Reviving the economy won’t be like flipping a switch
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Look around and you can see the economic damage caused by this public health crisis. We’ve been hearing from people who’ve lost their jobs and business owners who’ve had to let them go.
What happens when we get through this? President Trump had something to say about it in his Coronavirus Task Force press conference Sunday.
“I really believe everything’s going to fall into place. It’s going to be beautiful,” Trump said. “I call it a pent-up demand. People are dying to go out to a restaurant. People are dying to go onto airplanes.”
Consumers do drive 70% of the economy — or did, at least. Some demand will come back when this is all over. For instance, people who put on hold buying a needed dishwasher or replacing worn-out shoes. But that doesn’t work for everything.
“Do we go out to restaurants or bars three times as often when this is over?” asked Ben Jones, a professor at the Kellogg School of Management at Northwestern University. The short answer: No.
“You can defer the TV, the couch, the home repair, the car, but a lot of the demand that’s lost on the service side is lost permanently,” he said.
Some consumer demand is still strong for things like groceries. But Marie Driscoll, managing director for luxury and fashion at Coresight Research, said even there, coronavirus has already left a lasting effect on the consumer economy.
“When this is over, you probably will see changed habits in terms of the way people shop for food because they will have gotten used to getting a certain amount of their food and staples online that they weren’t doing before,” Driscoll said.
Coresight Research found that about 60% of consumers expect the COVID-19 disruptions to last three to four months, while 20% think it will be five months or longer.
What happens to consumer demand after that depends on what the economy looks like.
“Will they feel as confident buying a new home, getting a seven-year loan on a car, getting new furniture and appliances?” said Karen Harris, managing director of the macro trends group at Bain & Co.
Jones said the market economy will eventually rebalance, but time matters.
“The longer we stay in the off mode, the harder it is to turn that switch up and expect the lights just to come back on,” he said.
Because shutting down a business, and an economy, is a lot easier than getting it going again.
Correction (March 23, 2020): A previous version of this story misstated Marie Driscoll’s title. The text has been corrected.
COVID-19 Economy FAQs
What’s the latest on the extra COVID-19 unemployment benefits?
As of now, those $600-a-week payments will stop at the end of July. For many, unemployment payments have been a lifeline, but one that is about to end, if nothing changes. The debate over whether or not to extend these benefits continues among lawmakers.
With a spike in the number of COVID-19 cases, are restaurants and bars shutting back down?
The latest jobs report shows that 4.8 million Americans went back to work in June. More than 30% of those job gains were from bars and restaurants. But those industries are in trouble again. For example, because of the steep rise in COVID-19 cases in Texas, Gov. Greg Abbott, a Republican, increased restrictions on restaurant capacities and closed bars. It’s created a logistical nightmare.
Which businesses got Paycheck Protection Program loans?
The numbers are in — well, at least in part. The federal government has released the names of companies that received loans of $150,000 or more through the Paycheck Protection Program.
Some of the companies people are surprised got loans include Kanye West’s fashion line, Yeezy, TGI Fridays and P.F. Chang’s. The companies you might not recognize, particularly some smaller businesses, were able to hire back staff or partially reopen thanks to the loans.
You can find answers to more questions on unemployment benefits and COVID-19 here.
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