Thoughts on Opening the Economy
There are roughly twenty-million people unemployed. I don’t read about this enough. I’m not sure why this is so underplayed in the news.
It takes ten minutes to fire somebody.
Ten minutes.
You call them into your office. You tell them the business isn’t there anymore to support their salary. You send them to human resources. They sign the separation papers, learn about their severance, get walked to their desk and then out the door. Finished.
It takes a month or two to hire a white-collar worker.
It takes at least a week to hire an hourly worker.
The number of people on unemployment is staggering. And this is the micro view, the business view.
How about the macroeconomy view
It took one day to shut down the entire economy. The government, trying to protect our hospitals from being overwhelmed and to protect our citizens, shut down all non-essential businesses. This shutdown is the equivalent of firing someone. It took a day. One announcement. One edict. The streets of NY, LA, Chicago, Houston, Dallas, Miami, Atlanta, Washington D.C. were cleared. The pictures we saw on the news or witnessed personally made us all feel uncomfortable because it was surreal.
Reopening the economy
Now we are reopening the economy. There are all kinds of rules and restrictions to the reopening.
Last week was my forty-third wedding anniversary. We decided to go to one of the most popular restaurants in the city. We got a reservation the day before with no problem. When we arrived, everyone from the maitre’d to the server and kitchen staff was wearing masks. The tables were separated by more than six feet.
I asked the maitre’d how their reopening was working out. He said, “We are doing 30% of the business we usually do.”
I also talked to a bar and restaurant owner in my neighborhood. He said, “I am going to stick to mostly take-out until my employees feel safe to come back. Maybe I’ll open in August.”
So when will the employees feel safe to return?
An office-based business in town with just shy of one hundred employees created a plan to get everyone back. They created an A Team and a B Team. Their plan is for each team to work in the office two days per week with one day for both teams to work from home.
They were not sure how comfortable their employees were with coming into the office. To answer this question, they made it optional for the employees. Only come to the office when it is your Team day if you feel comfortable and safe. Seven of the forty-three employees of Team A showed up. And of the forty-three, three were older partners. One was seventy years old.
I am hearing the stories from the employees, too
One of my son’s friends who was thinking of starting a business pre-Covid changed his mind. He said, “I wanted to start my own business because I wanted more of the freedom I thought it would bring. But now I work from home. I have all the freedom I was seeking and I get a weekly paycheck. It’s wonderful. Why would I start a business? I have the best of both worlds. I work when I want and get paid every week.”
Another, while talking to his boss on a video call, was asked, “Will you be coming into the office this week?”
His answer was, “No. I don’t feel comfortable.”
His boss told me, “I didn’t want to say anything to change his mind. But if the employee had any awareness of body language, he knows I chafed when hearing his decision.”
Why not work from home?
This same employer made a couple of great points when we discussed this in more detail.
He said, “If the job can be done from home, then I just might think about outsourcing the job. I can probably get the job done for less without paying benefits or needing office space to be available for the employee.”
And then he said, “My employees need to realize why I pay them. In many cases, I pay them to sit outside my office so I can get done what needs to be done when I want it done. People who work from home are on their own schedules. They set their own working hours. Good for them. But that does not work for me. I’ll find someone else to replace them if they refuse to come in.”
Another business person and close friend told me the teachers in a local county were asked to come in to clear out their classrooms for the summer. The teachers, as a group, declined to do this because, “We just don’t feel comfortable.”
My friend said, “The only way to get some of these teachers back to school in the fall is to threaten them with their jobs. President Reagan did it to the air traffic controllers who went on strike in the early eighties. He told them to come to work tomorrow or they are fired.”
So how will the recovery look?
Many people are fearful to go to public places. We are venturing out, but these months of isolation have messed with our heads.
Employees like the freedom of working on their own schedule without a ten-hour per week commute. Many like not working at all and getting a government check.
Employers are being forced to utilize their office, store, and restaurant space inefficiently which causes a negative impact on revenues. In addition, the money being spent to be in compliance is enormous and non-revenue producing. Cash is not being spent to build the business.
Conferences are the current target of the scientific community. We lost the Q2 conference season and now we will lose the Q4 conference season. This is where a lot of business takes place. These conferences are the foundation for business growth.
Sports and entertainment as we knew it is what? Sports teams playing without fans or not playing at all. They are starting to return their TV revenues to the networks.
And will employees decide it is OK to fly again in the same numbers they flew in the past? Who knows? Delta Airlines is burning $50mm every day.
Leisure travel is busted. I have friends who are going to the Florida panhandle instead of their planned family trip to Paris.
The economic impact on the haves is emotionally jarring. For the economically disadvantaged, it will be devastating. This economic divide has the potential to further separate our country.
The systemic impact of this shutdown is pervasive and unprecedented.
To sum It up
It took one day to shut down our economy. It then took five weeks to layoff forty-million people in the United States. Now we are opening the economy very slowly with no agreement or cooperation between states, cities, or countries with whom we trade. This makes for a slow return to business as usual, which may mean even more unemployed.
When the federal government stops giving money to states, people, and businesses, the full force of this shut down will be felt by all of us.
Getting the world economy back to “normal” will take years. As entrepreneurs and investors, we need to come to our own forecast and plan accordingly.
I do hope I am wrong and we have the “V” recovery we are all hoping for. But my experience with people’s behaviors and past economic recoveries tells me differently. And then there are the forty-million people unemployed which just keeps haunting me.