It took just a matter of days to shut down New York City, once the coronavirus took hold. Restarting it will take much, much longer.
The economic impact in the city from the global pandemic has been striking: Hundreds of thousands are already out of work; at least $7.4 billion in tax revenue is projected to be lost by the middle of next year.
And the changes will be felt long after New York begins to reopen its economy.
How New York City, the epicenter of the country’s outbreak, begins to recapture its vibrancy is a question consuming political, business and cultural leaders.
The very features that make New York attractive to businesses, workers and tourists — Broadway, the subway system, world-class restaurants and innumerable cultural institutions — were among the hardest-hit in the pandemic. And they will take the longest to come back.
Half of the hotels in the city are not operating, and with no reliable forecast for when tourists might return, many may stay shut. Nearly the same portion of the city’s smallest businesses — some 186,000 shops employing fewer than 10 people — could fail, city officials fear. Replacing them could take years.
The city’s real estate and construction industries, major drivers of the local economy, have all but stopped. Millions of renters are struggling to make monthly payments, fueling concern over a cascading crisis in the housing market if rent goes unpaid.
White-collar business and financial services companies, whose workers were mostly spared immediate layoffs in the shutdown, are forecast to see declining profits next year, and even losses. Some law firms have already pared down pay.
And with social distancing guidelines likely to be necessary for the foreseeable future, all facets of New York’s work life will take on new rules, routines and costs.
“I don’t think the New York that we left will be back for some years,” said Gregg Bishop, the commissioner of the city’s small businesses agency. “I don’t know if we’ll ever get it back.”
New York is not the only metropolis in the world struggling with how to safely reopen businesses and cultural centers in a dense urban settings, but no city has been more devastated by the pandemic.
The virus has claimed more than 13,000 lives in New York City, a figure that includes roughly 4,400 victims who had never tested positive for the virus but were presumed to have died of it.
President Trump has sought swift reopenings across the United States. And on Monday, three Southern states moved toward doing so: South Carolina allowed retail shops to open with social distancing guidelines, and the governors of Georgia and Tennessee announced plans to soon ease restrictions on businesses.
But in New York City, interviews with more than two dozen business executives, city and state officials and industry groups revealed the depths of the difficulties in doing the same, especially when the coronavirus is still filling hospitals and hundreds are still dying each day.
The city’s Independent Budget Office forecast that 475,000 people would lose their jobs over the next year; other economists have put the job loss far higher: 1.2 million by the end of April, mostly in low-wage jobs in restaurants, retail or transportation.
And whole industries, gone overnight, do not as quickly return.
In the late 1970s, “It took four or five years for a lot of the city to empty out,” said Kathryn Wylde, the president of the Partnership for New York City, a nonprofit business group. “It took three or four decades to bring them back.”
New York City has been the center of calamity before — the Sept. 11 terror attacks, the 2008 banking crisis, the 1970s fiscal crisis — and each time, economic life bounced back, stronger but also scarred.
“The obituary of New York City has been written more than once,” said James Whelan, the head of the Real Estate Board of New York, an industry group. “And it’s always been proven incorrect.”
But no other crisis saw the city shut down as profoundly, or for as long. Nothing before has caused public life to simply halt, everywhere, at once, nor called into question the very thing that distinguishes New York City: its concentration of people and its street life.
Large and midsize companies are beginning to plan for a return to the workplace, in phases. Some are thinking about how to use their existing office space when workers cannot be packed together as tightly, and questioning how much they should be expected to pay for it.
“Because of the need for social distancing, that space is far less valuable,” said Neil Blumenthal, one of the co-chief executives at Warby Parker, the glasses company headquartered in SoHo. “We’re all going to need more space, or use it less.”
City officials and business leaders privately expressed concern that, with executives seeing just how well their companies could operate remotely, some might decide to downsize, or move out of New York City altogether.
Others worried that workers from around the country and the world would think twice about relocating to the city — for at least for a few years — and that those already here might move out.
“Nobody wants to get the economy going more than me,” Gov. Andrew M. Cuomo said on Saturday.
“The tension is when you start to open business, you start to have gatherings, you put people on a bus, you put people on the subway, you put people in a retail store,” he said. “Then you’re going to see more infections. You see that infection rate rise and then you’re going to be back to where we were.”
The economic pressure on the city’s finances is stark: Last week, Mayor Bill de Blasio released a gloomy $89.3 billion executive budget that slashed $2 billion in municipal services; the Independent Budget Office suggested that the loss in tax revenue may be even worse than the city was predicting.
Because the city’s economy is densely interwoven, reviving it is likely to be a halting process.
Swiftly shutting down the city’s more than 25,000 restaurants and bars was one thing. But getting customers back may not be a matter of simply allowing them to reopen, even with servers in masks and gloves and diners ordering from an app on their phones.
“When are companies going to start hosting events at restaurants and bars again?” said Andrew Rigie, executive director of the New York City Hospitality Alliance, a nonprofit association for the restaurant and nightlife industry. “When are the tourists going to start coming back?”
That is a question that has been haunting Broadway and the rest of the city’s entertainment sector as well.
As recently as February, New York City’s tourism promotion arm, NYC & Company, had been predicting a record number of annual visitors in 2020. That forecast has since been scrapped, and no new projections offered.
“How are we going to come back? There’s no playbook,” said Vijay Dandapani, the president of the Hotel Association of New York City, an industry group.
Tourists account for nearly 300,000 direct jobs in New York City, according to the Center for an Urban Future, eclipsing the number of jobs in finance and nearly twice as many as in the city’s tech sector.
But tourists are not likely to come back to a closed city, and the sorts of activities that draw crowd and visitors — parades, performing arts, museums, sports, festivals — are likely to be among the last parts of the local economy to reopen.
The Metropolitan Opera is weighing whether it can restart its programing in September. Broadway is bracing for a similar delay.
And a reopened Broadway could be a changed experience, said Charlotte St. Martin, the president of the Broadway League, a trade organization. “We could see masks. We could see certificates of Covid-19-free status,” Ms. St. Martin said. “We could see fewer shows.”
There is broad agreement that the return of economic activity would rely heavily on expanded public health measures, including a huge increase in testing and a robust system for tracking down and isolating those who might be infected.
Commercial office tenants are already discussing how to implement temperature checks at building entrances. Companies are looking at staggered schedules and having fewer employees per square foot of office space.
The trouble is, business leaders and executives say, once those measures are in place, office workers in industries like financial services and technology may not feel the pressure to return quickly.
“We have the luxury; people are working well from home,” said Mary Good, the chief people officer at Squarespace, a technology company headquartered in the West Village. “What we’re looking at are things like air flow, pathways around the office, conference rooms. Even things like elevators.”
Another major factor in the city’s ability to return is the city’s subways and buses — and so far the Metropolitan Transportation Authority has not articulated a safe service plan.
Riders and transit workers have recently been required to wear a face mask on a crowded subway car or bus. But the system is operating with less than 10 percent of its ridership: On Thursday, the city’s subway system had 470,000 passengers. The same day last year, it had 5.9 million.
Cities across Asia and Europe have added floor markings to encourage social distancing and provided hand sanitizer. In China, officials have limited capacity on buses to 50 percent, and riders have their temperature taken at checkpoints in train stations.
“It’s premature to make decisions, but we are looking at what the best practices are around the world in areas with transit agencies that have been affected by the pandemic,” said Patrick J. Foye, chairman of the M.T.A.
In the construction industry, union officials and builders are discussing how to maintain health and safety standards when the city’s roughly 35,000 dormant construction sites reopen.
State officials believe construction could be among the early sectors to return to work, along with manufacturing, because steps can be taken to keep factories and job sites safe and because working from home is not possible.
But just lifting restrictions does not guarantee a return to the way things were. “We believe that there is a way for them to mitigate any risk of transmission in their workplace,” said Robert Mujica, the state budget director. “But you need to have demand.”
On the real estate side, brokers have yet to figure out how to navigate a new challenge to their work: Buildings are not allowing potential buyers to tour homes for sale, depressing interest and sales.
“The market is nonexistent,” said Richard J. Steinberg, a real estate broker at Douglas Elliman.
More immediately, hundreds of thousands are now struggling to pay bills and meet the rent; some activists have called for a rent strike next month.
Local Democratic politicians, including Representative Alexandria Ocasio-Cortez and state lawmakers in Albany, have sought more governmental assistance for renters.
Industry executives and budget watchers fear the effects massive nonpayment of rent would have on the ability of some landlords to make routine payments, increasing the risk of delinquency and possibly foreclosure.
“Rent is part of the life blood of the economy,” said Andrew Rein of the nonprofit Citizens Budget Commission.
At Warby Parker, the reopening is going to come in at least three phases, said Mr. Blumenthal. The company — part technology firm, part retailer, part manufacturer — provides a kind of blueprint for how to return.
The first phase has already begun at its factory for cutting and fitting lenses just outside the city, considered essential business under state rules. “We’ve even rearranged our production lines to ensure social distancing,” Mr. Blumenthal said. There are staggered lunch hours, and mandatory hand-washing every hour.
The next phase would involve reopening stores, of which the company has 10 in New York.
The last people to return to work, Mr. Blumenthal said, would be the company’s roughly 300 corporate office workers, based in its SoHo headquarters.
Even then, life will be different.
“We’re not going to be able to have 100 percent of our team show up to work every day at the same time,” he said.
Reporting was contributed by Christina Goldbaum, Matthew Haag, Patrick McGeehan, Jesse McKinley and Michael Paulson.
The US will need to spend trillions more as economy takes until 2022 to fully recover: CNBC survey – CNBC
The economy could take one to two years to rebound to full strength and the Federal Reserve and Congress, having already committed historic sums to fight the coronavirus pandemic, will have to commit trillions more, according to respondents to the CNBC Fed Survey.
With the Federal Reserve’s balance sheet already at an unprecedented $6.45 trillion, the 36 respondents see it rising on average to $9.8 trillion. The additional trillions will be added by the end of the current quarter, the respondents expect. Congress, having already committed about $2.5 trillion, is seen putting in an additional $2 trillion.
“My guess is that the virus itself will largely disappear within a year, but that the structural social and economic impacts will be with us much longer,” John Kattar, chief investment officer at Ardent Asset Management, wrote in response to the survey.
Jack Kleinhenz, chief economist for the National Retail Federation, said, “The policy response has been appropriate, but policy takes time to work its way into the economy and targeted sectors. … Many small businesses stand at risk.”
Despite the massive relief, respondents still see the unemployment rate rising to 19%, hitting that level in August. It’s expected to decline only gradually, to 11% by December and to 7% by the end of 2021. That would leave it at about double the rate before the crisis.
Second quarter of 2022
“With spiking unemployment and rising business closures … the prospects of a sharp rebound (is) far outweighed by the more realistic prospect of a longer-term structural disruption,” said Lindsey Piegza, chief economist at Stifel.
A 33% plurality believes the economy won’t be fully restored until the second quarter of 2022. But 19% believe it will be back by year-end and another 19% believe it can happen even earlier, highlighting a wide range of views about the speed and strength of a recovery.
“During the pandemic, production and consumption have been largely deferred and not lost,” wrote Rob Morgan, director of market strategy at US Energy Advisors. “This leads me to believe the economy will experience a V-shaped recovery beginning in the third quarter 2020.”
On average, respondents see gross domestic product falling by 24% this quarter, followed by a rebound of 4.7% in the third quarter and another strong quarter in the fourth. It won’t be enough to make back the losses in the first half. For the full year, GDP is forecast to decline by 5%.
Mark Zandi, chief economist at Moody’s Analytics, said a vaccine is essential for the economy to gain traction. “Until then, any recovery will remain something of a slog, characterized by halting growth and high single-digit unemployment. And even then, the economy won’t be in full swing and fully recovered until mid-decade.”
The Fed funds rate is seen remaining at zero for the rest of the year and rise to 1.9% in 2021. The Federal Reserve concludes its two-day policy meeting on Wednesday. Answers for CNBC’s Fed Survey from investors and economists were collected Thursday to Saturday.
The S&P is forecast to finish lower on the year at 2,844 than Monday’s close, and rise to 3,141 next year for a 9% gain by the end of 2021.
“I think the risk markets are anticipating a faster return to normalized economic conditions than we are likely to see,” says John Ryding, chief economic advisor at Brean Capital LLC.
Among the risks: Respondents place a 61% probability on a second round of contagion in the fall and winter.
White House reportedly considering another round of stimulus checks – Atlanta Journal Constitution
As the U.S. economy slowly reopens, Americans across the country are still grappling with job loss, furloughs and economic uncertainty. To combat the continued financial struggles some are facing, a White House official says the administration is “studying carefully” another $1,200 payment to citizens.
White House economic adviser Kevin Hassett told the media the administration is determining whether to provide those who qualify another round of stimulus checks, according to NBC News reporter Geoff Bennett. The additional financial support could be included in a phase 4 deal.
No word on when the package would be presented the House, but, with the virus still looming, House Majority Leader Steny Hoyer told the media Tuesday that the House will no longer come back next week after speaking to House physician, according to a tweet by Politico congressional reporter Sarah Ferris.
“We made a judgment that we will not come back next week,” Hoyer told reporters.
While the new stimulus checks are being considered, some Americans have not yet received the first round of checks. The IRS began cutting stimulus checks in mid-April. As of this week, about 90 million people have seen the economic bump in their accounts, according to economic news site Market Watch.
The hope is that the checks, which average about $1,200 a piece, will encourage spending and quell the financial pressure to pay essential bills as the COVID-19’s impact has shuttered manufacturing plants, retail stores and limited business hours for dozens of companies.
The IRS had distributed about 88.1 million stimulus checks as of April 17 and paid out $157.96 billion, according to statistics released April 24. That’s more than half of the $290 billion put aside for direct payments to individuals in the $2.2 trillion bill called the CARES Act.
Consumer confidence is still low
The Conference Board Tuesday reported that its consumer confidence index tumbled in the month of April, as millions lost their jobs and others feared for the current and future work conditions.
The Conference Board said Tuesday that its confidence index plunged to a reading of 86.9, down from 118.8 in March. The index is composed of consumers’ assessment of present conditions and expectations about the future.
The present conditions index dropped from 166.7, to 76.4, a 90-point drop that was the largest on record. The expectations index, based on the future outlook, improved slightly from 86.8 in March to 93.8 in April.
The numbers in the present conditions index “reflects the sharp contraction in economic activity and surge in unemployment claims,” said Lynn Franco, senior director of economic indicators at the Conference Board.
Kathy Bostjancic, chief U.S. financial economist at Oxford Economics, said the confidence declines were worrisome because “consumers’ downbeat views about future income prospects can restrain consumer spending and the overall economy.”
Consumers drive about 70% of all economic activity in the U.S.
Many economists believe the country has already entered a recession that will be the largest economic disruption since the Great Depression of the 1930s.
The Associated Press contributed to this report.
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Goldman Sachs explains why stocks can keep rising even as a record-sized recession beckons – Business Insider
Drew Angerer/Getty Images
- Markets may continue to look past negative coronavirus news, especially if projections continue to show that the economy is expected to rebound after the pandemic, a Monday note from Goldman Sachs said.
- An analysis of GDP forecasts from the bank found that investors tended to discount the next two years of macroeconomic performance.
- Thus, metrics that focus only on growth over the next year “will overstate current valuations, given the large rebound expected beyond this year,” Zach Pandl, a cohead of global FX and EM strategy, wrote in the note.
- Read more on Business Insider.
Markets may continue to look past negative coronavirus news, especially if projections continue to show that the economy is expected to rebound after the pandemic, according to Goldman Sachs.
An analysis by the bank using changes to gross-domestic-product forecasts found that investors typically discounted at least the next two years of macroeconomic performance, a Monday note said.
That means that metrics that focus only on growth over the next year — such as multiples based on 12-month earnings expectations — “will overstate current valuations, given the large rebound expected beyond this year,” Zach Pandl, a cohead of global foreign-exchange and emerging-markets strategy, wrote in the note.
While the coronavirus-induced recession is set to be the deepest contraction in modern history, it’s also likely to be the shortest, Pandl said. Many economists expect that, after a dip in 2020, GDP will rebound in 2021 and 2022. By early April, consensus GDP forecasts incorporated a virus hit, down 4% this year. But forecasts are for 4% growth in 2021 and 3% in 2022 — an unusual pattern, Pandl said.
That means that more disappointing data in the near term may not weigh heavily on markets, as activity is expected to snap back “relatively quickly,” Pandl wrote. “The depth of the downturn matters much less than the duration of the recovery,” he said.
Goldman’s analysis came amid a stock-market recovery from March 23 lows. As US states weigh relaxing strict lockdown measures designed to curb the spread of COVID-19, stocks have slowly gained on optimism that the economy will soon reopen. From March 23 to Monday’s close, the S&P 500 gained about 29%, but it was down about 15% from all-time highs in February.
Still, many economists disagree that any rebound after the coronavirus pandemic will be a quick one. Instead of the sharp V-shaped recovery that Goldman is suggesting, many expect a rebound to take a softer U shape.
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