A Change in the Environment
3.7 million of our fellow men and women in the United States permanently lost their jobs this past October. That is 2.4 million more than did so this past February.
COVID-19 was and still is the culprit in this case of the murder of not only over 1.3 million men, women, and children, but also the killing of the global economic growth that the United States has enjoyed over the past decade. Both, the number of infected and number of job losses rose considerably and in tandem. In all likelihood, this trend will continue and the burden of proof is on the data below...
(Centers for Disease Control and Prevention)
The Centers for Disease Control and Prevention aggregates data points from infection models formulated by academic and research institutions across the United States ranging from MIT's Operations Research Center to Johns Hopkins' Center for Systems, Science, and Engineering (CSSE). In doing so, they also run statistical analyses on the data points. What we are seeing is, not only the historical weekly COVID-19 cases, but also the projected cases for the next few weeks.
The aggregate of those predictions suggest that the case growth will continue at least until the end of the year. More significantly, the 95% confidence interval, represented by the shaded area, suggests that it is more than likely that the rate of case growth will rise rather than fall. We think that this is the most likely scenario given the innumerable factors at play in terms of transmission vectors.
When we add in individual projections from the Los Alamos Laboratory, Columbia University, and Johns Hopkins' CSSE, we can see how it appears more likely that cases will rise rather than stabilize.
The implications of this are unfortunately disappointing for the United States' economy. In the past few months, the number of jobs permanently lost tracked the infected count. This was and still is intuitive given how, even large businesses will suffer over time as their cash reserves dwindle and even the level of service business is less than stellar. We think that the below linear forecasted permanent job losses is likely given the direction that the infected count is going in.
(Centers for Disease Control and Prevention)
(U.S. Bureau of Labor Statistics)
Darwin's Finches in the Modern Age
Large businesses often have significant reserves of cash. Even, if the cash can only sustain them for maybe a year, it is a far cry from what main street businesses have at their disposal. Months and many forms of monetary assistance later, small business began to rebound. However, this is starting to reverse. For example, Emporia, KS, a town of around just 25,000 people is seeing businesses decline again. Town officials estimate that 20% of its small businesses are at risk, a significant blow for a small community that is very common across the U.S. (WSJ) Businesses that aren't closing outright are barely subsisting off government aid and private donations.
We all know the rules: wear a mask, stand six feet apart, and sanitize your hands. During the onset of the pandemic, many businesses temporarily closed their doors, stopping all business outright. However, businesses adapted. Margins collapsed so owners began pulling out all the stops and began investing in PPE. A population with cabin fever began to return to the streets and to the store corners which began to aid businesses.
That wasn't enough. As the pandemic continues and cases begin rising again, business owners are asking themselves what further measures they have to put in place. For example, Delta Systems, Inc. in Streetsboro, OH took as many precautions as they could. Employees wore masks, had their temperatures taken, and even reported on their travel and interactions with others. Even with that, a few of their employees still contracted the virus and management is now planning ahead and exploring additional precautions.
The next logical step for many small businesses is contact tracing. However, this makes little financial sense for many small businesses since they are generally not equipped to handle the costs and labor involved. Businesses must then turn to the 'Holy Grail' of modern business: digital commerce. In the months since the pandemic, consumers have increasingly turned to digital sales.
(Wall Street Journal)
The burden of proof is once again on the data. Consumers are quickly adapting to lower/no-contact solutions to continue to buy and consume. The onus is then on main street and the rest of the economy to adapt and modernize. It even appears that they are recognizing this and we anticipate them to adapt.
Main street occupies (metaphorically, of course) approximately two-thirds of new new jobs in the U.S. The U.S. Small Business Administration estimates that these businesses account for 44% of all U.S. economic activity. We think that it is increasingly clear that the U.S. economy will experience moderate economic growth as main street's plans to evolve will clash with the increase in COVID-19 cases and accompanying lockdowns.