PANDEMIC HAS CHANGED ECONOMIES ACROSS BOARD
It would be just a temporary precaution.
When the viral pandemic erupted in March, employees of the small insurance firm Thimble fled their Manhattan offices. CEO Jay Bregman planned to call them back soon — as soon as New York was safe again.
Within weeks, he’d changed his mind. Bregman broke his company’s lease and told his two dozen or so staffers they could keep working from home — possibly for good.
The gains were at once unexpected and immediate. Bregman is saving money on rent. He no longer has to persuade recruits to relocate to a crushingly expensive city. He’s increased his staff by 20 percent and for the first time added new hires in Texas and California.
“I was very skeptical at first that we could conduct business this way for a long time,” Bregman said. But having employees work from home proved a “huge benefit” for everyone.
Like no other event in memory, the pandemic has upended economies in the United States and across the world — transforming how people work, travel, eat, shop and congregate. It has changed how students are educated, how people communicate, how households are entertained and which industries, geographic areas and categories of people will thrive and which will suffer.
It has widened a gap between educated and affluent people who can work from home and the less fortunate — people in lower-income households without college educations or high skills who depend solely on wages rather than stock or home equity gains — who now stand to be left further behind. And it’s forced many working mothers to quit their jobs for lack of child care.
The economy shed a shocking 22 million jobs after the pandemic struck. Many employers have since recalled some of their furloughed workers. Yet the recovery has slowed. Not until the end of 2023 does Moody’s Analytics foresee the U.S. economy regaining its pre-pandemic employment level. In the most bruised sectors — hotels, for example, and retail — changing economic habits mean that employers may never need as many workers as they did before the pandemic.
Even after vaccines have conquered the virus, economies have restored their health and jobless people have found work again, the economic landscape will almost surely look different. Among the many life-altering consequences of the year 2020, the coronavirus reshaped how people and businesses engage economically.
At the very least, the crisis accelerated trends that were already well underway: A shift away from physical stores toward e-commerce. The flexibility of working from home. The streaming of movies rather than theater-going. Frequent meal deliveries. Video-conferencing replacing much business travel.
“We’re not going back to the same economy,” Federal Reserve Chair Jerome Powell told a European Central Bank forum last month “We’re recovering, but to a different economy.”
Businesses are rewriting their business plans to keep up. Warner Bros Pictures announced this month that all its 2021 movies, including a new “Matrix” movie and “Godzilla vs. King Kong,“will stream on HBO Max at the same time that they appear in theaters — a seismic shift for Hollywood. Restaurants are testing delivery-only “ghost kitchens” to keep serving customers who remain wary of crowded dining rooms.
Even so, economists say it’s far from certain which of the myriad changes will prove permanent and which may fade as people who’ve been holed up at home for months return to their prepandemic routines.
Will white-collar workers yearn for their old cubicles and face-to-face contact with friends and colleagues? Will foodies return to fashionable restaurants, young people to the hottest bars? Will audiences once again gather, elbow to elbow, for symphonies, Hollywood blockbusters and Broadway musicals? If attendance doesn’t return to normal, can those industries survive?
For the economy’s vast retail sector, the urgent question is: Will customers want to shop in physical stores in numbers anywhere near what they used to be?
Retailers like Lisa Shah are holding out hope. Shah has been hurt by a plunge in tourism in Massachusetts and New Hampshire, where her three LIT Boutique stores are located. Before the pandemic, her women’s clothing stores combined would see about 600 customers each weekend. Government-mandated restrictions and the anxiety of customers have slashed that figure essentially in half.
Shah has since built up her online store, changed the brands she offers and dangled discounts. She keeps asking herself what else she can do.
“I don’t know where else to pivot,” she said. “We’ve pivoted so much.”
Optimistically, some experts detect a collective hunger to return to the old ways, at least for people with the means to do so — to the familiar and comfortable routines of gathering at bars, dining in restaurants, strolling in stores, flying off on vacation.
“I don’t think you should overestimate how much will be permanently changed” by the pandemic, said Jacob Kirkegaard, senior fellow at the German Marshall Fund of the United States. “The idea that COVID will be a fork in the road for a lot of things — I am personally skeptical.”
People, Kirkegaard said, “want to go to restaurants. They want their life back, not a new life they haven’t tried before.”
China, where the virus originated, may provide a hint of what’s to come for others. After that nation mostly contained the virus with a draconian lockdown and became the first major economy to emerge from the pandemic, nor
mal life reasserted itself with surprising speed. People returned to restaurants and shops, even though guards still check temperatures at malls and supermarkets. Cinemas are about half-full but have reopened. Chinese are beginning to travel for fun again.
Uncertainty about COVID’s lasting impact is evident in how companies and workers have spent months weighing the pros and cons of remote work.
For all the attention focused on employees who can work effectively from home, they are hardly a majority. According to a McKinsey Global Institute study of 800 jobs in nine countries, only a fraction of people work in jobs that can effectively be done remotely — fewer than 30 percent of workers in the United States, for example, and fewer than 12 percent in India.
Still, a McKinsey survey of 800 corporate executives worldwide found that 38 percent of them expect their employees who are now working remotely to continue to do so at least two days a week after the pandemic. That compares with 22 percent in surveys before the pandemic, according to McKinsey.
The shift is big enough to have farreaching implications — improving the quality of life for some, while deepening inequality and hurting some urban economies. Emptier cities are a grave threat to downtown restaurants and retailers that depend on office workers. Rents in cities like San Francisco and New York are sinking as more people move out. Municipal governments will struggle to collect enough taxes to provide services.
Some employees now working remotely express mixed feelings about the arrangement. A body of studies indicates that most of them oppose giving up the workplace environment entirely.The pandemic has caused an unimaginable nightmare for the restaurant industry. Some of the scars will likely linger.
In pre-pandemic days, Brenda’s French Soul Food was always hopping. Apopular restaurant in downtown San Francisco, it drew tourists and locals alike with its beignets and other Southern foods.
Everything slammed to a halt on March 16, when San Francisco banned indoor dining to stop the spread of the coronavirus. Suddenly, 150 employees were jobless. Chef Proprieter Brenda Buenviaje couldn’t bear to break the news in person.
It’s a story that has happened again and again this year. The National Restaurant Association estimates that one
in six U.S. restaurants — more than 100,000 — have closed. Many that stayed open shifted to takeout and delivery, but they need fewer staff. The association estimates that 2.1 million U.S. restaurant workers remained out of work in November. Hudson Riehle, who leads research for the association, predicts that U.S. restaurants will collect $659 billion in revenue this year — down 27 percent from the roughly $900 billion the association had forecast earlier this year.
Independent restaurants were hit hardest, said Rick Camac, a dean at the Institute of Culinary Education in New York. Loans from the government’s Payroll Protection Program helped initially. But that money has long run out. After an anemic holiday season, Camac expects another big wave of closures early in 2021.
By contrast, some fast food chains have mainly recovered, thanks to a growing customer use of drive-thru and curbside service. In China, the world’s second-largest economy after the U.S., spending at restaurants was up 0.8 percent in October from a year earlier. But customers are still uneasy. Some bring their own utensils, and restaurants keep jugs of hand sanitizer at the front door.
“Now, I will be more careful,” said Chen Luping, a 38-year-old mother of two in Beijing.
The pandemic has accelerated a trend toward takeout and delivery that was already well underway before the virus hit. In February, 63 percent of U.S. restaurant goers were eating their food elsewhere; by the third quarter of the year, that figure reached 90 percent, Riehle said.
Even when restaurants eventually reopen at full capacity, in-person dining may never revert to its pre-pandemic levels because so many people now prefer eating at home, says David Portalatin, an analyst with The NPD Group.
Restaurants are rethinking the amount of dining space they need and are adding drive-thru lanes. Starbucks is closing 400 U.S. cafes and speeding up its plans to build more pickup-only locations. Menus have slimmed down to control costs and focus on food that travels well. Ghost kitchens, which prepare food for delivery only, may proliferate. Carrabba’s Italian Grill, a 220-restaurant chain, has launched a delivery-only brand called Tender Shack out of its kitchens.
“We fast forwarded about five years into the future in a few months’ time,” Portalatin said.