Economic damage from the shutdown is becoming more obvious as more reporters spend time covering the destruction. Here are two articles each on the overall economic impact, specific impact on individuals, and concentrated impact on two cities:
- GDP in Italy expected to shrink to the level it was 23 years ago
- Airline CEOs expect it will take years for the airlines to recover
- Additional 8 million Americans drop below the poverty level, joining the 55 million who were there before the pandemic
- All 1,600 orchestras in the country have gone dark; their 160K musicians are unemployed
- San Francisco has 14% vacancy rate in commercial office space
- Impact on employment in New York City is more severe than the national average
How long will we let this go on?
Broad indication of the damage:
10/11/20 – India Today – Italy’s GDP in 2022 shrink back to the same level as 23 years ago: Report – Forecast by an industry trade group is estimating the GDP for Italy will shrink by 10% in 2020. That is for the whole year not just an annualized estimate for the second quarter or third quarter. Ten percent. For the year.
The Minister of Finance says the group’s forecast is “very close” to what the government is estimating.
This would bring the Italian economy back to the place it was 23 years ago, way back in 1997. Twenty-three years of economic growth vaporized in one year.
10/18/20 – Wall Street Journal via Fox business – Airlines plan for prolonged coronavirus travel drought – The CEOs of both United and Delta think it will be years before airline travel gets back to the volume before the pandemic hit.
Even as travel has recovered from the frightening low point earlier this year, this last weekend passenger volume was more than 60% below what it was the prior year.
United thinks traffic will recover to the 50% point but not go any further until a vaccine is widely used. He thinks business travel may not recover until 2024.
Ponder the impact on individuals:
10/16/20 – NBC news – 8 million Americans slipped into poverty amid coronavirus pandemic, new study says – The current definition of poverty is a family for with income below $26,200 a year. Analysis by a team at Columbia University estimates an additional 8 million people have slipped below the poverty level, joining the 55 million who were there before the pandemic.
The researchers calculated the monthly the poverty rate has gone from 15% in February to 16.7% in September, and that is after taking into consideration payments from the CARES Act.
A different study from team at two other universities estimates 6 million people have slipped into poverty in the last three months.
The economy wide shut down is pushing people into poverty. Impact is disproportionately on people of color. Who still thinks this is a good idea?
10/14/20 – Wall Street Journal – What Happens to the Musicians When the Orchestra Music Stops? – Imagine spending every spare moment during elementary school, junior high, and high school practicing the musical instrument you love. Imagine going to Julliard. Imagine just having graduated from Julliard or just having landed your dream job with an orchestra.
Then imagine the pandemic hits. Imagine every one of the 1,600 orchestras in the country shutting down with no idea when any of them will reopen.
No need to imagine that.
Every orchestra musician and conductor in the country is living that nightmare.
Stories of specific individuals to illustrate this disaster include a musician who was just about to graduate from Julliard and another who had just landed a wonderful position with an orchestra. She had played in a mere two performances before the orchestra hall went dark.
One professor estimates there are 630,000 jobs for musicians and conductors in the live performance industries. Half of those jobs are gone and it is unknown how many of those may actually come back. A trade association estimates there are 160,000 musicians in orchestras – obviously they are all out of work today.
The recovery, if any, will be in the hazy distant future. The Metropolitan Opera had previously canceled their schedule through New Year’s Eve and has now announced they will be dark until September 2021.
The impact on some cities is severe. Look at the New York City in general and office space in San Francisco in particular.
10/14/20 – Socket Site – Nearly 12 Million Square Feet of Vacant Office Space in S. F. – Staggering.
There is 5.6M square feet of vacant office space in San Francisco plus another 6.2M square feet of space that is leased but the current tenant is seeking a sublease, meaning they have moved out. That is about 11.8M square feet of available space.
For context, that is up from about 5.8M of unleased and sublease space at the end of the first quarter. Approximately twice as much space is now available compared to the start of the pandemic.
The sublet space of 6.2M square feet is in relation to about 1M a year ago.
That gives a citywide vacancy rate of 14.1%, compared to 9.8% at the end of the second quarter, and 5.5% a year ago.
New activity? Minimal. There was 385K square feet leased in the third quarter. At that rate it would take, oh, merely 15.5 quarters to get back to the vacant space at the end of the second quarter. That assumes no new construction for four years.
Check out the first comment on the post – one person said his/her landlord offered a 10% discount on the lease due for renewal at end of this year. The person said no, they were moving out. No counter offer. No nothing. Without any further discussion regarding the lease, the landlord came back with an offer of a 55% discount.
Other comments explain there is around 3.1M square feet of office space under construction, only half of which is leased. So, add another 1.5M of empty space coming online in next year or so. Another several lmillion square feet of planned construction is on hold.
Autumn 2020 – City Journal – New York’s Year from Hell – Extremely long article details the interconnectedness of the New York City economy. Heavy tourism funds the performing arts, retail, hotels, and restaurants. A mix of office workers, tourists, and a few nearby residents funds restaurants. Mass transit brings workers to fill high rent skyscrapers, with many of those going out for lunch or staying for a show or social event. The performing arts have a voracious appetite for costumes meaning they need lots and lots of cloth which feeds the garment district. The huge number of people working in all those enterprises means grocery stores, retail outlets, and landlords have lots of paying customers.
Slam the door on working from the office, the performing arts, tourism, and a few other industries means every sector takes a severe hit.
Just a few statistics showing the devastation in New York City:
- down 16% – job losses in New York City as of late July, compared to 8% nationwide
- down 53% or 472K – job losses for workers in leisure and hospitality
- down>67% or 65K – job losses in arts and entertainment
- down 49% or 185K – job losses in restaurants and hotels
- down 13% or 45K – job losses in retail
- down about 70% – traffic on subway, which is good proxy measurement for workers commuting into the city
The job losses are now starting to show up in finance, real estate, commercial banking, and investment banking with professional and business services category being down about 14%, or 110K jobs.
I ask again. How long will we let this go on?