Economy After the Crisis: An Uneven Landscape When Businesses Reopen

Coronavirus social distancing in a store
Credit: Issei Kato / Reuters -

Despite different versions of what the economic recovery will look like—a V-shaped snap-back or a more gradual U-shaped version—one thing is clear: there is no template to work from. The extraordinary set of circumstances of the coronavirus crisis is unlike anything our nation has seen, and the impact it has on businesses and consumer confidence once social distancing measures are relaxed is still unknown.

In some of the rosiest scenarios, the economy roars back in the second half as consumers emerge from lockdown and spend, eager to satisfy pent-up demand. Investors dive in to buy beaten down shares of their favorite companies, and the bailout money from the federal government helps stabilize the balance sheets of corporations across every industry. The doomsday scenario, of course, is just the opposite of that. Somewhere in the middle, economists say, is where we’ll likely end up.

In the meantime, there are some areas of the economy that are being hit the hardest and are most vulnerable to a long climb back: brick-and-mortar retail, the cruise industry, airlines, and small businesses in general, but particularly small restaurants.

“Small businesses typically operate on the margin anyway, with maybe two to three months of cash on hand,” said Gus Faucher, chief economist at PNC Financial. “This crisis has made them even more vulnerable, and there are going to be some that will not reopen for business even when the economy begins to restart.”

Prior to the crisis, brick-and-mortar retailers, including big names like Macy’s, Gap, and Pier 1, were already shuttering stores. The pandemic only accelerated the shift to online shopping that was already taking place.

In fact, a record 9,500 stores went out of business in 2019, but more than 15,000 could shut down permanently this year because chains will have trouble recovering from COVID-19 closures, according to an estimate from Coresight Research.

Small local restaurants that operate without much of a cushion to begin with will be among the casualties of the coronavirus, says Elise Gould, senior economist with the Economic Policy Institute in Washington, D.C.

“Many of these businesses have already closed because they were so specialized and couldn’t shift to something else,” she said.

Perhaps no industry has been more impacted by the response to coronavirus than travel. The epicenter of the industry’s problems is also where the virus began: China. But here’s the irony. Since 2012, China has accounted for more international travelers than anywhere in the world—about 150 million outbound trips taken in 2018.

Going on cruises is a big part of that. In fact, China is the cruise industry’s second biggest market after the U.S. The S&P 500 Hotels Resorts & Cruise Lines Sub-Industry Index is down 56% year-to-date, led by the cruise industry.

Airlines are also in for a rough landing. With air travel all but ground to a halt, the International Air Transport Association is estimating that airlines will lose $314 billion this year. On April 14, there was a bit of good news when the federal government agreed to a $25 billion bailout for U.S. carriers. This will allow airlines including American, Delta, United, and JetBlue, among others, to continue paying salaries and benefits to employees in the coming months.

A slow recovery for industries and consumers in the U.S. will likely be matched by slower demand overseas for American-made goods. Countries like Italy, Spain, and others in Asia and South America that were particularly hard-hit won’t have the same appetite for imports.

The one bright spot in this could be manufacturing, said Faucher. “There’s certainly an argument to be made that U.S.-based companies are going to look at their supply chain and decide to keep more manufacturing capacity in the U.S.,” he said. “They may also create more redundancies so instead of having one plant they might have two or three here so that there’s no disruption in the event of another crisis.”

As we come out of the crisis, he also believes the decline in manufacturing employment could actually slow. “There is the potential for a slower decline in manufacturing jobs as businesses look at their supply chain and decide they want to have a greater ability to be flexible and produce more at home,” he added.

One thing many economists do agree on is that reopening the economy will not be sustainable without a strong signal that the virus is under control.

Rubeela Farooqi, chief U.S. economist for High Frequency Economics, says companies having conversations about when they can reopen their businesses and bring people back to work, is a positive step, but much needs to happen on the healthcare side first.

“People need to be reassured that it’s safe to go out and be back at work,” she said. “We can’t be in a hurry to reopen the economy because we’re afraid of the impact. We already know the impact and it’s going to be terrible. The second quarter will be awful. But it’s important that when we do come out, people actually feel safe and can go about their lives.”

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Susan Caminiti

Susan is a writer and senior editor whose work covers a wide range of business and social topics including corporate profiles, personal investing, entrepreneurship, health and wellness, work/life issues, and wealth management for both editorial and corporate clients. She is a former staff writer for Fortune magazine and her work appears in Fortune,, and in a variety of other print magazines.

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