CAPITALIST REACTION TO VIRUS; MASS LOCK OUT
Virus-related shutdowns bringing US economy to grinding halt
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FILE - This March 12, 2016 file photo shows flyers advertising comedy
on a light pole on Sixth Street during South By Southwest in Austin,
Texas. Austin city officials have canceled the South by Southwest arts
and technology festival. Mayor Steve Adler announced a local disaster
as a precaution because of the threat of the novel coronavirus, effectively
cancelling the annual event that had been scheduled for March 13-22.
(Photo by Rich Fury/Invision/AP, File)
AUSTIN, Texas (AP) — It took 15 minutes for the coronavirus to wreck Shelley Hutchings’ carefully calculated financial plans.
Hutchings, a bartender and performer, had lined up gigs in advance of the South by Southwest film, music and technology festival, which draws hundreds of thousands of visitors to Austin each year. She’d expected to earn about $3,000 — enough to pay her taxes and buy a new sewing machine for a tailoring business she runs.
Relaxed, she sat down to watch a movie. Then her phone started vibrating. Cancellations rolled in. One by one, the jobs she’s been counting on were gone. In the face of the spreading coronavirus outbreak, Austin officials had called off the festival just as the first attendees had begun to arrive.
“In 15 minutes, things fell apart,” Hutchings said. “To watch it vanish, all at once, was shocking.”
As Hutchings and hundreds of millions of Americans can attest, damage from the coronavirus has pummeled the U.S. economy with breathtaking speed and force. Hour by hour, day by day, the activities that households take part in and spend money on — plane trips, sporting events, movies, concerts, restaurant meals, shopping trips for clothes, furniture, appliances — are grinding to a halt.
And so, it seems, is the U.S. economy.
Just a month ago, experts had expected any severe economic pain from the outbreak to be confined mainly to Asia and Europe. The U.S. economy, enjoying a record-breaking 11-year-long expansion, would likely keep cruising, it was thought — a bit bruised but not seriously damaged.
Now, forecasters can’t downgrade their outlook for the American economy fast enough.
“The expansion is under threat,” said Philipp Carlsson-Szlezak, chief economist at the Boston Consulting Group. “There’s a very plausible risk this will amount to a recession.”
On Wednesday, Wells Fargo Securities had predicted a slight drop in the nation’s gross domestic product — the broadest measure of economic output — in the April-June quarter. The next day, as the American stock market endured its deepest plunge since 1987, Wells Fargo economist Jay Bryson wrote that it was “painfully obvious that we need to rethink this forecast” and further downgrade the outlook.
A woman wears a face mask as she rides the M42 bus crosstown, Friday,
March 13, 2020, in New York. New York has more than 400 confirmed
cases of COVID-19, the disease caused by the virus. For most people,
the new coronavirus causes only mild or moderate symptoms, such as
fever and cough. For some, especially older adults and people with
existing health problems, it can cause more severe illness, including
pneumonia, and death. (AP Photo/Mary Altaffer)
How did the picture darken so sharply, so quickly?
The speed of the virus’ spread appeared to surprise economists as it hopscotched to 117 countries, including the United States, infecting a documented total of roughly 150,000 people worldwide and killing more than 5,500. And what health experts agree was the U.S. government’s fumbling early response to the crisis has undermined the confidence of consumers, investors and businesses. Anxieties have escalated.
U.S. officials are bracing for a dramatic acceleration of cases — beyond the roughly 2,200 that have been documented so far in 49 states, Washington, D.C., and Puerto Rico.
For most people, the coronavirus causes only mild or moderate symptoms, like fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia. The vast majority of people recover. According to the World Health Organization, people with mild illness recover in about two weeks, while those with more severe illness may take three to six weeks to recover.
Yet as the gravity of the crisis had seeped into public consciousness, suddenly everyone is shrinking from public gatherings of any real size for fear of contracting the virus, and organizers can’t call off events fast enough.
The NBA and the NHL suspended the rest of their seasons. The NCAA dropped its wildly popular March Madness basketball tournament. Broadway is closed. St. Patrick’s Day parades are scrubbed. Hunkered down at home, Americans are leaving restaurants empty, hotels vacant and jetliners unoccupied.
The danger to the U.S. economy stems from a fundamental reality: Consumers drive roughly 70 percent of growth. When spending halts, the economy can’t grow. And while online shopping will likely surge as people sequester themselves at home, such purchases still account for just a small fraction of overall consumer spending.
“The economy is doomed to recession if the country stops working and takes the next 30 days off,” Chris Rupkey, chief economist at MUFG Union Bank, wrote in a research note this week.
Compounding the threat, the very measures that are required to contain the outbreak — quarantines, reduced travel, an avoidance of crowds and gatherings — are sure to stifle economic activity.
The resulting slowdown across the globe has undercut the price of oil, intensifying pressure on energy producers and likely reducing business investment. And many U.S. companies, especially in the airline and energy industries, are heavily indebted and might have to respond to financial pressures by cutting expenses — including jobs.
Despite rebounding Friday on President Donald Trump’s declaration of a national emergency to try to help stem the health crisis, the stock market remains in a bear market — the Dow Jones Industrial Average has shed nearly 22% in just a month — which stands to further dim the confidence of consumers. Investors whose stock market wealth shrinks typically become less likely to spend much.
“You can take to the bank that we’re going to have negative growth in the second quarter,” said Nathan Sheets, chief economist at PGIM Fixed Income.
Recessions are defined informally as two consecutive quarters of economic contraction. It isn’t yet clear whether the coronavirus inflicted enough economic damage from January to March to turn GDP negative for the quarter or how deeply the harm will spread into the April-June quarter.
“It’s pretty close now to a 50-50 proposition as to whether we see two quarters of negative growth,” Sheets said. “Even if that condition is not technically satisfied, it’s going to feel pretty bad. It’s going to feel recessionary.”
Officially, the U.S. unemployment rate remains just 3.5%, a half century low. During the Great Recession of 2007-2009, companies responded to a deteriorating economy by aggressively slashing jobs. This time, Sheets suspects that most of them will hold off on layoffs in hopes that the virus and its economic damage will subside in just a few months. If, however, many companies across the country were to cut jobs, the blow to the economy would worsen. In addition, the slowdowns in Asia and Europe, which are closely intertwined with the U.S. economy, are sure to weaken growth in the United States.
Intervention by the Federal Reserve, by slashing interest rates, and Congress, by moving toward approving financial aid to people affected by the crisis, could help mitigate the economic hardship. So would a relatively swift containment of the virus.
For now, though, the uncertainty is distressing businesses across the country. When Austin’s South by Southwest gathering was canceled, Brent Underwood’s 20-bed hostel lost about 20% of its annual income.
“I’m not sure how we’ll keep our employees,” Underwood said. “I’m not sure how we’ll keep our manager of four years. I’m not sure how we’ll keep the business open.”
Normally, the hostel also receives bookings from people attending events at the University of Texas, and in the fall, from the annual Austin City Limits music festival. Underwood fears his income will suffer further if the university’s graduation and the festival are canceled. He would like to cut expenses. But most of his costs are fixed, including a property tax bill due this month.
Andy Cooley has already had to cut the hours of three of the six workers at his printing company, Central Press in Millbrook, New York, because the foundations, hospitals and schools that are some of his major customers are canceling events. He’s lost orders for printing invitations and programs.
“Earlier today, I received a call cancelling all printing related to a fundraiser happening in May,” Cooley said. “I understand they have to do what they have to do, but the ripple effect is exactly that — we all feel the effect.”
Economists say the U.S. economy has never faced a moment quite like this one. The 9/11 terrorist attacks 19 years ago, devastating as it was, caused only a short-lived downturn. And it presented consumers with starkly different challenge:
“Then the patriotic thing was go out and spend,” said Louise Sheiner, policy director for the Brookings Institution’s center on fiscal and monetary policy and a former Federal Reserve economist. “Now, the patriotic thing to do is not go out... It’s like something we’ve never seen.’’
Thomas Grech, CEO of the Queens Chamber of Commerce in New York, urged residents who aren’t quarantined to patronize neighborhood restaurants and corner stores.
“You’ve got to eat,” Grech said. “Keep these guys alive because my fear is, if they close, they may not reopen.’’
Americans brace for new life of no school and growing dread
A line of people waiting to buy supplies amid coronavirus fears snakes through a parking lot at a Costco, Saturday, March 14, 2020, in Las Vegas. For most people, the new coronavirus causes only mild or moderate symptoms. For some it can cause more severe illness, especially in older adults and people with existing health problems. (AP Photo/John Locher)
Millions of Americans braced for the week ahead with no school for their children for many days to come, no clue how to effectively do their jobs without child care, and a growing sense of dread about how to stay safe and sane amid the relentless spread of the coronavirus.
Are play dates for the kids OK? How do you stock up on supplies when supermarket shelves are bare? How do you pay the bills when your work hours have been cut? Is it safe to go to the gym? And how do you plan for the future with no idea what it holds?
“Today looks so different from yesterday, and you just don’t know what tomorrow is going to look like,” said Christie Bauer, a family photographer and mother of three school-age children in West Linn, Oregon.
Tens of millions of students nationwide have been sent home from school amid a wave of closings that include all of Ohio, Maryland, Oregon, Washington state, Florida and Illinois along with big-city districts like Los Angeles, San Francisco and Washington, D.C. Some schools announced they will close for three weeks, others for up to six.
The disruptions came as government and hospital leaders took new measures to contain an outbreak that has sickened more than 150,000 people worldwide and killed about 5,800, with thousands of new cases being confirmed every day.
As the U.S. death toll climbed to 51 on Saturday and infections totaled more than 2,100, President Donald Trump expanded a ban on travel to the U.S. from Europe, adding Britain and Ireland to the list, and hospitals worked to expand bed capacity and staffing to keep from becoming overwhelmed as the caseload mounts.
“We have not reached our peak,” said Dr. Anthony Fauci of the National Institutes of Health. “We will see more cases, and we will see more suffering and death.”
Many working parents are scrambling to find child care, even if they are being allowed to work from home. The child care needs are especially dire for the legions of nurses, hospital and health care workers across the country who need to be on the job to deal with the crisis.
Governors drew up emergency plans to find child care for front-line medical workers and first responders, equating it to a wartime effort.
“I would put this as a World War II-capacity daycare for our public health workers because we’re going to need every single body we can get,” said Oregon Gov. Kate Brown.
Parents desperate to get to work with schools closed have jumped on social media boards to seek child care or to exchange tips about available babysitters.
Seattle resident John Persak set up a Facebook group last week for parents with children at home because of school closings. The group exploded to nearly 3,000 members.
“We’re getting about five requests a minute at this point,” said Persak, a father and crane operator at the port of Seattle, who said his work hours have been curtailed for weeks by the coronavirus outbreak, which is affecting cargo deliveries from Asia.
In Maryland, where schools will be closing from Monday through March 27, parents are calling up their kids’ former nannies and babysitters.
“They are desperate,” said Ellen Olsen, who has been a nanny for more than 11 years and co-manages a Facebook group that connects parents, nannies and sitters in Maryland. “We’ve seen a lot of parents posting, ‘Hey, schools are closed, but I still have to work.’”
Olsen takes care of two babies, but starting next week, two girls ages 9 and 11 whom she once watched will also be under her supervision. Olsen said the girls’ parents are doctors and asked for her help after school was canceled.
New York Mayor Bill de Blasio defied mounting pressure to close the nation’s biggest school system, saying shutting the schools for the more than 1.1 million students could hamper the city’s ability to respond to the crisis by forcing parents who are first responders and healthcare workers to cast about for child care or stay home.
“Many, many parents want us to keep schools open,” he said. “Depend on it. Need it. Don’t have another option.”
The cascade of closings upended weekend routines for countless mothers and fathers. Little League and other sports were canceled. Parks were closed. Play dates were upended. The size of the crowd at a public library in suburban Portland rivaled that of the neighborhood Costco as parents scrambled to stockpile books for children.
While some people were opting to isolate themselves, not everyone was ready to put their lives on hold.
Despite the cancellation of St. Patrick’s Day parades around the country and pleas to curtail public gatherings, pub celebrations continued in many places. In Chicago, pub crawls and other revelry went ahead as planned, prompting an angry rebuke from Illinois Gov. J.B. Pritzker.
“If you are young and healthy, listen up: We need you to follow social distancing, too,” Pritzker said, urging partygoers to go home.
Spring Break partying in Florida also prompted official action, with authorities closing South Beach to prevent the virus’ spread. Miami Beach officials ordered hundreds of college spring breakers and others from around the world off the beach Saturday and eliminated parking on major streets in the city’s entertainment district to cut down on crowds at South Beach clubs and restaurants.
In New York City, where de Blasio called the scramble to fight the coronavirus a “wartime scenario,” a passer-by who noticed relatively light crowds at a Whole Foods supermarket on Manhattan’s Upper East Side remarked: “That’s because there’s no food left!”
That was far from true, though some items -- frozen foods, canned tuna, herbal teas, bagged salad -- were sold out or nearly so. Signs limited customers to two large packs of toilet paper apiece, and few were available. A similar scenario played out at supermarkets all around the country amid a run on household staples that reached a peak Friday.
San Antonio-based H-E-B, a grocery chain with more than 400 stores in Texas and Mexico, is reducing its late-night store hours to discourage hoarding and give it time to restock.
“There is no need for panic buying, this is not like a hurricane,” H-E-B spokeswoman Dya Campos said. “This should not be a ‘stock up’ event.”
Bauer, the photographer in Oregon, said the bans and fear of travel have hit her professional and personal life. First, a photography workshop she was set to attend in Greece was canceled. Now, she and her husband are trying to decide whether to cancel their spring break trip to Charleston, South Carolina, next week.
“We’re worried we’ll get stuck out there or get there and be sick,” Bauer said. “There’s just so much unknown that you don’t know what to do at the moment.”
Keeping occupied was becoming challenging, for both children and adults, with so many businesses closed and uncertainty about whether routines like going to the gym were still advisable.
Minnesota resident Nancy Patton said she was sticking to her yoga class, for now, because it helped her feel mentally and physically healthy.
On Saturday, Patton was leaving a yoga class at a gym in the Minneapolis suburb of Plymouth, where she said “social distancing” was in effect with more space between each person.
She is taking all the recommended precautions, she said, including washing her hands as soon as she finishes the class and wiping down the equipment before and after she uses it.
Seattle resident Marlena Blonsky said she wanted to help friends in need. The 33-year-old sustainability director at a Seattle logistics company has no children and has flexibility at work. She sent out a tweet Thursday that she was available for child care for her working-parent friends, or to run errands for those who have health problems and don’t want to go out in public.
Almost immediately, she had a taker and devoted a few hours last Thursday and Friday to watching a friend’s 3-year-old daughter. The child’s mother is a doctor who has long hours these days at work.
“I feel like this is hitting so many people harder than me, and this is the least I can do,” she said.
In New York, Bonita Labossiere toted a bag filled with toilet paper, snacks and a couple of bottles of pinot noir — the final touches on stocking-up she has done for three weeks.
The singer, voice teacher and director had no plans to flee New York, even as the outbreak grew more deadly there, having seen New Yorkers weather 9/11 and other frightening times.
“People say, ‘Why don’t you get out of there?’” she said. “Because in a crisis, I think this is the best place to be. We will connect with each other.”
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The Associated Press receives support for health and science coverage from the Howard Hughes Medical Institute’s Department of Science Education. The AP is solely responsible for all content.
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Associated Press writers Jennifer Peltz in New York, Jeff Baenen in Minneapolis and Regina Garcia Cano in Washington, Margery Beck in Omaha, Nebraska contributed to this report. Gecker contributed from San Francisco, Flaccus from Oregon.
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