COVID-19 Crisis: Moving (Cautiously) Forward
It’s Friday, and what a week it has been. Let’s review the highlights so you can get onto your weekend.
Moving (cautiously) forward
Curbing business ambitions
Well, here we are. I could give you a state-by-state rundown, but in this instance, a visual speaks louder than words. In the graphic below, courtesy of The New York Times, states in dark blue represent those that are partially reopening (mostly in the Midwest and the South). The ones in light blue are scheduled to reopen soon (AZ, OH, PA, NH, RI, and NC), and those in yellow are still shut down with restricted operations (primarily along the East Coast and the West Coast, and a few in the North).
What became most apparent this week was how partisan an issue the reopening of U.S. cities and states has become. America’s response to the coronavirus is quickly joining climate change, gun rights, and immigration in the ranks of contentious issues that will be forbidden from dinner tables and workplace discussions when we emerge from lockdown.
But unlike those timeless political issues, the debate around COVID-19 is even more multifaceted and far-reaching, with seemingly every aspect of our lives — in the current state and the future — greatly impacted by the coronavirus. (In other words, it’s difficult to talk about the coronavirus situation in its entirety, but it’s just as challenging to not talk about the coronavirus.)
How do we respond to the pandemic on the international stage? Where did the outbreak begin?
When will it be safe to return to work? How do you confidently return to work? Do you even remember how to get to work?
How long do you remain quarantined and refrain from visiting your family and friends outside the home?
Will schools be open in the fall? Will you be comfortable letting your child go to school by then?
Do you believe the death toll and the number of confirmed cases is accurate?
Are you getting tested if/when it becomes widely available? Would you get vaccinated if/once treatment is discovered?
All these questions and more are driving a relentless stream of analysis, commentary, social debate, and emotional fatigue for consumers that will continue throughout the summer months. (Not to mention the surge in fake news and misinformation that’s flooding the internet.) From Axios, “While every U.S. state has had outbreaks and in recent weeks counts have been rising outside major cities, a handful of states are still responsible for the bulk of COVID-19 cases so far, with New York City alone making up more than 14% of confirmed U.S. case and more than a quarter of confirmed deaths. That uneven epidemiological experience contrasts with the economic toll of the pandemic and social distancing, which truly has been national.”
As shared in our Wednesday briefing, online conversation about the coronavirus is lessening, likely as a result of information overload, emotional and social media fatigue, and just for the sake of mental wellness.
And this new reality has lingering effects that we’ll need to be mindful of. When stores open, will consumers even be in the mood to go out and shop? According to Kohl’s CEO, the answer is yes. When is it safe to return to work? Will people want to? The CDC updated its guidance for how to confidently reopen, which was the topic of great debate late this week.
Will consumer spending be soft in Q3 and Q4 as job losses mount? It depends on who you ask. According to reports, two Federal Reserve officials said they believe “the U.S. economy can likely avoid a worst-case scenario in the coronavirus crisis, in part because of aggressive action taken by the central bank.” The economy will continue to contract, but just how drastically is difficult to be certain of. At this point in time, there are more questions than answers, but, in the very least, a look at Sweden may offer us clues into what could have happened if the U.S. didn’t go into its quasi-lockdown. From The Wall Street Journal,
“Sweden didn’t impose a lockdown on its residents, a decision that has drawn global attention from policy makers eager to judge the strategy’s impact on public health and the economy. Many Swedes, nonetheless, have been voluntarily following authorities’ social-distancing recommendations and limiting travel.”
“That, in turn, has pushed down domestic consumption, with streets quieter and business slower despite recent warm weather. And Sweden can’t insulate itself from the lockdowns among its trading partners. Exports are falling. Sweden’s experience shows that the move by other countries to ease restrictions may not deliver a quick economic recovery, said David Oxley of Capital Economics, an economics research firm. “Even if shops and restaurants are open, people will not consume amid a global health scare,” Mr. Oxley said.”
Chart from EuroNews
Several European countries, including Austria, Belgium, Czech Republic, Demark, Germany, Greece, Italy, and Poland, have eased lockdown restrictions as caseloads shrink. France, Netherlands, Lithuania, Switzerland, and a few others remain under lockdown until May 11th. As mentioned, Sweden never locked down or implemented formal restrictions.
The U.S. recovery is behind Europe’s likely because lockdown restrictions weren’t as stringent or widespread. Though, it appears that a combination of travel restrictions, social distancing, mass testing, and a bit of luck all have to do with beating back the virus for a gradual economic reopening.
States such as Georgia will be entering the second week of phased reopening by next week, so in the meantime, it’s a waiting game to see if those early openers experience a surge in caseloads and hospitalizations. (I think officials are considering reopenings similar to a dress rehearsal. We won’t know until we try, and once we do, we’ll have our answer, and we’ll know what to do next.) For sanity’s sake, it’s important to remember that the total number of cases is considered an imperfect metric, especially in the U.S.
From Axios, “As we conduct more tests, we’ll identify more cases, and so the number of confirmed cases can spike even if the scope of the outbreak isn’t getting a lot worse. The U.S. case count could be rising because new cases are rising, or because of better testing or a combination of the two.”
Confused yet? Me too. Let’s switch gears and talk about something a bit more concrete.
Nearly 33.5M people have filed for unemployment benefits in the U.S. since mid-March, according to the Labor Department. In the latest report, the U.S. lost a record 20.5M jobs in April, and unemployment hit 14.7%, which is likely an undercount due to technical glitches and understaffed unemployment offices.
In the seven weeks since officials began ordering businesses to close, the implications of the coronavirus have been far-reaching and are only mounting. At a glance, ADP reports the following losses across industries:
Of those 33M+, roughly 45k were associated with tech companies, organizations that analysts believed could weather the storm.
Airbnb, 1,900 workers
ClassPass, 22% of its workforce
Glassdoor, ~300 individuals
Lyft, 982 employees
Uber, 3,700 employees
Yelp, 2,000 workers
ZipCar, 500 employees
The website Layoffs.fyi sprang up in recent weeks to track the coronavirus’s impact on tech and media industry employment. (When I saw this, my first thought was what mass tech layoffs will mean for the San Francisco housing market, an area with a historically-high cost of living and real estate market.) As such, state governments are outlining budget deficits that have cleared the way for additional stimulus plans that are barreling through Congress.
Make no mistake, these unemployment numbers and its effects are mind-numbing, but what’s eye-catching are the other developments that accompanied the news of furloughs, layoffs, and pay cuts, which give us a glimpse into the future of life after COVID-19.
Media — From NBC Byer’s Market, “A major restructuring of NBCUniversal that will bring the company’s television networks and streaming service together under Mark Lazarus and reunite NBC News, MSNBC and CNBC into a single unit… [NBC] is moving fast to streamline costs and establish a more cohesive structure across the organization… the unification of NBC News, MSNBC, and CNBC will strengthen the company’s competitive position against AT&T’s CNN, which is the only other news network with similar scale.” The restructuring announcement came right before the news of pay cuts to senior leadership at NBCUniversal.
Retail — J.Crew and Neiman Marcus filed for bankruptcy this week, moves that will help better reposition the retailers for success after COVID-19. J.Crew will reportedly reopen stores and continue its ecommerce and digital advertising operations while undergoing its financial restructuring.
Travel — Airbnb announced it would be laying off 25% of its staff in the same letter that Airbnb CEO Brian Chesky shared announcing that the company was going to “step away from more experimental areas, like media, to focus on its core business,” according to The Information. This news came only days after Airbnb announced it had secured $2B in additional funding to help the company ride out the challenges currently facing the travel business. It seems that some layoffs represent long term business strategy shifts, not necessarily the cash or liquidity position of a business.
Bottom line: Across industries, companies are facing a threat unlike any other, causing ambitious and revered brands to rethink long-term strategies as firms step away from ventures that are not business-critical to the viability of the company.
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Have a restful weekend, and we’ll see you back on Monday.
Posted by Abby Long
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