How a summer of ‘yes’ ends in a cloud of uncertainty for businesses
It started as the summer of possibilities. Earlier this year, the lines outside the restaurants were long and the bars filled with revelers. People have started shopping for clothes to look presentable again after more than a year of pandemic isolation.
And why not? Things seemed safer: by the end of April, around 100 million people had been vaccinated. The worst days are behind us, said a leading public health expert. Soon after, the relatively risk-averse Centers for Disease Control and Prevention told Americans they could get rid of their masks even for indoor gatherings as long as they were fully immunized.
There was a feeling of dizziness in the air.
How quickly the roles have turned. Masks have been put back on in many places as the latest variant of the coronavirus surges in the United States. Shoppers are scared again, travelers are staying at home – and that means the economy is once again on shaky ground.
“The increase in infections and hospitalizations this summer has been disconcerting,” Mark Zandi, chief economist at Moody’s Analytics, said this week in a research note. “Worried households suddenly became more cautious when flying and going to restaurants.”
On Wednesday, the Harris Teeter supermarket chain said it would close earlier, in part in response to the latest wave of the delta variant. Another regional grocery chain, Publix, has done the same in the Charlotte, North Carolina area. As fewer customers showed up, the store decided it was time to call back.
This type of decline is repeated in different types of companies in the US economy.
After spike in travel in early summer, people recall plans to fly
Southwest Airlines recently warned that bookings were starting to drop and cancellations had started to rise.
It came just weeks after Southwest CEO Gary Kelly said demand from leisure travelers was so great that traffic in July is expected to exceed levels of the same month in 2019, ahead of the pandemic. of coronavirus.
In fact, the airline was even predicting bigger and better days to come.
“Next year, we plan to resume deliveries of new aircraft, with the desire to restore our network of routes if necessary to pre-pandemic levels,” Kelly said on a conference call the same month.
This optimism is now clouded by uncertainty for so many companies. This is evident in the series of decisions made by different companies to postpone their plans to return to the office, despite preparations for the big reopens in September and October. Microsoft even refrained from providing a new date last week when it postponed its October reopening plans.
All of this has led to a dramatic slowdown in hiring. After creating around 1 million jobs in June and July, the United States added just 235,000 jobs in August, less than a quarter of each of the previous two months.
Airbnb’s revenue skyrocketed, but soon after, things slowed down.
The uncertain trajectory of the coronavirus has caused a whiplash in many sectors of the economy. The most affected are restaurants and bars, which had seen a wave of hiring earlier. In July, they added almost 300,000 jobs. But in August, they cut 42,000 jobs.
Nowhere is this more visible than in businesses that rely on people to leave the safety and comfort of their homes and go to new places.
In the early summer, when airline bookings skyrocketed and rental cars ran out in many parts of the country, vacation homes for rent were hard to come by.
“It was Vrbo’s best start to the year in the US,” said Melanie Fish, travel expert at vacation home rental site Vrbo.
Rival Airbnb’s revenue for the months of April, May and June combined increased 300% from last year and exceeded the same period by 10% in 2019. But even as Airbnb’s CFO , David Stephenson, announced the results, he warned that the company had already started to see a “decline in demand”.
This is the path of the unpredictable, ruthless and relentless virus.
Seeing the writing on the wall, economist Zandi sharply lowered his forecast for economic growth this year. Zandi now believes the economy will grow 6%, down 14% from his earlier, more optimistic estimate of 7%.