When governments around the world order we all have to social distance and many tourism and entertainment facilities were shut down because they help bring people together, also included in the list is restaurants and airlines. There were and are very good reasons to do so, because the virus spread is slowed and stopped for a period of time when medical companies can find a fix.
In an article by Christoper Rugaber of Reuters, it turns out what is wonderful public health fix is a terrible economic fix and reality is coming back. Every in the restaurant industry discusses number of times the restaurant can turn over, adding patios to double seating, what is the minimum space between patrons. All those numbers are turned upside down when discussing reality and social distancing. The average restaurant needs 60% capacity, if social distancing means 33%, how many bodies are needed to serve the patrons?
Of the 20.5 million people who lost jobs, over 80% stated their loss as temporary. The majority of people working work for small and medium sized businesses and they will not be fully staffed when it comes time to open. As time goes by, more layoffs become permanent, the recovery will be slower and unemployment is going to rise.
Compounding the problem is who is temporary laid off. In 2008 the majority were men and targeting infrastructure programs provided a major boost to the economy. This year the majority laid off are women and policy makers are terrible at helping women manage in the economy. If large gatherings are not allowed then the conventions to the restaurants to the events mean fewer working. Do more with less until people feel comfortable with the surrounding is going to be the order of the day.
Linking to dividend paying stocks, for companies that products appeal to the masses one has to worry about the general economy. For companies such as utilities that appeal to the masses but is essentially an monopoly, growth in revenues is the issue not whether the company will make money or not; for companies making money in select functioning areas, the general economy is less of a concern. Before investing ask how does the company make money? has it been through a couple cycles and still make profits. Profits is a good thing when investing.
There are more questions than answers, till the next time – to raising questions.