. “For the associates that we’re going to have to furlough — 1,000 in Ohio alone — they don’t have the backstop of the federal government with the enhanced unemployment insurance and stimulus checks. What are they going to do?”

Getting By, Barely

Robert Dumas, a 58-year-old who drives for Lyft and Uber in the San Francisco Bay area, works away from his Los Banos home for days or weeks at a time. With the pandemic keeping people in and shutting gyms where he’d usually take showers, work has become more difficult — and dangerous.

“You think I’ve never had anybody in here that had Covid ever?” he said. “I think that that would be impossible.”

He and other gig workers scrape for their wages.

“We deliver liquor now,” Dumas said. “We deliver parts for cars, from one Tesla dealership to another. We deliver groceries, we pick up medicine at the pharmacist and deliver it to people who can’t get out.”

“I can’t really complain because there are people not even working at all.”

Stocks have risen on announcements from Moderna Inc. and Pfizer Inc. that experimental vaccines proved more than 90% effective in trials. While they eventually may end the pandemic, regulatory approval and distribution will take months.

Eating In

Many business owners are worried they can’t last that long.

“I don’t think we can make it through a shutdown right now,” said Bobbi Reynolds, owner of Mom’s Kitchen Cafe in Otis, Colorado. In the spring, her cafe served takeout orders to the prairie community of 485 people. The latest surge has forced her to return to takeout only starting Friday, and she suspects some customers will be unable to place orders this time around: “They don’t have money themselves.”

In Chicago, small businesses have had to be scrappy to survive, said Christine James, director of operations for the Greater Southwest Development Corp., which works with hair salons, auto repair shops and insurance agents, among others. That’s about to get harder after Illinois Governor J.B. Pritzker announced new restrictions effective Friday that will cut retailers’ capacity to 25% and ban indoor service for bars and restaurants.

“The anxiety, fear and frustration is at an all time high,” James said. “There are very few solutions.”

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