Covid-19 Bankruptcies Bleeding Out Jobs, Economic Capacity

Even though quite a few American are confessing to having Covid-19 fatigue, there’s no escaping the ongoing damage to the economy, like bleeding out of a major artery. Commercial tenants, particularly of retail space and office space, are either not paying or are pushing their landlords to give a major rent reduction. Upscale business hotels remain closed in major cities. I am told there are lots of moving vans in New York City, and they aren’t for move ins. Restaurants are trying to figure out how to get by. Operators that depended on corporate activity, be it shops and food vendors catering to office cube dwellers commuting or retailers in airports, are thinning out their locations and their staffing.

And mind you, that was the state of play as states were partly or significantly though reopening, when there was hope the economy would haltingly get back to something approaching the old normal. But now, thirty-two states reported an increase of 10% or more Covid-19 cases in the last week. Even though the death rates so far aren’t correspondingly high, experts warn that with the lag between infection and mortality, that it’s too early to rule out a follow-on death spike.

What has kept the bottom from dropping out of the economy is the emergency response. Yes, way too much was in the way of zombie futures, as in allowing already heavily leveraged companies to have more access to debt. And the subsidies to households, both directly, through the $600 a week unemployment insurance supplement, which resulted in five out of six making more than when they were employed, the payroll protection plan, which kept others from being furloughed, and the $1200 per person payouts all helped preserve incomes. As a result, even though residential mortgage delinquencies are elevated, they aren’t at the post financial crisis level, when 9 million mortgages went into foreclosure.1 From HousingWire:

The U.S. mortgage delinquency rate rose to 7.76% in May as Americans struggled to pay their bills during the worst public health crisis in more than a century.

The rate rose from 6.45% in April and was 3.39% in March, the month when states began issuing stay-at-home orders to try to stem the spread of COVID-19, according to the report on Monday. Black Knight counts loan in forbearances – meaning they have an agreement with the servicer to suspend payments – as being delinquent, as does Mortgage Bankers Association.

Measured as a number, rather than a percentage, there were 4.12 million mortgages in the U.S. that had payments more than 30 days overdue in May, Black Knight said.

Last week there were 4.6 million homeowners with mortgages in forbearance, down 57,000 from the prior week, according to Black Knight. Some owners get an agreement with their servicers to suspend payments and then keep paying their home-loan bill, the firm has said in the past.

Mississippi had the worst delinquency rate, at 12.73%, according to the report. Louisiana was next, at 11.79%, followed by New York at 11.28%, New Jersey at 11.03% and Florida at 10.52%….

Serious delinquencies, which means people who are 90 days past due but not yet in foreclosure, have increased by more than 50% over the past two months to 631,000, Black Knight said.

There’s a moratorium on foreclosures for loans that are backed by Fannie Mae, Freddie Mac, and the Federal Housing Administration through the end of August because of the COVID-19 pandemic.

Bloomberg has a new story on enterprises that declared bankruptcy as a result of the crisis. The authors admit the list is incomplete and even yours truly, who doesn’t follow particularly companies much, has noticed some bankruptcies not on the list attributed to Covid-19. One is 24 Hour Fitness, which if anything is larger than Gold’s Gyms, another health club operator that at best is radically shrinking.2

Some other omissions are on the restaurant front.3 The piece does capture Fig & Olive, which had been in trouble and Covid-19 pushed it over the edge; a story on its bankruptcy filing listed other Covid-19 casualties, some of which escaped Bloomberg’s notice. From Restaurant Business last week:

The pandemic has forced a number of restaurant operators to declare bankruptcy in recent weeks, including NPC International, the largest Wendy’s and Pizza Hut franchisee, as well as Chuck E. Cheese, Twisted Root Burger Co., Souplantation and Sweet Tomatoes, and others.4

But some companies, like Chesapeake Energy, can’t be propped up because they are just too far gone in the new normal.

Nevertheless, the Bloomberg survey does give a sense of the sort of companies that are falling over. The article also has an excellent interactive graphic which enables you to see even more names than listed in the text. I was sad to see other businesses I had patronized there, like Sur la Table, where I’d bought holiday presents and got all my good knives sharpened before I left NYC, as well as J Crew (which even though I hadn’t bought from them in a decade due to crapification was still a warhorse you expected to stay around), Tuesday Morning (a Southern chain selling remaindered goods at cheap prices; a good place to grab cheap linens or a knockabout piece of luggage), and GNC (one of those stores I never partronized but seemed to have a loyal customer base). But what is remarkable is the range of businesses that are having to reorganize, including a DC parking garage operator, American Addiction Centers, and The Roman Catholic Church for the Archdiocese of New Orleans. The authors also picked up some very small businesses, with only $50,000 in assets like:

…Sugarloaf Craft Festivals, which organized artist fairs across the country. It simply saw no way to keep going in the era of social distancing. Ditto for Bounce For Fun, which rented bounce houses and water slides for school parties and spring festivals in the Dallas area. The owner says cancellations had hit 100% this year, with little hope for a rebound next season.

In addition to the infographic, the article also has case studies of some of the bankruptcies, like of Northern Bear, a diner in California, Klausner Lumber, a sawmill in Florida, professional sports league Alpha Entertainment in Connecticut, and Alaska regional airline Ravn Air. A table sorts the bankruptcies catalogued by size. From the biggest:

Consider:

Bankruptcies are only one measure of economic damage. The companies that do survive it will emerge smaller, but some will liquidate and never return. But other companies are shrinking without declaring bankruptcy. Airlines are expected to cut more staff soon. Even Starbucks has been closing stores.

Moreover, particularly for small businesses, bankruptcy isn’t a great way to shutter your business. Small business owners almost always have to issue personal guarantees of their company’s obligations. So a business bankruptcy will often trigger a personal bankruptcy. Oh, and bankruptcies often lead to divorce. So an owner who sees the handwriting on the wall is better off closing his business and walking away if he can.

And as we’ve stressed, companies that received PPP loans, on the whole, expect to cut employment levels once they’ve met the eight week requirement to turn the loan into a grant. That bleeding is just starting.

So far, the economy is tracking our non-letter “recovery”: a bounce off the bottom followed by a rapid loss of trajectory, followed by wobbly sideways to possibly downward activity.

Where things go next is highly uncertain. One big variable is what the Feds do next. While there’s talk of a second stimulus package, the noise-making is for it to be stingier to households than the first. The $600 per week unemployment supplement has engendered a lot of conservative whining. And it has made hiring low wage workers harder; I know the home health care agencies in Alabama attribute their recent increased difficulty in getting staffing directly to the unemployment supplement.

For one-stop complaining, some sightings in the New York Post, the first from July 5, NYC grocers struggle to hire while workers bank on unemployment claims:

New York City supermarkets are getting inundated with unemployment claims — while most of them are looking to hire workers during the coronavirus lockdown, not fire them.

Morton Williams, which operates 16 stores in the New York metro area, was slammed with 400 claims at the height of the pandemic in March and April — up tenfold from a year earlier, co-owner Steven Sloan told The Post. Through June, claims have risen to about 600 — or about half the workers on the payroll, he said.

What’s more, during that time Sloan said Morton Williams has laid off only three people as grocery demand went through the roof. Yet by the end of May, more than 160 ex-staffers were drawing weekly benefits OK’d by the state, he said.

In the past, it was rare that the New York Department of Labor would pay a claim the supermarket disputed, and if they did, they would explain themselves, Sloan said.

That practice changed with the outbreak of the coronavirus, he said.

“In three months I have not received a single explanation about why former employees are being paid when I have disputed their claims,” Sloan told The Post. “So, I don’t know what their reasoning is. I can’t argue any of these cases if we don’t know what the rules are.”

Shorter: So not only are the unemployed being paid too much, they are not being portrayed as the new welfare cheats. This contrasts with the situation in Florida (and no doubt other states), where reader alex has written me at length about how large numbers of workers are encountering big obstacles to getting unemployment. I have been remiss in not writing it up, but it’s a real hairball to explain.

And from the Post over the weekend, Why Congress must say no to the $600 unemployment bonus extension:

Five out of every six recipients are receiving unemployment benefits that exceeded their previous earnings, according to the Congressional Budget Office. This significantly depresses employment and makes it more difficult for businesses to reopen.

The add-on payment expires on July 31. It should not be extended. Doing so would encourage workers to remain unemployed longer than they otherwise would and depress the economic recovery. We estimate that if the add-on is continued, more than 60 percent of those unemployed after July 31 would be out of work specifically because of the add-on.

Congress should create additional incentives for people to return to work, in part because longer-term spells of unemployment can harm a worker’s lifetime earnings, as skills atrophy.

Needless to say, that charitably assumes jobs will be there, a fact not generally in evidence.

Another Scrooge front is proposals for another round of checks to individuals, but at a much lower income level cutoff.

Keynes observed that there isn’t the political will to run big enough deficits long enough to lift an economy out of a depression absent a war. Recall how the US dialed back support in 1937 when activity was improving and the economy promptly fell over.

On top of the general tendency to curtail stimulus spending too soon, we now have the additional wee problem of Covid-19 whacking the economy again. California, Texas and Florida alone are all significant in terms of economic activity. Yet they don’t appear to (yet) have had enough Covid-19 deaths to frighten enough locals into taking mask discipline seriously (unlike New York, when I visited last month, compliance was extremely high and almost everyone was wearing them correctly, as in over their noses). Even so, communities are seeing anything from debates to pitched battles over whether public schools will reopen, with teachers and some parents favoring closure or at most very limited opening. But the first time around, school closures were often accompanied by non-essential business closures, so most parents could tend their kids. What happens if schools are shuttered but more parents are expected to work out of the house?

And the same debate is taking place with colleges, with similarly complex pressures, since in many communities, those institutions are major drivers of local employment.

And these debates will inevitably be framed as jobs versus safety, when we’ve seen from Sweden that high infection rates lead consumers, particularly older affluent ones, to curtail their activities and spending, as well as become national pariahs. For instance, Americans can’t even go to Canada without being required to quarantine, and that’s assuming the trip is deemed essential.

In other words, while a lot of important decisions are in play, the odds considerably favor results that will take more air out of this already weak economy. Yet the NASDAQ hit an all-time high last Friday, and the commentator patter is Mr. Market thinks Covid-19 means only one or at most two lost quarters. I’d like some of what they are smoking.

One of the things that is propping up the sense of normalcy is the apparent limited amount of superficial change. I have not seen that many more “For Sale” signs than usual. I don’t get out much but I have seen only a few vacant stores and they were in marginal locations (I suspect this is true of many moderately-well-off to affluent suburbs; I’m curious to get a grip on why Americans seem to be underreacting to what is happening).

Thing will only get more turbulent. Hope you are well bunkered.

____

1 Note that some homes had first and second mortgages on them. In general, the data on mortgages and rental is poor due to the fragmentation of that market and the lack of central reporting.

2 I have only been to one 24 Hour Fitness, but it was vastly larger than a Gold’s Gym typically is and had a pool, saunas, and steamrooms. So even though it had slightly fewer locations, I strongly suspect the 24 Hour Fitness operations typically had more members. Golds also became a franchise, and I haven’t come across a breakdown on how many locations were owned v. franchised.

3 A Yelp survey says 53% of the restaurants listed at Yelp say they are permanently closed, but there’s something amiss with their metrics, since it also ways 47% are temporarily closed, whic obviously adds to up 100% when there are some restaurants still open.

4 NPC, Chuck E. Cheese and Twisted Root do get mentions in the Bloomberg piece; there are clearly so many restaurant deaths that it would be difficult just to catalogue them.

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37 comments

  1. JBird4049

    I really have to stop doing a bedtime scan of NC bunkered here in my junior one bedroom.

    Like a broken record I have expressed my bewilderment over the lackadaisical approach that Congress, the White House, most States, and perhaps most municipalities have taken to all this. Yes, we’re all told that the government and country are corrupt, incompetent, and lack resources; what I see are people doing all that they can not to make the obvious and necessary choices that most countries can do while skillfully creating Byzantine “aid” programs. Programs that mainly funnels billions to businesses owned by either patrons or cronies while giving merely hundreds of millions to be apportioned among the vast majority of Americans.

    It is very easy to see the increasingly speedy collapse as well as see that the political fallout will be severe for anyone or any parties that did not deliver, not talk about, but deliver effective aid to the general population. Yet, Mitch McConnell and his fellow Senators talk about lowballing the aid needed and forcing people to look for work with at least a 20% and a growing pandemic. Then there is Nancy Pelosi and her feckless, jello boned performance artists Democratic Representatives. And then there are the governments doing similar nonsense at the state and local levels.

    I bring this all up because while the American population has the long term memory of a flea, hunger and want are very memorable things and the general elections are less than five months away. Just what do they think is going to happen then? That everyone will calmly accept the status quo and the certain rigging of at a few of the states’ results or in the 2022 House elections?

    This all the feeling of June 1914 when the senior leadership of all the governments went on summer vacation leaving the very junior varsity teams in charge. That is one of the causes of that war. The incompetents, screwups, and goofballs were in charge as the summer caretakers after being told not to break anything like good china.

    Reply
    1. fresno dan

      JBird4049
      July 13, 2020 at 4:35 am

      There was a lot of “Prosperity is just around the corner” at the start of the Great Depression (began with a republican administration – makes me think I am in a Twilight Zone episode). Our version is the V shaped recovery – which to believe that, is beyond bizarre and makes believing in Easter Bunnies, Santa Claus and the Tooth Fairy the epitome of realism.
      I think just as there was a lack of imaginative thinking at the start of the Great Depression, we will be in the same situation for a few years. Maybe this time we can get ourselves out of this situation without a world war….

      Reply
      1. L

        While I am not much given to “Washington is a bubble” talk the fact is, Washington is a bubble. A large proportion of our house and senate members are wealthy in their own right and are well positioned to ride this out (e.g. Nancy Pelosi and her overpriced ice cream). Likewise many of them spend most of their time talking to the already rich, or their lobbyists who feel business closures as lost investments, if they feel them at all, rather than the existential employment crises that they are. People who are losing their homes and their family members have more immediate concerns than attending a fundraising zoom. If you then add the fact that much of DC is run by older “centrists” in both parties and you can well understand why they are primed to believe in happy talk, v-shaped recoveries, and the need for fiscal “discipline.”

        As a case in point when I had a phone call with one of my US Senators’s offices I had to spend most of the time patiently explaining that no we did not have free testing for everyone and no the economy wasn’t all perfect. The kind woman on the other end spent her time talking about nice meetings she had with the Chamber of Commerce where they said everything was fine and testing was going great.

        And this was the “local” office.

        At this point I think many of them have checked out on the assumption that their past virtue signaling was enough and they can run for reelection on the previous pathetic stimulus, or their opposition to it.

        Reply
    2. OpenThePodBayDoorsHAL

      JBird:

      the political fallout will be severe

      I’d love to see even one recent example of that assertion in reality. Ripping up Glass-Steagall? Single payer off the table? China in the WTO? Iraq War? RussiaGate? Nancy “States and localities cannot get any funds but I have luxury ice cream” Pelosi?

      Reply
      1. JBird4049

        I can see why you would think that as that is what has happened for forty or fifty years. I think the public reactions will be severe this time because the impact will be on many Americans in all classes excepting the top 5 or 10%. Believe me that missing meals every day for a month or praying that you won’t be living in your car or even on the streets. Heck, the food pantries are often skimpy although the soup kitchens are always open. Then add the families of these people. Even their pet dog or cat.

        Those items you mention are very important, but we are unusual for knowing this stuff. For me it not only a hobby, my declared major is political economy. Most people working full time and trying to take care of family even friends have difficulties just finding the time to sleep! Even knowing about Glass-Steagall would be unlikely.

        That’s not to say that people don’t care or have some knowledge. People across the political spectrum actually agree that the current government at all levels are corrupt, incompetent, lying weasels, but don’t actually feel like they can do anything. Yet again the wealthy and Finance have been bailed out and everyone else from Joe Shiftworker to owners and CEO of businesses from tiny to large have been shafted. Only the devastation is so general that there is nowhere to escape to and precious few jobs for the more than one in five decades who are unemployed.

        So Americans can generally agree on the incompetent handling of the pandemic, that the people most responsible for this disaster are either protected or even rewarded while at ⅓ of the population can’t pay for their housing or for food. Pick up the newspaper or go online; trillions for the wealthy and maybe a few hundred here or a $1200 check; millions have not even got their first unemployment check four months into the crisis.

        So desperate people with increasingly little to lose and as has been sung by Janis Joplin: freedom is just another word for nothing to lose. The organization(s) might not be in place and we are all hoping that Congress will see reality and do something. If they don’t, current groups like the DSA will get a fantastic boost and some people will create their own groups to get some payback and maybe some reforms.

        Nothing left to lose or perhaps just ground down after decades of work with what happened in just a few months right in our collective faces. Taunting us with their greed and contempt for us. And if by some chance the explosion does not happen in 2020 will be organized and ready to go by the midterm elections. Oh yes, they will.

        Reply
  2. Sound of the Suburbs

    Understanding the economics always helps.

    There is something very dangerous about neoclassical economics.
    Debt looks like the solution to every problem when you use an economics that doesn’t consider debt.

    The economics of globalisation has always had an Achilles’ heel.
    In the US, the 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at debt, neoclassical economics.
    Not considering private debt is the Achilles’ heel of neoclassical economics.

    The Americans were the first ones to run their economy on debt until they got a financial crisis in 1929. They had no idea what had happened and plunged into the Great Depression.

    Japan was next in 1991, and by studying the Great Depression they avoided this fate.
    Richard Koo used to be a central banker at the Federal Reserve Bank of New York, and he looked at both sides of the bank’s balance sheets during the Great Depression.
    Richard Koo shows the US money supply / banking system (8.30 – 13 mins):
    https://www.youtube.com/watch?v=8YTyJzmiHGk
    1) 1929 before the crash – June 1929
    2) The Great Depression before the New Deal – June 1933
    3) During the New Deal – June 1936

    The money supply ≈ public debt + private debt
    The “private debt” component was going down with banks going bust and deleveraging from a debt fuelled boom causing debt deflation (a shrinking money supply).
    It was the public borrowing and spending of the New Deal that helped the economy recover.

    The money supply ≈ public debt + private debt
    The New Deal restored the money supply by increasing the “public debt” component of the money supply.
    Once the New Deal was working, they reduced Government borrowing and plunged the nation back into recession again.
    The enormous public spending and borrowing of WW2, eventually sorted things out.

    Japan avoided a Great Depression by saving the banks.
    Japan learnt the lesson of the New Deal, and used fiscal stimulus to maintain the money supply as they deleveraged.

    Reply
    1. JBird4049

      Our problem isn’t describing the causes of our problems, or sketching out the solutions, but that the ruling class apparently being adrift in their own fantasy world. What they think is happening or is real is all in their heads, which they don’t realized, and probably won’t until the neo-Jacobins come for their collective heads.

      Reply
      1. Sound of the Suburbs

        It is a parallel universe.

        Economics the timeline.
        Classical economics – observations and deductions from the world of small state, unregulated capitalism around them
        Neoclassical economics – Where did that come from?
        Keynesian economics – observations, deductions and fixes for the problems of neoclassical economics
        Neoclassical economics – Why is that back again?

        We thought small state, unregulated capitalism was something that it wasn’t as our ideas came from neoclassical economics, which has little connection with classical economics.
        On bringing it back again, we had lost everything that had been learned in the 1930s and 1940s, by which time it had already demonstrated its flaws.
        The Mont Pelerin society developed the parallel universe of neoliberalism from neoclassical economics.

        Reply
  3. Maritimer

    I would imagine that given our criminogenic financial environment that creative accounting would be on the increase and many of these bankruptcies would be lootings. Also, with more bankruptcies, there is probably less court supervision and more looting opportunities. To paraphrase Rahm Emmanuel, “Never let a good bankruptcy go to waste.”

    Bankruptcy for many financial engineers is just another economic cycle. It may be even more profitable this time around since the Government is kicking in so much loot. It would be very interesting to hear a criminologist reporting from the Court Trenches.

    Reply
    1. Lambert Strether

      > many of these bankruptcies would be lootings

      I would imagine that housing is tight in the Caymans etc., the Caribbean being one of the few places where our passports allow one to get away easily. Perhaps shipping containers would meet the demand for looter accommodations.

      Reply
  4. PlutoniumKun

    I think a general air of unreality doesn’t just apply to the US. I think many key business decisions have been put off until everyone is back to work as funders ponder what the real damage might be. I’m surprised at the number of building sites going full speed. My friends in England who run businesses are surprisingly relaxed at the moment as the governments supports have kept things relatively stable. They have full bookings for the rest of the year, but they are aware many of these are speculative, and people could back out later on if a further lockdown is needed. Curiously, most people in the UK seem to think that further lockdowns are unlikely (despite all the evidence that the disease is surging back), while here in Ireland, with much lower levels, there is an assumption that there will be at least one more national lockdown required to prevent the inevitable post holiday season surge. My guess is that because of the uncertainty along with continued cash flowing from government, many investors/businesses are putting off any fundamental decisions (i.e. closing down businesses) until later in the year.

    I went out for food/drinks for the first time this weekend due to a family visit. The restaurants and bars in Dublin seem packed, although this could be deceptive as many people are choosing to eat outside giving everywhere a very continental feel, but many places could be more empty inside. To my surprise, nearly all restaurants have opened, although a few have opted to stay closed for renovations – they seem to have wisely decided that its better to just write the summer off and do essential works while they can. There is an air of normalcy around, but the big question is whether people have enough money to keep this up, nearly everyone has taken some sort of financial hit.

    Some businesses are booming – a guy I know who has a furniture store said he was trading ‘privately’ through the lockdown, and had his best June ever – people are spending money on home improvements and furniture as a way of just using up time, or maybe preparing their home for working arrangements. His big problem is getting stock, he says some of his suppliers have stopped giving him delivery dates.

    I heard that many hotels are in very serious trouble – well under 50% occupancy rates despite many being shut. Some family/spa hotels in rural areas are fully booked out as people book ‘staycations’, but it seems very random – hotels aimed at foreign tourists and coach parties will never fill up, while those in popular beach areas which cater for domestic tourists are likely to do very well in the next year or so, many are booked solid until Christmas.

    Reply
    1. vlade

      Prague hotels are empty. Almost literally – most of them have 10% occupancy if that (they were all aimed at tourists, which is a rare beast to be seen these days).

      Holiday cottages and similar in the country are chock full though, as absolute majority of people who would normally holiday abroad stayed at home.

      That said, a friend returned from hols in Greece last week, said it was faboulous – they were the only family in the whole resort (of 15 private villas). Entirely empty beach, and basically all staff there was just to look after them. And as they were the first ones this seasons, the service was fantastic.

      Reply
    2. Ignacio

      Putting off some fundamental decisions: this is almost certainly true for many business. Here In Spain I am seeing some renaissance in the last two weeks but I cannot say how this would compare in a year-to-year basis because last July I was not in the same activity. It is increasingly clear that even if a majority of the population is taking personal precautions and social distancing is widely respected the disease always finds its way in the exceptions to the rule. We are seeing clusters in almost all Spanish provinces, some of them are large and looks like, pretty much like the US though still at a much lower level, we cannot spontaneously control the spread without obligatory measures mandated.

      The new clusters in summer are killing a few tourism business in Galicia but so far the Mediterranean coast looks relatively safe. I have been told that, may be today, the use of masks could become mandatory in Spain even outdoors and when proper distance is granted. This would be a step in the good direction even if one considers this as exaggerated but it will help to 1) increase risk awareness and 2) identify those excessively relaxed about this.

      Reply
    3. wayne

      Try finding weightlifting or any exercise equipment online, most online retailers get sold out as soon as they restock. Walmart has gym equipment that has a ship date of August, but those are all sold out (weights and racks). Resellers are 3x or even 4x the price on weight equipment. The better brands of weight equipment (rogue, Vulcan) have people watching 24/7 to buy up stock as it goes online. I put up an bowflex onlinen to sell locally and within 30mins already had a buyer. It is wild.

      Reply
    1. Arizona Slim

      Okay, here are my ideas:

      1. Garden seeds and gardening equipment
      2. Cooking ingredients and kitchenware
      3. Equipment for exercise that doesn’t require a trip to the gym. Note wayne’s comment above. ^^
      4. Tools for doing your own projects and repairs

      Any other ideas from the commentariat?

      Reply
      1. Amfortas the hippie

        seeds, seeds and more seeds…that’s gonna be a problem come spring.
        matches, bic lighters, zippos and paraphernalia, if you can find them….
        and don’t forget medicinal herbs, if you have the space. Grasshoppers have put a dent in my efforts at this, but i have managed some:chaste tree, syrian rue, both growing wild(mom planted the former as a silent middle finger to the antiabortion people), papaver somniferum, mullien, yarrow(also wild) and a bunch more…pennyroyal(another middle finger)…
        The problem is that building up a parallel system, even in one’s garden, let alone whole house or whole town…takes time, money and effort.
        and, per Cassandra, by the time it’s obvious to everyone, it’s likely too late.

        Reply
      2. HotFlash

        Stuff for DIY repairs. I esp know about bike parts. Tires, inner tubes, cables, brake pads, normal maintenance stuff is hard to get, suppliers are backordering.

        So strange!!! Inner tubes are a bit of a stretch (so sorry, didn’t mean…) but I would stock up on patch kits just in case. Fun thought: bikes are generally low-tech, and simple repair parts like cables, brake pads, spokes, patch kits should be possible to make *locally* with minimal mfg equipment using simple tech and recycled materials. Eg, old inner tubes could be made into patches, S/S cable plus some silver solder and a simple mould will allow you to make any number of brake/gear cables, and old auto tires could be fashioned into replacement brake pads just by cutting. Laserr cutting would make it fast, easy, and accurate. I believe I have identified a market opportunity for local and cottage industry.

        Reply
  5. Jesper

    I believe that if governments were prioritising small businesses and people over the FIRE-economy then they would consider finding a way of nullifying personal guarantees given by owners of limited liability companies.
    As is then I suspect that the FIRE-economy will continue to be prioritised as it has been prioritised for decades. Possibly it can work, it will probably work in the short-term but in the long-term then it looks like the FIRE-economy is draining too much. Since pension-funds are part of the FIRE-economy then I’d expect the fight will be portrayed as being between something other than the FIRE-economy (elderly?) and workers (young?).

    I believe that people currently in paid employment now know how much better they have it than the increasing number of unemployed. They’ve got two choices:
    -join cause with the unemployed and share the paid employment
    -not rocking the boat and doing whatever it takes to keep the paid employment
    One is living in fear of losing all, the other is giving up some and gaining more security and free time. The likely choice, as our elected leadership will present it, is to continue letting the market decide without legislation hindering or limiting the market-power -> live in fear of losing paid employment is in my opinion the likely (default) outcome.

    Reply
  6. Amfortas the hippie

    this Reaganesque Whine from the Masters:
    “It (UI)should not be extended. Doing so would encourage workers to remain unemployed longer than they otherwise would and depress the economic recovery”
    and
    “….Congress should create additional incentives for people to return to work….”

    Heard it all my life,lol.
    First, I don’t think that rational people necessarily WANT people to return to work in droves…there’s a Pandemic, ya know…

    Second, the Whining contradicts these folks’ own dogma…that of The Market(holy)…specifically the Labor Market.
    Obviously, and under their own rubric, if people get more money staying at home than they would working, and you want people to come work for you…then perhaps you should look into paying them more.
    You know…to provide an incentive, and all.
    That would seem to be what The (labor) Market is saying.
    The Masters sent the Procuctive Plant to China, gambling that the Chinese Peasants would be happy to remain Peasants.
    Similarly, after 40+ years of Real Wage Stagnation, they are expecting American Workers to be satisfied remaining Peasants…and continuing to work for peanuts because it makes the Masters happy.
    That is not, I’m sorry to inform, sufficient Incentive to return to work in the face of a pandemic.
    This is not hard to understand.
    Didn’t these selfish whiners go to Wharton and the like?
    Do they not cover these basic economic concepts at such places?

    Reply
    1. Oh

      If the grocery chains are making more money why don’t they raise the wages? They could use hiring bonuses to attract new workers if they’re having trouble finding new help.

      Reply
  7. DTK

    Why Congress must say no to the $600 unemployment bonus extension:

    One of the the many problems with this assessment is that we have long since passed the time of being lectured on the morality of paid work. And yes, employment is depressed and will continue to be. People do want to earn enough to at least break even. The Scrooge implication is that if the extra unemployment benefits are denied then the economy will strengthen. Employment through unemployment?

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    1. Amfortas the hippie

      yes, the term of art is “Disciplining the Workers”…ie: starvation is the great motivator.
      I have little use for “people” who make such arguments, given that they do so from a place of wealth so fabulous that they never have to even think about food or running the A/C.

      Reply
    1. Yves Smith Post author

      Yes, that was the point, we’ve covered that issue. Canada would normally be very unlikely to impose restrictions like that due to the high level of cross border traffic and commerce.

      Reply
    2. drexciya

      This also has a lot of repercussions on specific sectors.

      My brother-in-law works for a company, that supplies and maintains machinery on ships. Getting people on board for maintenance or deployment is a challenge. How can you send out someone, if you have to go 2 weeks into quarantine first. What if you can’t get a flight back to your country? So, a lot of activities have been put on hold.

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  8. Joseph

    I watched an interview with Larry Kudlow on Bloomberg last Thursday in which he remarked that the high unemployment benefits in some states make returning to work less attractive. Where is the empirical data to support this claim? And as it’s stated in Yves’ piece, the jobs may be gone when the benefits run out.

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  9. Andrew

    A close friend of mine rose to be director of audio/visual services at a major resort hotel after working there for over twenty years. Their company was bought out by a large national chain just as the pandemic hit and the hotel shut down. Now as things are re-opening he is being “invited” to volunteer for his old job for two days a week which quickly escalated to four or five days all with no compensation or understanding that he will be re-hired. Not even gas money. He is being treated like an intern.

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        1. a

          yeah, He said the regional director was almost cocky about it. There is not a lot of prospects in the field right now and he is raising two high school aged boys, he knows the tech so he may be able to work with home office type things.

          Reply
  10. rjs

    curious: Mississippi had the worst delinquency rate, at 12.73%, according to the report. Louisiana was next, at 11.79%, followed by New York at 11.28%, New Jersey at 11.03% and Florida at 10.52%….

    it strikes me as odd that those same states led the nation in delinquent mortgages 10 years ago, during the original mortgage crisis, though probably not in the same order…(i covered that Mortgage Monitor report for years, back when Black Knight was better known as LPS)

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  11. kareninca

    I live in Santa Clara county in CA. The population of the county is 1.9 million. There have been 6k confirmed cases of covid, and 167 deaths. I take the virus extremely seriously, but I do not think that is enough deaths for the local population to take it seriously. It is true that in the local stores (in a wealthy area) mask usage is required and universal. But in less affluent areas, people wander around socializing without masks, or wearing them wrong. I have a friend who lives in the poorest part of the city of San Mateo, and he says that walking home is like running a gauntlet of maskless young people.

    I drive up and down El Camino, the main commercial road, every day. There are now a lot of buildings that look closed. A lot. They don’t have “for rent” or “closed” signs on them, but they were occupied before and now they are not. I don’t know what most of them used to contain. It feels as if an economic time bomb has been set and is ticking.

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  12. Paleobotanist

    Montreal here. We are half-reopening and half-locked in. Premier Legault is determined to reopen. Montreal is the driver of half the economic activity in Quebec. It has also had the most cases in Canada. With the re-opening a couple of weeks ago, Montreal has many a louer signs as businesses have folded. This is true in rich neighbourhoods and poorer ones. I walk around alot because I’m nervous of public transit, so I have been observing. People have been able to not go to work and take the $2000/month benefit that Trudeau put in and just extended (he’s thinking of having an election and getting out of minority government). Businesses are grousing that they can’t hire low paid workers because of the federal benefit. Some of the small family businesses probably can’t pay more, but the rich ones can. The wealthy supermarket chains just clawed back their $2/hr hazard pay to their staff. Les Montrealais are being shunned by the rest of Quebec as Typhoid Marys. I’m thinking the wave of business closures is just starting. It looks scary. Montrealers are really rotten at mask wearing but mairesse Plante is slowly making them mandatory. She’s been a good mayor, better than the last one who only cared about money and developers.

    Reply

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