To Reopen the Economy, Close the Bars

The New York Times ran a story this week suggesting that the economic recovery is slowing and, in certain industries in certain parts of the country, even reversing. This makes sense given the resurgence of coronavirus cases in places like Texas and Florida and the more-cautious reopening measures being taken in other, less affected areas worried that a spike might be just around the corner. On Wednesday, New York City announced it would indefinitely postpone the resumption of indoor dining service, as New Jersey did a few days prior. California has also ordered restaurants and bars to close again in much of the state. It’s likely that in the coming weeks, we’ll see that spending in food and beverage service establishments has gone back into decline nationally.

There are two separate trends we may be seeing right now that are causing the economic recovery to slow, and they may be difficult to differentiate when looking at the data. One is the growing realization that it will be more difficult for certain sectors of the economy to return before the virus is fully tamed than previously thought. Some businesses were in a position to reopen quickly when allowed to do so; many of them have already reopened and part, or all of, their staff has returned to work. But other businesses will be disrupted persistently until there is an effective medical treatment for COVID-19, and some businesses will never reopen at all; it will necessarily take more time for workers and owners in those businesses to find new things to do. This has always been a reason not to get too complacent about the pace of the recovery and to ensure that the economy has adequate government policy support after the expiration of key CARES Act programs this summer. One thing we may have been learning in the past couple of weeks is that more of the hospitality industry will be in the persistently affected category than we had hoped, waiting for effective medical interventions before the industry can return anywhere close to normal, and with some establishments closing permanently in the meantime.