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Unsanitized-061720
AT&T is among several businesses realizing they may not need as many retail outlets—and workers—after the coronavirus.
First Response
When you confine people’s reality for weeks on end, they tend to come out of that with new habits. You go on a vacation and you got a really good latte every day for a month and now you come home and want to keep drinking lattes. And so on. We’re building new habits in the pandemic, and in general they’re pretty good habits (eating healthier, using less gasoline). But the global economy has been set up to deliver the old habits, and the transition to new preferences will upend some things.
That was the subject of a story I wrote last week, but I didn’t have any hard numbers to attach to it, until now. Bloomberg Economics did the research and found that 30 percent of job losses between February and May can be attributed to “reallocation shock.” That’s a fancy way of saying what I said in the first paragraph. The Becker Institute at the University of Chicago puts the number higher, at 42 percent. That translates into millions and millions of jobs never coming back.
We’re already seeing hints of this, as the “core” jobless rate rises (taking out the temporary layoffs). Here are some real-world examples of how this goes.
This business story reports that AT&T has figured out that it didn’t need as many retail stores to make the same level of profits. It will cut 3,400 unionized jobs at 250 stores, as it shifts focus into entertainment and wireless services. The virus, and the mass closure of physical stores, forced people to upgrade service or buy new products online or over the phone. And they did.
Business travel isn’t going to be the same, not just because cost-conscious companies see the travel budget as ripe for downsizing, but because you can do most of the same stuff with Zoom and keep former travelers happier at home. That’s going to crush sectors of the economy where business travel is a major profit center. Hilton is letting go 22 percent of its global workforce.
Read all of our Unsanitized reports
Increased mergers, expected as companies collapse and other sick ones are purchased, will inevitably lead to near-term job loss. That’s what “efficiency” means in the context of monopoly. Hundreds of layoffs are taking shape at Sprint after the company merged with T-Mobile. In some cases, broad restructuring that was considered but put off has come back now that profits dropped. HSBC plans 35,000 job cuts from a plan written years ago.
Then there are bigger structural factors. More working from home will make those lunch spots near the office struggle. A smaller footprint for malls will deal a severe blow to commercial real estate, a big chunk of city finances. A change to the 5-day, 9-to-5 workweek being considered by large businesses has many beneficial effects, but everything set up to serve commuters will take a hit.
With every negative impact from changing tastes there could be a positive one: the plexiglass industry is booming, for example, and organic produce and home theater systems could go way up. But the turbulence is the near-term problem. Getting a worker from waiting tables to the plexiglass factory takes time and skills building.
Team Trump is thinking about running another infrastructure week, and we can have a laugh at that. But the structural unemployment gap does argue for public works jobs. If there’s a lot to do to get the country wired, moving around, and in a shape befitting a 21st-century developed nation, then there’s an ample workforce to get onto the payroll and do the work. But there will be a period of adjustment, and any slow recovery could just be a function of that.
Lightning Round
Speaking of expanding upon previous versions of Unsanitized, let’s check in on a few matters:
• The Arizona problem: Still a problem. With the Sun Belt on a different curve as the Northeast, Arizona, Florida, Texas, and Oklahoma all experienced record highs in cases on Tuesday. Oklahoma, you may recall, is where that 20,000-person indoor rally is happening this Saturday. When officials signal that everything’s OK, it’s not entirely the fault of individuals who believe them and then contract the virus. This is a public policy problem.
• The Fed interventions: Jerome Powell happened to be on Capitol Hill yesterday, and there was this amazing passage where Sen. Pat Toomey (R-PA), who is on the bailout oversight panel, asked why the Fed is continuing to buy corporate bonds when the bond market is doing fine. Powell mumbled something about follow-through, and mentioned that there’s no demand for direct sales of corporate bonds to the Fed, only indirect ones. Toomey was making a standard anti-intervention case, but he was actually making the case for the Fed shifting to rescue state and local governments. Powell also noted that all the Fed can do to support racial equality is promote full employment, but the best way to do that is to… rescue state and local governments, which have disproportionately Black workers. The Fed’s resistance right now to solve the immediate threat to the economy is failing Black lives.
• The PPP: Outrage continues over the lack of transparency on who got forgivable small business loans. Democrats are demanding details. Investigative reporting is delving into whether David Boies’ law firm got a PPP. What is the point of this? There’s still over $130 billion in PPP funding available, weeks after the second round. It was designed as a too-small bridge over a chasm, such that restaurants who survived don’t have the cash to buy food to reopen. If minority-owned businesses are getting rejected at higher numbers, that’s a big problem, and the ACLU has filed suit over part of that (businesses owned by people with criminal records, disproportionately people of color, were barred from the loans). But if demand is low because businesses either failed or don’t see PPP as anything useful, then the “more transparency” just serves more witch hunts to chase people out of the grants, and chase workers out of their jobs. What purpose does that serve? Of course, a lot of folks in Congress don’t want the details of PPP recipients to come out because the businesses they own got them. (Full disclosure: the Prospect took a PPP loan and there’s nothing wrong with it!)
• Nursing homes: You would think the epicenter of the crisis in the United States would be now be fully scrutinized, and procedures established to minimize deaths. But half of all assisted living facilities have not even been inspected. Stories of “phony isolation wards” and other forms of neglect are intolerable. There’s a House investigation but the bigger problem is long-term care itself: how it’s funded in particular. As with so much, the crisis cracked open an exposed wound. And don’t get me started about Georgia putting a polling place for outside voters in a nursing home.
Days Without a Bailout Oversight Chair
82. Michael Hiltzik went hard after Pelosi on this in the L.A. Times, so maybe it’s getting more attention. I hadn’t noticed that she got questioned about the missing chair at her last press conference a week ago, responding with annoyance at even being asked about a basic job function. “Hopefully soon” was all she could muster. There’s that commitment to transparency and oversight.
Today I Learned
- Dexamethasone reduced deaths in patients in a large trial. Not preventive, but helps those already on oxygen. And it’s cheap and generic. Very hopeful news. (Politico)
- Mike Pence: what coronavirus? (CNN)
- Congress have made coronavirus testing free in like four straight bills, so why are people still getting charges of $2,315? (New York Times)
- Harrowing story of an outbreak at a prison in Arkansas. (The New Yorker)
- Odious meeting in Orange County, where masks have become an ideological issue. Remind me to continue not going there. (Los Angeles Times)
- Seeing more examples of workers being fired during the pandemic for trying to start a union. (In These Times)
- An exhaustive list of private sector litigation around COVID-19. About 10 times more insurance disputes than workers or customers suing over contracting the disease. (Hunton Andrews Kerth)
- One park along the U.S./Canada border is open and couples separated during the pandemic are reuniting and getting married there. (Washington Post)
