The 2020 recession Americans have been enduring is very different from past downturns.
First and foremost, the economic shutdown was induced by government fiat.
But the shutdown was selective in nature. Amazon and the big box stores (Costco, Walmart, Target), which were permitted to remain open, have been doing pretty well financially throughout the crisis.
In the case of Amazon, it has done extraordinarily well. The value of the Amazon stock owned by Jeff Bezos, went up $13 billion one day in mid-July.
The Big Government crowd approve of big stores because their corporate chiefs, who fear boycotts and public denunciations, are easily intimidated.
Hence, the section of the economy disproportionately damaged—small businesses. (Since they are hard to control, Big Government types despise small shops almost as much as they loathe suburban single- family homes.)
A study issued by the Partnership for New York City estimates that one-third of the city’s small businesses—that’s 80,000—may not reopen. That translates into several hundred thousand working-class folks pounding the streets looking for a job.
The news gets worse.
The Wall Street Journal, in an article titled “More Restaurants Forced to Close as Virus Fears Diners Away,” reported that between March 1 and July 10, 2020, over 1,250 New York restaurants have closed permanently.
Only Texas and California — whose combined population is three and a half times greater than the Empire State — have experienced more closings, 1,300 and 2,250, respectively.
Fisher and Phillip’s National Hospitality Practice Group has noted that in August there can be more restaurant closings in New York if the Paycheck Protection Program grants to save jobs runs out. Also, many landlords who offered rent deferments of a few months want to be paid in August.
The Nassau and Suffolk COVID-19 Economic Impact Report released by the two County Executives on July 8, 2020, also paints a dreary picture.
The study states that “net job losses to date total 220,000 and may reach as high as 375 thousand in 2020, reducing local earnings by as much as $21 billion and local economic activity by $61 billion.”
So far, 8 percent of Long Island businesses have closed and the hospitality sector — food and drink services — has been hardest hit.
This helps explain why the highest unemployment on Long Island is among the working class — particularly Hispanic workers.
The selective nature of the coronavirus pandemic closings is wreaking havoc on Main Streets throughout Long Island.
Retail space vacancies are hitting all-time highs — north of 20 percent — which in turn means commercial real estate values will drop and many owners may have no alternative but to default on their mortgages.
Here’s another reason why the recession is unique:
In past downturns, people stopped spending because they were unemployed. Hence, the government often stepped in with deficit spending to jumpstart the economy in order to get people back to work so they could resume spending.
However, as economist Arnold Kling, writing in National Affairs, noted, “In , the government has been more concerned with slowing the spread of the virus, and policymakers actually prefer to see ‘unessential’ consumption activities curtailed. In a typical recession, construction and durable goods manufacturing experience the sharpest decline, while service industries stay relatively stable. In this case, in-person services have been among the hardest hit sectors of the economy.”
Retail and restaurants have been suffering because those lucky enough to be employed with disposable income are staying home and not spending locally.
And their spending habits are changing.
Many, myself included, are ordering more online and are not in a rush to dine indoors. As for outdoor dining, it has not been appealing in 90-degree weather and will not be feasible come November.
In addition, Gov. Cuomo has further hindered restauranteurs by dictating what constitutes a bona fide meal.
Sadly, the coronavirus pandemic will have a lasting impact on New York’s economy—particularly on Long Island. Thanks to poorly-conceived government policies, Main Street shopping may become a relic of a quainter age.