JUNE 1, 2020
Consumers Remain Fearful Even as States Reopen
Uncertainty seems to be the key word in describing how most Americans are feeling about their lives in the midst of the coronavirus pandemic, about the state of our country's economy, and about their own financial security. This issue spotlights some of the factors causing that uncertainty as well as some of the issues our country must pay attention to if our economy is going to restart and fully rebound.
ThereTwo surveys, one conducted in April by Slate, the other conducted just two weeks ago by Associated Press and the NORC Center for Public Affairs Research, provide some insight into the economic recovery.
When asked in April what they will be comfortable doing when stay- athome- orders are lifted, 70% said they would still not fly on a commercial airplane, 61% would not go to an outdoor concert, 71% would not go to a movie even with reduced seating, and 73% would not eat at a restaurant indoors even with reduced seating.
In the most recent survey, 81% said it is unlikely they would attend a sporting event in the next few weeks if they could, 57% would avoid going to a restaurant (an improvement compared to the April survey), 86% would not use public transportation, and 76% would not return to the gym.
of people surveyed in May said they would avoid going to a restaurant if they could, an improvement from 73% in April
Real world results, as opposed to a survey, also demonstrate the reluctance on the part of many consumers to return to their pre-pandemic lifestyles. Recent data published by OpenTable noted that even in Georgia, which opened many businesses last month ahead of other states, traffic at restaurants that have reopened is only about 15 percent of normal.
However, as reported by AXIOS, consumer fear may be easing, at least for now, in that the number of Americans who say returning to their precoronavirus lives right now would be a large or moderate risk to their health and well-being declined from 72 percent in April to 64 percent in May. Fear of going to the grocery store has declined from 70 percent in April to 54 percent in May, while concern about in-person gatherings has gone from 81 percent to 68 percent.
The widespread fear of contracting or spreading coronavirus is not surprising when one considers the data: over a quarter of all Americans now know someone who has tested positive for the coronavirus, while about 1 in 8 know someone who has died from it. The take-away is that a rapid economic recovery is not likely, slowed by fear, which will likely abate once a proven vaccine is available or herd immunity is achieved.
Meanwhile, the effects are dramatic, OpenTable has estimated that one of every four restaurants will go out of business. UBS claims 100,000 retail stores will close over the next five years. April saw a collapse in clothing and accessories that amounted to an 89.3% fall from a year ago. There is a bright spot for e-commerce, however, as online sales have jumped to 25 percent of U.S. retail sales, up from 15 percent last year.
It is reported that 75 percent of American small businesses applied to the government loan program, however only about 38 percent have received a loan.
The first round of money authorized for paycheck protection loans -- some $349 billion – was fully distributed in just fourteen days. The issues with how difficult it was for the smallest businesses to access that money was reported in this publication.
Now a second round of money -- $310 billion -- has been available since April 24. However, as of mid-May some of that money was still available. The reason is that many small businesses are now reluctant to complete a loan because the restriction to use the money only for employee payroll doesn’t match their need or size of business, the terms are unclear with clarifications still not available from Congress, and there is an 8-week loan forgiveness period, which businesses still not able to open cannot fulfill.
The average loan size has come down dramatically from $206,000 in the first round to just $73,000 in the second. Part of the reason is because selfemployed individuals and other single-person businesses were not initially able to compete with larger employer businesses.
Now the question is, “Has the PPP program been successful?” As reported in AXIOS, Torsten Slok, chief economist at Deutsche Bank Securities, says we won’t know until eight weeks after the loans were given out. He says success means we will need to see job growth go up in the millions in May and June because that’s when we get closer to the deadline for companies to hire back their employees.
A Continuing Challenge For U.S. Latino Business Owners
As reported in the New York Times, a survey conducted by the Global Strategy Group for two equal-rights organizations, Color of Change and UnidosUS, included interviews with 500 business owners and 1,200 workers from April 30 to May 11. That survey found that Just 12 percent of the owners who applied for aid from the Small Business Administration, most seeking loans from the Paycheck Protection Program, reported receiving what they had asked for, while 26 percent said they had received only a fraction of what they had requested. Two-thirds of the respondents sought loans of under $50,000 through the government’s aid program.
It was further reported that nearly half said they had to lay off at least some employees, while nearly half of all owners said they anticipated having to permanently close in the next six months.
For some U.S. Latino business owners, this was the first time they had ever approached a bank for a loan. Some banks would only consider current customers for loan approval. Equal-rights advocates and some lawmakers began pushing to get more help for minority business owners built into the government’s response to the coronavirus pandemic. Some progress was made in the second round of funding for the loan program, which set aside $60 billion for small and rural banks and nonprofit lenders, the kinds of institutions that tend to do more work in minority communities than large banks do.
Pandemic makes income disparity in U.S. even more obvious
On a day in mid-May, it was reported that the 8 wealthiest individuals in the United States experienced a collective $6.2 billion in profits in the stock market. At the same time, 36 million Americans had filed jobless claims, and almost 40 percent of households earning $40,000 or less annually had experienced at least one lost job, compared to just 19 percent of households earning between $40,000 and $100,000.
The underlying income disparity in our country has been growing for the past fifty years and has been more clearly exposed during the pandemic. At the end of 2019, the average income of 90 percent of Americans was just $35,628. Forty-six percent of our working population were earning less than $30,000 per year.
of America's working population earns less than $30,000 per year.
It has been estimated that 40 percent of workers who are now receiving unemployment compensation due to losing their job because of coronavirus, are making more from unemployment than they were from their job. That is a sad commentary on the value our society has placed on many of the jobs everyone depends on, many of which are essential to our everyday well-being, such as agricultural and healthcare workers.
Many of those critical jobs are filled by U.S. Latinos. In fact, U.S. Latinos have accounted for 80 per cent of the net new growth in our workforce across most sectors of the economy in the last decade. As consumers, U.S. Latinos have been responsible for the majority of net new sales growth across nearly every sector, thanks to the fact their real consumption has been growing 70 percent faster than that of non-Latinos. One of every seven small businesses in America is owned by a U.S. Latino.
Today, one of every five Americans is a U.S. Latino. Among Millennials it’s one of every four. Among the Alpha generation U.S. Latinos are one of every three. In other words, this is the cohort that will account for our country’s economic future, and is already responsible for much of our tax base that funds Social Security and Medicare for the four Baby Boomers who leave the workforce every minute.
We know that this cohort has been economically impacted by the coronavirus to the tune of 19 percent unemployment. However, the majority of those unemployed tend to be in the industries that undervalue their employees from a compensation perspective. It is estimated the 19 percent unemployed portion of the U.S. Latino workforce only represents about 8 percent of the total U.S. Latino GDP.
The income disparity in our country is now more obvious than ever, and threatens our country’s ability to fully recover economically from the pandemic because fewer and fewer people are losing more and more of their purchasing power. The top 10 percent of the population, based on income, now owns 70 percent of all the wealth in our country. This concentration of wealth is the greatest it has been since the 1920’s.
The May 8th NBC News headline should serve as a flashing warning light to our country. It said, “Latinos hardest hit by coronavirus job losses.”
U.S. Latinos are the people who have been starting more new businesses, buying more new cars, representing over 50 percent of new homeowners, buying more mobile phones, and even enlisting more as U.S. Marines. They are America’s New Mainstream Economy, and its restart and rebound are undeniably essential to our country’s recovery from Covid-19.