By Edwin Quinabo
Americans are shook up and reeling over two simultaneous crisis caused by the COVID-19 pandemic — public health and the economy. They are also conflicted in a tug-of-war of what to do. On one side there is a desire to reopen and return to business as usual; while pulling at the other end is a reality that staying steadfast to social distancing must continue.
President Donald Trump and his conservative allies suggest that it may soon be time to get people back to work. Health experts overwhelming say it is premature, at least in the next month.
“You’ve got to be realistic and you’ve got to understand that you don’t make the timeline. The virus makes the timeline,” said Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases.
Even if the president did reopen the economy (and governors complied – that’s a big question mark), economists are realistic in saying confidence to resume business as usual would still be shaky at best while COVID-19 is still peaking.
Economic experts also concede that until a vaccine is created or deaths-infectious rates drop dramatically — open for business or not — people will not suddenly be the consumers they were spending at the rates prior to the COVID-19 outbreak. Bouncing back will take time.
No one really knows how or when the double-pronged crisis will unfold. What’s certain is the economy is in a deep recession; and Americans are needing all the help they can get to make it through the storm.
Economy on life support
It doesn’t come as a surprise that ordering residents to stay at home, avoid most non-essential business activity, restaurants, theaters, shopping (apart from groceries), traveling, most in-person services, and gatherings of groups 10 or more would dramatically hurt the economy and jobs.
In the latest jobs report (week ending March 28) an unheard-of figure of 6.6 million Americans filed for unemployment benefits, putting the total number of people out of work in just three weeks to more than 16 million.
For perspective, that is about 13-15 percent of the total workforce in the U.S. Just last year, unemployment rates fluctuated under the 5 percent range. It took only a few weeks of the pandemic to spike numbers of jobs loses to what normally would take years in a regular recession.
Since the federal government has been collecting data of the unemployed, the worst week in the history came in a week in September 1982 when 680,000 people claimed unemployment benefits. A close second came during the last recession a week in March 2009 with 665,000 new claims. Today’s unemployment numbers crushed all previous records.
Economists say the situation could get bleaker with unemployment rising as high as 30 percent. Historically, Labor Department figures of the unemployed is underreported of what actual jobs losses are. In theory, economists’ worst case prediction is that 3 out of every 10 Americans could be out of work by the end of the year.
But a new poll by Pew Research Center suggests that the country may already be there. The poll found a third of Americans have someone in their household who’s been laid off or lost pay.
The latest unemployment figures from the Hawaii State Department of Labor and Industrial Relations show 53,111 Hawaii residents filed unemployment claims for the week ending in April 4.
For small-to medium and large companies operating during this stay-at home period, many have reported drops in revenues and activity.
Vilma Fuentes, Doctor of Physical Therapy and Manager of OptimalCare Rehab, LLC, an outpatient physical therapy and therapeutic massage company, said their business has seen a decrease in patients by 50-80 percent that started in February. She said this month, April, has been the worst.
“Patients have been cancelling their appointments due to fear of going out. There has been a decrease in patients’ referrals from doctors’ offices. Some referring physicians (that we work with) have temporarily closed their practice.
“The estimated gross drop of revenues is significant and profound, about 75-80 percent from norms. It’s like a chain reaction. Most people are out of work. We have less patients,” said Fuentes.
In hopes of surviving and making it through the crisis, many employers have furloughed employees (temporarily place their position on hold without pay) or reduced employees’ work hours.
OptimalCare Rehab, LLC has resorted to both furloughing and reducing work hours for some of their employees. “Our employees can go back to work if business will be back on track. However, we expect it to be gradual,” said Fuentes.
Asked how the public could help her business, she said “safety to our patients with this COVID-19 pandemic is our concern. The public can help our business by continuing to visit our facility. They can feel safe with all the safety measures (we’re taking).”
She said staff wear masks and gloves at all times, wash and sanitize their hands, as well as sanitize all equipment and door knobs. She said patients and staff who could be sick are sent home as a precaution.
For Jeoffrey and Cheryl Cudiamat, owners of three businesses in Hawaii, the impact of the COVID-19 crisis has been a mixed bag. For their company One, Structural Hawaii, Inc., a structural & civil engineering design and consultation firm, and architectural drafting firm, Cheryl said they have experienced a few projects put on hold due to homeowners whose jobs are now uncertain. On the plus side, she said new projects have also come through because clients have been taking advantage of the low interest rate.
“We cannot ascertain at this point whether there is a significant drop in revenue, but thankfully we are holding steady at the moment. It can certainly change any day. We will see the effects of COVID-19 probably in this next month,” said Cheryl.
For their second business, Keiki Care Center of Hawaii, Inc. a preschool education center located in Pearl City, it is temporarily closed due to the State DOE’s directive of closing schools. But they plan to reopen as soon as Gov. David Ige gives the all-clear.
She said they are not collecting tuition during the closure and have applied for the SBA loan assistance programs. “We do still have to cover employee health insurance, rent, other insurances, etc. We bank with First Hawaiian Bank, and I am grateful that they were on the ball with rolling out the PPP loan program on April 3.”
On the status of their third business Structural Builders, Hawaii, Inc. a general contracting firm, Cheryl said, “We thankfully just obtained a new bonded-project in March, and that is keeping our crew steadily busy, and should hold us for a few months until completion.”
For Keiki Care Center, all of their employees are furloughed. “For Structural Builders Hawaii, Inc., construction was deemed essential, so it is still thankfully ongoing. And for Structural Hawaii, Inc., we have identified which employees are ‘essential’ and have offered all employees the opportunity to adjust their schedule if they are not comfortable working full-time at this time. We definitely do not intend to lay off any workers.”
Cheryl said she hopes the public understands the important role small businesses play in the economy and that they have empathy for small businesses. “If we disappear, then many jobs will disappear.”
Melody Calisay, Ph.D. is the President and CEO of East West Marketing, Inc., an importer, and wholesaler of Filipino dry food products. Her businesses is doing well during this time. “Food is always considered the last frontier. This is a basic need that people will buy in time of crisis. We did good in the past two months, people are panic buying and storing food amid this COVID-19 pandemic.”
She did not have to furlough any employees. Calisay said she will probably seek help from the stimulus package because she isn’t sure what will happen in the next month or so. She said she likes what government is doing by providing loans to small businesses to help pay for rent, payroll, and continued operations. Calisay encourages the community to support local businesses.
Economic Growth Lowered for 2020
No one knows how impactful COVID-19 will be on small businesses in the long-term, or how many will go under.
Already, the University of Hawai’I Economic Research Organization (UHERO) has sharply lowered its economic forecast for the state. A UHERO report on the COVID-19 crisis states while new infections have slowed markedly in Asia, the spreading of the virus across the entire U.S. suggests a more prolonged outbreak is in the cards. “And the longer the virus spreads, the greater the human and economic toll.”
The state’s Department of Business, Economic Development and Tourism (DBEDT) also lowered Hawaii’s economic growth forecast for 2020 to 0.5 percent from the 1.2 percent projected in the 4th quarter of 2019. The forecast was revised downward mainly because of the COVID-19 outbreak.
“We face a globally driven COVID-19 event that is dynamically evolving,” said DBEDT Director Mike McCartney. “We remain focused on controlling and preventing the spread in our state. At the same time we are planning for a recovery action plan when Hawaii’s communities are ready and the visitors in our major markets are ready to visit. Volatility in the market will likely continue until COVID-19 becomes controlled.”
On when the economy could begin to stabilize, Hawaii economist Paul Brewbaker said during a joint presentation to three REALTOR® associations on two islands, “If we get the daily (COVID-19) case counts down, we implement contact tracing, isolation, and quarantine, maybe in a year — maybe in 18 months — we’ll reach the day when a version of herd immunity or a vaccine becomes available, But my own impression is that the state is not leading as much as following, and not following fast enough.”
We face a globally driven COVID-19 event that is dynamically evolving. We remain focused on controlling and preventing the spread in our state. At the same time, we are planning for a recovery action plan when Hawaii’s communities are ready and the visitors in our major markets are ready to visit. Volatility in the market will likely continue until COVID-19 becomes controlled.—Mike McCartney, DBEDT Director
Efforts to soften the Impact of the economic fallout
The Federal Reserve stepped in once again, announcing new and expanded programs that could pump $2.3 trillion into the economy. Wall Street reacted positively, holding steady, even as it already lost all the gains from years of a bullish market.
But investor confidence in the economy more significantly came from President Donald Trump and Congress’ passage of three stimulus bills (called three phases of coronavirus assistance): the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, the Families First Coronavirus Response Act, and most recent, the Coronavirus Aid, Relief and Economic Security Act or the CARES Act.
PHASE 1, Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020
CPRSAA is the first coronavirus relief effort that allocates $8.3 billion mostly to go towards coronavirus vaccine research and development. It also includes funding for medical supplies, health-care preparedness and community health centers.
PHASE 2, The Families First Coronavirus Response Act
FFCRA is the second stimulus bill that primarily focuses on helping American families and workers. $104 billion will fund:
- paid sick leave for workers to deal with COVID-related emergencies (e.g. to self-quarantine or to get tested for the virus, or to care for an individual in self-quarantine from the virus)
- family medical leave available to an employee who needs to care for a child whose school or place of care is closed because of COVID-19
- unemployment benefits for individuals directly affected by COVID-19. It also expands eligibility of unemployment benefits related to COVID-19.
- free coronavirus testing
PHASE 3, The Coronavirus Aid, Relief and Economic Security Act or CARES ACT
The CARES Act allocates $2 trillion, the largest-ever economic stimulus package in U.S. history, amounting to 10 percent of the total U.S. GDP.
The CARES Act is far more comprehensive than the two previous bills. Its main purpose is to revive the economy and stave off a deeper recession. It allocates funds for big business, small business, as well as expanding areas to groups addressed in the first two bills: individuals, state and local governments, and public health.
A few of the big-ticket items in the bill includes:
- $260 billion increase in unemployment benefit spending. It enhances and expands unemployment benefits from what was covered in the previous Families First Coronavirus Response Act. For a first time, independent contractors/freelance workers/gig workers can now qualify to receive unemployment. It also adds $600 per week for four months to qualified applicants
- 370 billion in loans to small businesses. These are for businesses with 500 or fewer employees. Loan money used to maintain payroll can be forgiven if workers stay employed through the end of June.
- 500 billion in lending programs for big businesses, cities and states. Money from the loan cannot be used to stock buybacks or CEO pay raises.
- 180 billion for public health to include 100 billion to hospitals, $4.3 billion to the CDC, $80 million to the FDA to expedite approval of new drugs.
One of the main features of the CARES Act is direct payment of $1,200 for each qualified adult and $500 to each child. An adult earning less than $75,000 a year will receive the full amount of $1,200. Higher income earners will get less, or not be qualified.
An estimated 93.6 percent of tax filers will have a rebate, according to Garret Watson, senior policy analyst at the Tax Foundation. “And this works out to approximately 140 million households,” he said.
As of the second week of April, the Treasury Department has started to process individual direct payments. Americans who have direct deposit from their 2018 and 2019 tax returns should be among the first to receive payments. Paper checks will take longer to disburse.
The Treasury will also launch a new app called “Get My Payment” to expedite payments to Americans without direct deposit.
The IRS will soon release an online tool on its website that helps people track the status of their stimulus check. The tool will let people follow the scheduled payment date for either a direct deposit or mailed check.
Marilou Cadiz of Ewa, a stay-at home mother, who lives with her husband and adult daughter, says she is anxious to receive her and her family’s stimulus checks. “We are struggling here. My husband’s work hours have been cut. We have our regular bills coming in and we need that money. Fortunately, my daughter works in the health sector and has steady work and hours. Her job will not be affected by all the layoffs at this time. We’re trying to all watch our spending right now. No more buying things on the internet or ordering take outs.
“I am thankful that in our household, we still have jobs. My sister, who doesn’t live with us, was furloughed from her hotel job. I worry about her. And feel sad for all the workers out there.
“If this goes on longer, the government got to give us all another stimulus check. It’s good we got this help. But it’s not our fault we got to stay home and cannot make money,” said Cadiz.
Possible 4th Coronavirus Assistance Bill
All three bills or phases received bipartisan support. Lawmakers are considering a fourth bill or fourth phase should the COVID-19 crisis continue past June.
Should there be a next bill, economists say more needs to be done for even smaller businesses with 10 or less employees.
Like most small businesses, Fuentes looks forward to any aid that the stimulus packages can provide. “The government’s response to help small businesses such as Paycheck Protection Program (PPP) which is available from our local bank is valuable. PPP provides rapid funding to small businesses in the form of a forgivable loan as long the loan proceeds are utilized to cover payroll costs, most mortgage interest, rent, utility costs over the 8 week period after the loan is made, and employee and compensation levels are maintained. I hope that government will continue to help and support small businesses until the economy will stable,” she said.
SBA Assistance for Small Businesses Affected by COVID-19
The SBA is offering several new temporary programs that was established by the CARES Act.
- Paycheck Protection Program or PPP, a loan program that provides loan forgiveness for retaining employees during this crisis
- EIDL Loan Advance, a loan advance that provides up to $10,000 of economic relief to businesses that are currently experiencing temporary difficulties • SBA Express Bridge Loans enables small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly
- SBA Debt Relief provides a financial reprieve to small businesses during the COVID-19 pandemic
To learn how to apply for these loans, visit sba.gov.
Cadiz said, “we never expected something like this to happen. Nobody did. I don’t know how long the virus problem will last. We’re all just afraid for our health, but we scared because we got to make money too.”
“I hope God help us all,” said Cadiz.