Memphis economy amid COVID-19: How long will it take to rebound?
We reached bottom. We’re starting to come back.
Just the other day, Autozone reported surprisingly decent quarterly results.
The Memphis-based retail chain isn’t the only business on an uptick.
Apple has prepared to reopen some of its stores around the country.
Hotel occupancy rates have risen nationally for five straight weeks, reaching 32.4% by May 16.
New home sales have picked up. “One critical measure is consumer confidence, and in May, the Conference Board’s Index rose a touch, which was good to see,” Philadelphia-based economist Joel Naroff says in his most recent note to clients.
People are spending again. The economy is rebounding. And all those jobs we lost — will we have full employment by the Fourth of July? Or Labor Day? Or Valentine’s Day?
Don’t bet on it.
Getting back to business
Work vanished across the region at an almost unbelievable rate in April. Over a few weeks, more people were let go than were laid off in the three years the last recession hammered on Memphis, beginning in 2008.
In the best of times, Greater Memphis grows new jobs slowly. If this truism holds, getting past this downturn will take years. Kids entering first grade this summer might be in middle school before Memphis regains all its lost jobs.
“We all know we are not got going to bounce back quickly,’’ University of Memphis economist John Gnuschke said. “What’s going on with the airlines is telling. When will they get people to get back on the airliners? People have to be confident the coronavirus is really gone.”
Help is coming, but it is still over the horizon. Dozens of companies and laboratories worldwide are trying to innovate a medicine or vaccine to stymie the virus. A remedy appears to be perhaps a year away.
Until a solution arrives, uncertainty will stifle consumer spending. Millions of people will be reluctant to sit down in a nightclub, get into a ride share, walk into the shop or attend a big meeting.
That in turn will hold back the economy and hiring, particularly in Memphis’ tourism-oriented hotels, museums and restaurants and their legions of vendors such as linen suppliers, food brokers, liquor wholesalers, accountants and electricians.
Opening up the city amid the virus
We’re opening back up now, using social distance and safety guidelines, while lifting the lockdown that sank the economy, although the virus is still among us.
Numbers in Memphis Mayor Jim Strickland’s latest “Weekly Update” email show that 364 coronavirus cases were confirmed in the five-day period that ended May 21, compared with 298 cases in the previous five days, and 371 in the five days before that.
There’s half a month of data, and the numbers suggest the virus shows little or no hesitation. Its spread continues. Since the epidemic took hold in early March, 5,945 cases had been detected by Tuesday in the nine counties that make up the 1.3-million-population metro area, along with 121 deaths, led by 4,451 cases and 94 deaths in Memphis and Shelby County. In contrast, the case count stood at 1,070 for the metro area on April 6.
In spite of the virus’s spread, there is a positive sign. The lockdown was meant to slow infection and spare the city’s nine hospitals from overload. Clearly, doctors, nurses and technicians have avoided a crushing surge in COVID-19 patients.
In Memphis, hospital intensive care units treating the sickest people surpassed 40 virus patients on April 8 and since then have fluctuated between 42 and 57 virus patients daily, Strickland’s “Weekly Update” shows.
We’re not experiencing a rapid spike in the most life-threatening cases.
Meanwhile, the economy is reopening, but slowly.
If history repeats itself
Just before pandemic set in, employment in metro Memphis reached record highs. By early March, 614,400 area residents had paying jobs. Employers had filled 654,200 part-time and full-time jobs. (Jobs outnumber workers; thousands work two or more part-time jobs.)
March brought a 4.3% jobless rate, but government labor analysts have not yet reported April’s carnage. The new unemployment rate will be available later this month. It’s certainly headed into double digits. At least 80,000 residents have filed applications for unemployment compensation. This gives rise to estimates of an April unemployment rate above 15% in metro Memphis, which puts the jobless rate among African Americans over 30%, Gnuschke said, given black unemployment usually doubles the regular unemployment rate.
When will Memphis get back to its pre-crash job levels?
“I don’t think we’ll be back by this time next year,” Gnuschke said. “It could take us a decade. It took us decades to create that many jobs.”
What he means is this: Once the coronavirus lockdown cooled the economy in March, employers shed 65,700 jobs the next month, says the U.S. Bureau of Labor Statistics’ latest survey of metropolitan Memphis employers.
Even as layoffs surged, 588,500 jobs remained filled in April, which prompted Gnuschke’s comment. The last year employment in metro Memphis stood at April’s level was in 1997, which means generating 65,700 new jobs took 23 years, including setbacks in two recessions.
Given the lessons of the recovery from the 2008 crash, Memphis could get its employment levels back in less than two decades. But as Gnuschke said, it could still take time.
Greater Memphis clawed slowly out of the recession that began in December 2007. By 2010, employers had 53,000 fewer jobs filled than in 2008. Once recovery began in 2011, hiring was steady but cautious. Depending on the month used as a yardstick, employment here did not exceed pre-crash job levels until 2017 or 2018.
What comes next?
One difference between now and 2008 is Washington’s stimulus package. That and the fact credit all but vanished in 2008, while many companies and households today can continue to obtain loans.
Although criticized for not extending enough aid for small businesses, part of the recent stimulus package aims to stabilize business in a way that was not available amid the 2008 recession, including one-time $1,200 payments to households, an additional $600 per week in unemployment compensation and guaranteed loans to make sure payrolls remain in place for several weeks.
And as the sales figures from Autozone show, the U.S. economy hasn’t turned dormant. The company’s samestore sales fell 1% compared with the same quarter a year ago. Once the stimulus checks reached households, sales perked up.
“While certain retailers closed their stores during this time, our stores remained open to service the motoring public,” said Autozone Chairman Bill Rhodes.
That may be what recovery looks like in the coming months. National companies tick up, rely on extensive reach like Autozone, which operates more than 6,000 stores on two continents. And we could see a new tide of construction. Memphis real estate executive Dan Wilkinson says companies may bring back production of key products and make and distribute in Memphis items they now import.
Meanwhile, full recovery for nightclubs, restaurants and museums may await the coronavirus solution. Memphis relies on tourism for a large share of its economy. But travelers have to feel comfortable they can venture out again.
Ted Evanoff, business columnist of The Commercial Appeal, can be reached at evanoff@commercialappeal.com and (901) 529-2292.