- The Washington Times - Tuesday, May 12, 2020

Washington is spending trillions of dollars on an economic recovery, but many businesses — from restaurants to factories — won’t snap back at all from the coronavirus crisis.

The manufacturing, hospitality and restaurant sectors are among the industries with a high percentage of businesses that aren’t expected to survive the pandemic, economists say. Eight weeks into the emergency, some companies without customers are shifting from furloughs to closures.

A study by the National Bureau of Economic Research predicted that more than 11.6 million of the layoffs during the pandemic, or 42%, will become permanent job losses.

The shutdowns in various states also have accelerated the dire condition of brick-and-mortar retail chains such as J.Crew and Neiman Marcus, both of which have filed for bankruptcy protection. The outlook is grim for retailers such as Sears, Lord & Taylor, Kmart and JCPenney.

If the shutdowns persist, “you will get business failures on a grand scale and you will be taking risks that you would go into depression,” James Bullard, president of the Federal Reserve Bank of St. Louis, said in a video speech Tuesday.

Some colleges and universities, too, are being pushed to the financial brink. Overall, higher education institutions employ about 3.6 million people nationwide.

“This is so deep and so dramatic, it’s just hitting everywhere,” said Heidi Shierholz, senior economist at the Economic Policy Institute. “Nothing is being spared. The pace of this is incredible.”

House Democrats introduced a $3 trillion coronavirus relief proposal Tuesday, including more than $875 billion for states and cities, and a second round of direct payments of up to $6,000 per household. The measure, which will receive a vote Friday, comes on top of about $2.8 billion already approved by Congress and the White House in aid for businesses, workers and communities.

Airlines are receiving at least $25 billion in government loans and grants to prop up the struggling industry, which has seen U.S. passenger travel drop 90% during the pandemic. But Boeing CEO Dave Calhoun said Tuesday that at least one major U.S. carrier “most likely” will go under this year.

“Something will happen when September comes around,” Mr. Calhoun said on the “Today” show on NBC. “Traffic levels will not be back to 100 percent, they won’t even be back to 25 [%]. Maybe by the end of the year, we approach 50 [%].”

Boeing itself sold no commercial planes in April, the second month in a row, and orders for 108 planes were canceled.

Hyatt Hotels said this week it would lay off 1,300 employees globally due to the pandemic, which has brought travel to a standstill. The hotel industry is losing an estimated $1.4 billion in revenue every week.

Companies big and small are feeling the pain. Polaris, a manufacturer of outdoor-recreation vehicles, said this week it is closing a boat-making plant in Syracuse, Indiana, displacing about 120 workers.

A company official blamed “market dynamics and the continued uncertainty around the sustained impact of the COVID-19 pandemic.” The displaced workers can apply for open jobs at two other Polaris factories about 30 minutes away from Syracuse.

Michigan Maple Block Co. initially furloughed workers at its plant in Petoskey in March. A month later, the maker of cutting boards and table tops told the 54 workers the factory was closing permanently.

About 1.3 million manufacturing jobs were lost in April, including temporary layoffs, the federal Bureau of Labor Statistics said.

Brian Kench, dean of the college of business at the University of New Haven, Connecticut, said the businesses most hurt by the pandemic have high fixed costs and rely heavily on person-to-person interaction. He cited auto dealerships and department stores.

“Those are the industries that need to reimagine themselves,” Mr. Kench said in an interview. “More of a Tesla [business] model, and less of in-person [contact] in the auto dealerships. The big, fancy building, retail trade clearly fits into that box: high fixed cost, a lot of close interaction human-to-human — Macy’s, Neiman Marcus.”

He said the pandemic probably will accelerate the trend toward automation in manufacturing.

“That has been frankly good for the higher ed side, where we’re teaching kids about AI and robotics,” Mr. Kench said. “You have to have those high-end skills to work in that sector. Folks that are getting hit hardest by unemployment are the ones without a high school education, or just a high school education. I think that trend [in manufacturing jobs] continues.”

One of the most startling aspects of the unemployment report for April was the heavy losses of jobs among public-sector employees, Ms. Shierholz said.

“I was blown away they lost almost a million jobs in state and local governments already,” she said. “It’s just a stunning testament to how bad this is, because usually that’s much delayed [in a recession]. You can’t point to anywhere in this economy and say ‘this is a place of safety.’”

The authors of the National Bureau of Economic Research study did find some areas of growth in the labor market. Lowe’s, the home improvement chain, plans to hire 30,000 new employees this spring.

The report said Domino’s is adding about 10,000 pizza delivery drivers, and Papa John’s plans to hire 20,000 new employees to meet greater demand for pizza delivery.

Citing information from the data analytics firm Earnest Research, the authors said spending on airlines, hotels, rental cars, taxis, ride sharing and movie theaters has dropped more than 75% from 2019, while spending on fast food, auto parts and autos is down 35 percent, and spending on apparel is down 70 percent.

But spending has boomed on “home improvement, video streaming, gaming, food delivery, meal kits, and online grocers,” they wrote.

“The bulk of these spending cuts and shifts will reverse when the pandemic recedes and the lockdown ends, but some aspects of the shift are likely to persist,” their report said.

Ms. Shierholz predicted a full economic recovery will be “a very long haul.” She said even if employers add 1 million jobs per month, a massive number, it would take more than two years to recover all the jobs lost in the past two months.

“There’s just a ton of uncertainty about this,” she said. “If we got a vaccine or an effective treatment tomorrow, even in that scenario, it would take a long time because so much damage has been done. Absent a vaccine or an effective treatment, in order to be able to successfully reopen the economy, we’re going to need a lot of provisions in place — a good testing and contact-tracing regimen and lots of smart planning about how to make it happen, and it will be much slower. I think it’s going to be a long slog.”

President Trump and his advisers disagree, predicting a robust turnaround in the second half of this year.

“I think the second half of this year, you’re going to see much stronger growth,” White House economic adviser Larry Kudlow said Tuesday on the Hugh Hewitt radio show. “With the Federal Reserve and the Congress and the White House, we probably put in over $9 trillion dollars of assistance paid out to roughly 175 million people to try to keep the ship afloat. Now it’s time to turn back to tax cuts and regulatory relief and things of that sort which made this economy so strong in recent years. If we can go back to economic growth incentives, we can have a spectacular second half and next year.”

• Dave Boyer can be reached at dboyer@washingtontimes.com.

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