Economic Impact of the Coronavirus Pandemic
By Faiza Zia Khan
Newport Beach, CA
Recently it feels like the world has hit the pause button on their favorite Hulu TV show and forgotten to press play. Each morning I wake up and fearfully switch-on the news to check the number of reported coronavirus cases in the United States. Daily I repeat the same mantra under my breath - here is to hoping that tomorrow these figures will go down. That day will definitely come soon.
Presently, despite all wishes and prayers the US now leads the world statistics with the highest number of confirmed coronavirus cases. Experts had correctly predicted the situation will worsen before it gets better. What they were not prepared for was the colossal impact this virus is having on the physical health of the affected individuals and the financial health of the global economy. In California it is mandated to close all businesses except the "Essential Services." There could not have been a better call-to-action than this lockdown. The only way to stop the virus from spreading is by keeping the healthy in good health and as far away from the virus as possible.
The US Department of Labor reported at the end of March 21, a record 3.3 million people filed for unemployment insurance in one week alone.The record jobless claims announced the beginning of an economic crisis for American workers and businesses. This recessive behavior is projected to have a ripple effect that will continue for months after the coronavirus pandemic is contained. Economists forecast this massive spike in unemployment that could potentially result in over 40 million Americans losing their jobs by mid-April. Due to the dine-in restaurants and hospitality industry on a full shut down and operating on a skeletal basis there are massive layoffs. Hotel chains and airlines furloughed their employees indefinitely. Corporations gave strict orders to their employees to work from home (WFH).
News in regards to massive business losses started coming through. Globally, governments struggled to stabilize their economies, while locally companies grappled to cope with the disruptions caused by this pandemic. The most surprising statement came from The Cheesecake Factory (TCF), one of the most popular sit-down restaurant chains in the country. TCF issued a press release stating “it will not be able to make upcoming rent payments for any of its storefronts on April 1 because of significant loss of income due to the coronavirus crisis.” After I read this news it hit home hard as TCF was founded in Beverly Hills in 1972 and still maintains its original location on Beverly Drive where I have fond memories with friends and family alike.TCF attributed a severely low cash flow due to a drastic decline in restaurant traffic that has “inflicted a tremendous financial blow” to its business. TCF further reported that its affiliated restaurants, such as Flower Child, North Italia, Rock Sugar Pan Asian Kitchen, and Social Monk Asian Kitchen will also not be able to make their April 1 rent payments. Most of TCF restaurants are located in major malls that are currently closed due to the lockdown.
The US airline industry seemingly was a recession-proof industry. However, due to the coronavirus travel restrictions the airline industry saw a radical decline in reservations. A major blow came as the CEOs pushed the federal government to grant the bailout package there would be no layoffs or furloughs before September. If the pandemic is contained in a timely fashion, there would possibly be none at all. On the flip side the CEOs forgot to include thousands of employees who work for airport and airline contractors around the country. These workers are employed by the airline peripherals on a contractual basis by the airport authorities. They provide services like oversized baggage handling and security, pushing wheelchairs, managing check-ins, collecting luggage carts, and ushering foot traffic.
Attached to the airline industry is the car rental business. Avis announced major cutbacks by laying off staff, reducing the car rental fleet and strictly pausing capital spending along with other cost-cutting measures.
The Real Estate market in California took a downward dive in sales. Although the property prices stayed consistently at an all-time high the real estate groups took to capital-conserving methods. It was reported in the media that Zillow Group postponed home buying in the 24 markets significant for their business. Zillow stopped open houses for homes in all markets last week.
The idiom, every cloud has a silver lining, suits the next news perfectly. While the above businesses are struggling, there is a very bright light shining at the end of a dark tunnel for online retailers such as the shopping giant Amazon. Online shopping figures are at an all-time high. Amazon Prime customers have been told some items could take up to a month to deliver as there are monumental pile-ups of online orders.
Most importantly, an ethically responsible decision made by the company has shifted their focus on getting medical supplies, hand sanitizers, sanitizing wipes, germicides, baby formula, and other essential survival items to customers first. The usual two-day delivery deadline can no longer be met due to excessively high influx of sales orders. Further, Amazon announced it plans to hire 100,000 people in the US to keep up with this increase in orders as no word came from the US government about opening up businesses in the near future. Amazon projected orders to quadruple as more people stay home and resort to online shopping for effective social distancing. Similarly,Instacart, an online grocery shopping service, CVS Health, most major grocery stores, and pharmacies are hiring more staff such as delivery drivers to put up with the boost in online sales.
The Haute Couture industry took a humanitarian stance keeping stylish high price fashion business matters aside and coming to the aid of those in need. The luxury fashion houses Yves Saint Laurent and Balenciaga ramped up the manufacturing of surgical masks to help protect against the COVID-19 flu strains. A press release from The Kering Group (that owns both labels) said, “French workshops that usually make clothes for Yves Saint Laurent and Balenciaga will switch over to manufacturing masks.”
Kering announced it will buy three million surgical masks from China to donate to the French health service. The largest Parisian luxury group LVMH home to 75 distinguished fashion houses such as Celine, Christian Dior, Givenchy, and Louis Vuitton states on its website that it is manufacturing and distributing free hydroalcoholic gel. LMVH announced it has reached a deal with a Chinese industrial supplier to deliver ten million masks to the French population. Businesses have joined forces globally and this chain of events will have incrementally beneficial effects in the long run, once the COVID-19 is safely contained.
(Faiza Zia Khan holds a Master’s in Journalism degree from the University of British Columbia, Canada. She has collaborated with news media outlets including Global National and actively volunteers for several community investment projects for the Red Cross, United Way and the Breast Cancer Foundation)
