There are various geographic regions that are beginning to open their economies.
Some are choosing to take a phased approach that sees different subsets of the economy turned back on one by one. Others are choosing to simply go from “shelter in place” to “economy fully open.”
I will leave the nuances of re-opening the economy to the healthcare professionals.
My focus is on how quickly and robustly can the economic recovery occur.
We know that there will be large percent increases in economic activity, because most consumers have been stuck in their homes for weeks spending very little money.
The question is not whether the economic data will improve, but rather can we get back to the economic activity levels that we saw pre-pandemic?
One detail appears to have been overlooked in many of the analysis that I have seen though — ongoing business disruption.
As businesses re-open, the expectation has been that they will return to full operating hours.
If you used to be open Monday through Friday from 9am to 5pm, then you will do the same thing as the economy re-opens.
Fairly intuitive.
Many of these businesses are implementing certain safety measures to ensure that employees and customers can have peace of mind that they are working in a safe environment with people who are not infected with COVID-19.
These measures can include daily testing, temperature checks, enforced social distancing, mandatory periodic hand washing, or face masks, gloves, and potentially face shields.
Again, all of this is fairly intuitive. But what happens if someone, whether it is a customer or employee, enters the workplace and is infected? This is where business disruption is likely to occur.
Take Ford — they are currently implementing all of the precautionary items I outlined above. This week they had three employees across two car manufacturing plants test positive for COVID-19 though.
This led to a complete shut down of the facility, so that a maintenance team could conduct a deep cleaning of the workplace.
Imagine a restaurant, which is notorious for having many people working in confined spaces.
Add in a revolving door of customers and you have a recipe for a virus to jump from person to person.
Does the restaurant stop operations for a deep clean every time someone tests positive for COVID-19?
Do they alert customers who came into the restaurant the last few days that the employee was working?
This entire scenario is obviously highly disruptive to the operations of running a business.
There is also a psychological aspect to these disruptions as well. Before the pandemic occurred, customers would show up to restaurants, bars, stores, and other places of business because they had an expectation that they would be open.
If you have to guess whether a place is open today or not, you are less likely to go to the location. Additionally, if you hear that a restaurant or other business had an employee that tested positive for COVID-19 recently, you are probably less likely to go visit the location.
There is going to be a fine line to walk between getting businesses up and running again, while doing our best to prevent complete ignorance on the healthcare front.
I don’t think there is a magic bullet for any of these challenges. It will be case dependent based on where you live, what type of business it is, and how the spread of the virus is locally affecting the community.
Most large companies have the balance sheet to handle the new normal, but almost every small business is reeling right now, so they simply need to make sure they are going to survive this horrific series of events.
We have already seen some accounting firms try to create EBITDA(C), which would account for “pre-coronavirus” financial metrics.
Don’t be surprised if someone tries to invent a “without virus disruption” metric once businesses start opening up. They will claim “we would have done X if we didn’t have to close down for 2 days because an employee tested positive.” Of course this is a ridiculous claim, but someone will definitely try it.
Building businesses is hard. Entrepreneurs are the reason that we enjoy such a great lifestyle in the United States.
The virus has made things more difficult, while also reminding us what is really important in life. We all want to see a strong economy full of safe, healthy people.
My fear is that the economic restart will not be a smooth transition, but rather one that is riddled with starts and stops at both the macro and micro levels.
Hope each of you has a great weekend.
Source of information: BTCexchnet