How A Summer Of 'Yes' Is Ending In A Cloud Of Uncertainty For The Economy
It started out as the summer of possibility. Earlier this year, lines outside restaurants were long and bars filled up with noshing revelers. People started shopping for clothes to look presentable again after more than a year of pandemic isolation.
And why not? Things were looking safer: By the end of April, about 100 million people had been vaccinated. The worst days are behind us, one top public health expert said. Soon after, the relatively risk-averse Centers for Disease Control and Prevention told Americans they could shed their masks even for indoor gatherings as long as they were fully vaccinated.
There was a giddy feeling in the air.
How quickly the tables have turned. The masks have gone right back on in many places as the latest coronavirus variant has surged in the United States. Shoppers are fearful again, travelers are staying home — and that means the economy is once more on shaky ground.
"Rising infections and hospitalizations this summer have been unnerving," Mark Zandi, chief economist of Moody's Analytics, said this week in a research note. "Worried households suddenly turned more cautious getting on airplanes and going to restaurants."
On Wednesday, supermarket chain Harris Teeter announced it would close its doors earlier, partly in response to the latest surge of the delta variant. Another regional grocery chain, Publix, did the same in the Charlotte, N.C., area. As fewer customers were showing up, the store decided it was time to dial back.
This kind of pullback is being repeated across different kinds of businesses in the U.S. economy.
After an early summer spike in travel, people are dialing back plans to fly
Southwest Airlines recently warned that bookings were starting to fall and cancellations had started to rise.
This came barely a few weeks after Southwest CEO Gary Kelly said demand from leisure travelers was so great that traffic in July was expected to outpace the levels of the same month in 2019, before the coronavirus pandemic.
In fact, the airline was even planning for bigger and better days ahead.
"Next year, we plan to resume new aircraft deliveries, with the desire to restore our route network as needed to pre-pandemic levels," Kelly said in a conference call in the same month.
That optimism is now clouded in uncertainty for so many businesses. It's evident in the spate of decisions at different companies to postpone their back-to-office plans, despite preparations for grand reopenings in September and October. Microsoft last week even stayed away from providing a new date when it postponed its October reopening plans.
All this has resulted in a dramatic slowdown in hiring. After adding around 1 million jobs in both June and July, the U.S. added just 235,000 jobs in August, less than a quarter of each of the previous two months.
Airbnb's revenue skyrocketed, but soon after, things slowed.
The uncertain path of the coronavirus has caused whiplash in many parts of the economy. Worst hit are restaurants and bars, which had gone on a hiring spree earlier. In July they added nearly 300,000 jobs. But in August, they cut 42,000 jobs.
Nowhere is this more visible than in businesses that rely on people to leave the safety and comfort of their homes and travel to new places.
At the beginning of the summer, when airline bookings soared and rental cars ran out at many locations around the country, vacation homes for rent were difficult to find.
"This was Vrbo's best-ever start to a year in the U.S.," said Melanie Fish, travel expert at the vacation-home rental site Vrbo.
Rival Airbnb's revenue for the months of April, May and June combined rose 300% from last year and exceeded the same period in 2019 by 10%. But even as Airbnb's chief financial officer, David Stephenson, was announcing these results, he warned that the company had already started to see a "pullback in demand."
Such is the path of the unpredictable, unforgiving and unrelenting virus.
Seeing the writing on the wall, the economist Zandi has sharply lowered his forecast for economic growth this year. Zandi now thinks the economy will grow by 6%, which is 14% below his earlier, more optimistic estimate.
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