“It’s a terrible thing that after being shut down for so long, and these businesses were preparing for opening on June 3, putting out patio furniture and doing other things to get themselves ready, that now instead of a moment of celebration, what they’re doing is experiencing a moment of despair”, Chicago mayor Lori Lightfoot said Sunday.
The city may delay a partial reopening planned for Wednesday in the wake of protests which turned violent, as they did in several other major metropolitan areas across the US over the weekend.
It was just four days ago when Lightfoot announced that Chicago was poised to move to “phase three” of a reopening push on June 3, following the rest of the state down the long road to recovery after coronavirus lockdowns.
California, meanwhile, declared a state of emergency in Los Angeles County. Similar precautionary measures are being mulled or adopted elsewhere.
This is a body blow for the world’s largest economy, and potentially to investor confidence and consumer sentiment, both of which are trying to recover following deep dives in March. The protests against racial injustice threaten to upend a tenuous reopening process that was already fraught with uncertainty and logistical dilemmas.
It goes without saying that discussing the context of the protests is far more important than what happens to any stock benchmark or the timeline on any “grand” reopening date for a given city.
It is entirely possible that the country has reached a cultural breaking point, beyond which large swaths of the public will adopt a “zero tolerance” policy towards violence and discrimination against minority groups. That policy, it would appear, will be enforced in the streets.
And yet, as callous as it seems, and as flawed as American capitalism has proven itself to be (just ask Ray Dalio or Jamie Dimon, two of the most successful capitalists in the nation’s history, how screwed up things are), we have to consider the economic context, not just because we care what the S&P does this week, but because the country is currently witnessing the worst economic downturn in at least 100 years.
If the recession persists and morphs into a “real” depression (where that means mass joblessness and extremely depressed demand are sustained for an extended period), it will invariably mean even more pain and suffering for minority groups, low-income families and others hit hardest by the virus lockdowns.
Target, which had closed dozens of locations around Minneapolis, said Sunday it will temporarily shutter stores in Oakland, Atlanta, Chicago and Philadelphia, among others.
“We recognize the important role we play in helping our communities shop for the food, medicine and other essentials they need”, a press release reads. “We apologize for the inconvenience and will reopen our stores on their normally scheduled hours as soon as it is safe to do so”.
Target is, of course, based in Minneapolis, the scene of George Floyd’s death. “We are a community in pain”, CEO Brian Cornell said in a letter. “The murder of George Floyd has unleashed the pent-up pain of years, as have the killings of Ahmaud Arbery and Breonna Taylor. We say their names and hold a too-long list of others in our hearts”.
From a macroeconomic perspective, it’s important to note that unlike the virus lockdowns, this is not a situation where all “essential” businesses can necessarily be kept open, as Target made clear in the statement announcing additional store closures. This isn’t as simple as wearing a mask and politely asking patrons to observe social distancing guidance.
Even Amazon may not be able to completely pick up the slack.
“If you are currently out delivering packages, stop immediately and return home”, a message sent to the company’s drivers in Chicago and LA on Saturday evening commanded. “If you have not completed your route, please return undelivered packages to the pick-up location whenever you’re able to do so”.
I don’t claim to have analyzed the data beyond what’s indicated in the figure, but the chart shows Apple mobility data (using the “walking” category) and plots a 113-city average against four individual cities.
Protests aside, New York City is still in lockdown mode, so it’s not surprising that the data shows subdued activity, and some spikes are surely tied to what day of the week it is. But it’s probably safe to say that the spikes shown for Minneapolis and similar (if less dramatic) upticks for Chicago and Atlanta, are related to the demonstrations.
It’s true that the protests would have to persist for quite a while longer in order to materially impact total US economic output, especially considering nobody is going to notice another point or two of downside during a quarter set to show the largest contraction in the history of modern economic statistics.
But this should be considered in the context of a populace that’s already wary of returning to “business as usual” given the uncertainty surrounding the public health situation.
On the whole, the reopening push nationwide was going about as well as one could expect, a few outliers notwithstanding. It’s too early to say whether the protests will derail things for more than a couple of weeks, but the issue for many businesses is that each day with the doors shut is another day closer to insolvency – even with federal aid.
According to a recent poll by the Society for Human Resource Management, more than half of America’s small businesses will exhaust their capacity to keep going by the end of October.
The study polled 375 firms between April 15 and April 21. 12% said they can last “up to one month”, while 20% said they can make it more than 30 days, but may be out of business within three months.
Just 34% expressed confidence in their own viability past six months.
Over the weekend, the doors on some retail locations in large cities were indeed open. And there was plenty of foot traffic – just not the kind that generates any revenue.