The Long Road Back
Like most of us, you're no doubt only too ready to return to life before Covid-19. For some of you, that may mean being able to go out to a restaurant, the movies, or a sporting event. It probably also means gathering with friends and family and being able to see their faces without a surgical face mask obscuring the view. And we are all looking forward to a return to hugging and handshakes, cuddling and kissing grandbabies, pats on the back, and all the many ways we took touch for granted once upon a time.
As wistful as we might be for life to return to normal, we need facts not emotions when trying to ascertain what the future might look like. And that begins with acknowledging that we are now in a recession, according to the National Bureau of Economic Research. And not just any recession, but one with extraordinary features that may challenge how well and how fast we recover.
Near Record Unemployment
Ours is a consumer-driven economy, so when consumers aren't buying, the economy is hurting. And nothing keeps consumers from spending like being out of work - or the fear of a pending job loss. While the Bureau of Labor Statistics (BLS) reported that the unemployment rate in May fell to 13.3 percent from 14.7 percent in April, a telling caveat put a sobering spin on that result. The BLS noted that a "misclassification error" caused them to underreport the actual level of unemployment by about 2 full percentage points, making May's rate around 15.3 percent.
As of June 30, the BLS is reporting an unemployment rate of 11.1 percent, a trend in the right direction, but still a sign of economic problems.
Most economists agree, however, that even this number probably grossly underreports the number of Americans out of work, as it doesn't capture those working in the gig economy, the self-employed, or those others whose income may have dried up but who have no recourse to unemployment benefits. Although the Paycheck Protection Act was meant to extend benefits to a wider range of workers, many states had difficulty administering the additional aid and workers who might have qualified found that aid out of reach.
All told, more than 19.2 million workers are now sidelined. As long as unemployment remains high, the economic recovery will be impaired.
Hard-Hit Service Sector
During past economic downturns, service sector jobs in such areas as dining out, entertainment, travel, etc., remained relatively resilient while industries producing big ticket items, such as durable goods, autos, new homes, etc., took the hit. This recession, featuring a prolonged "lockdown" that kept consumers at home and away from restaurants, malls and the Cineplex, have hit service sector workers hard.
Three sectors -- leisure and hospitality, education and health services, and retail -- account for 59 percent of the non-farm job losses from February to May. These sectors account for 47 percent of the jobs held by women, while just 28 percent of men work in these fields. In other words, women are bearing the brunt of this economic downturn -- especially women of color.
Reshaping the Retail Landscape
The economic crisis Covid-19 created was the final nail in the coffin for many troubled retailers and small businesses. One estimate has as many as 100,000 small businesses closing their doors forever. Marquee names such as JCPenneys, J. Crew, Neiman Marcus, Brooks Brothers, and Pier One are declaring bankruptcy, and other retailers have reduced their locations. You may soon have to travel farther to find a Starbucks, Barnes & Noble, or Nordstrom, and that little neighborhood boutique you loved so much may be shuttered for good.
Then there's the sizable impact of online shopping. Once a late night obsession of insomniacs, shopping online is now a huge source of revenue for those retailers who added a robust digital storefront to their brick-and-mortar operations. Those retailers slow to embrace the digital world will either learn to adapt or continue to lose ground even after Covid-19 is a distant memory.
When the dust clears, what's very likely is that the strong retailers will get stronger while marginal operations will struggle even more. But when consumer spending rebounds, those retailers that have survived are likely to reap the benefits of less competition and pent-up demand.
Not if But When
Clearly, recovery can't begin until Covid-19 ceases to be the catastrophic health threat to so many. That will happen when we have adequate treatment options, better and more consistent testing, and lastly, a viable vaccine. The news on each of these fronts seems to change hourly, but each passing day gives us more and more reason to hope that we may turn the corner soon.
Spending Our Way Into Recovery
As big a footprint as the Apples, Walmarts, ExxonMobiles, Amazons, etc., might have in the U.S., it's small businesses that serve as the engine of our economy. For a recovery to take hold, these enterprises have to be able to resume business as usual with consumers buying their goods and services at previous levels.
Those with the means to do so may help the economy return to normal once they begin to spend and invest as they have in the past. Once consumer spending picks up, it's likely hiring will too, helping to put a dent in the astronomical unemployment numbers now dragging down the economy.
How to Be a Proactive Consumer
There's no doubt that the world after Covid-19 is likely to look different than before. But much of the power to rebuild the economy is in the hands of consumers and investors.
So, when it is safe for you to do so when your community fully opens, consider returning to local restaurants, heading back to the malls, going out for a movie, supporting your local arts organizations, donating to the nonprofits you admire, and in all the other ways you usually do, providing both the financial and emotional support your community needs to help it heal.