May 29 Coronavirus Report: The Economic Toll Rises

Dow Jones six month view
The Dow Jones index crashed as coronavirus set in and has not yet fully recovered.

Consumer spending fell a record 13.6 percent in April and unemployment ticked up to 40 million people, even as reopenings across the country put some back to work.  Bankruptcies and mass layoffs continue as Weight Watches just laid of 4,000 people in a three-minute video conference, Boeing laid off 7,000, and Chevron said it would cut its global work force by up to 6,750. 

As we predicted in early April, restaurants are finding it difficult, if not impossible to make any money when limited to 25 to 50 percent capacity.  This is from a May 28 Wall Street Journal article:

One Denny’s Corp. franchisee is closing 15 restaurants in New York and laying off 520 workers, according to a notice provided to the state this month. An owner of 49 IHOP restaurants in four states cited stay-at-home mandates in its bankruptcy filing this month. A spokeswoman for Dine Brands Global Inc., parent company to Applebee’s and IHOP, said the company sent notices terminating the owner’s franchise agreements last month.

Independent restaurants face even greater challenges than sit-down chains because they tend to have less room to cordon off customers and fewer seats to remove. A survey of 250 Colorado restaurant operators earlier this month found that nearly half expected to permanently close in less than three months at the 50% capacity cap that the state set on Wednesday. A study of 483 New York City venues found that 61% couldn’t make it with occupancy limits below 70%.

Another article details the preparations and changes that a restaurant in South Carolina had to go through as well as the economic decisions facing the owner and employees.

No Soft Landing

The economic impact of the coronavirus and the uncertainty caused by shifting rules and the possibility of a second wave will be with use for a long time.

It will be interesting to see how history weighs the 40 million people without jobs versus the 100,000 people who died.

Coronavirus Numbers

The United States has reported an additional 22,500 cases of COVID-19 in the past 24 hours, an increase of 1.3 percent.  Deaths were up 1,209, or 1.2 percent, to 101,635.

While the U.S. and parts of Europe continue to see cases level off or slowly drop, global numbers continue to rise.  In the past 24 hours, 128,000 cases were reported around the world, with Brazil seeing an increase of 26,417 to 438,238, according to the data collected by Johns Hopkins. Global deaths increased by about 5,000 to 361,249.

To put today’s data into perspective, you can look back at yesterday’s report or look back a week ago.