Confirming that most Americans aren’t comfortable returning to restaurants or other crowded venues, it’s going to take much longer than expected for the economy to return to normal. Gone are expectations or a V-shaped recovery, except what’s witnessed in the stock market, where there’s a disconnect between Wall Street and Main Street. Finding that 66% of Americans are uncomfortable getting back in crowds, including public transportation or air travel, it doesn’t look good for airlines, restaurants, hotels and the hospitality industry in general, a mainstay of the U.S. and European tourism industries. Constant bombardment on TV about stay-at-home, shelter-in-place and social distancing has left most Americans unable to do what 73-year-old President Donald Trump wants, to get back to normal. Whatever the new normal is, it doesn’t bode well for the economy in 2020.
Wall Street usually leads the way to economic recovery with the U.S. economy now officially in recession. But Wall Street, as Allianz SE economist Mohamed El-Erian likes to say, deceiving investors, just when they think they should jump in. El-Erian sees some tough sledding ahead as corporations downgrade earnings, as sure sign that a sell off is in the works. NBC/Wall Street Journal’s poll about corornavirus AKA SARS CoV-2 or Covid-19 indicates that businesses will continue to struggle to regain traction as skeptical consumers stay cloistered in their homes, venturing out only when necessary. Respondents of the NBC/Wall Street Journal survey found that 66% say they were uncomfortable flying, 44% saying they were very comfortable. With seniors the most vulnerable group to corornavirus, expectations for a recovery in the hospitality industry look pretty dim.
Seniors have more time-and-money on their hands to travel, plunking $3.1 billion into domestic travel in 2019, before the virus. International tourists spent $251 billion on travel in 2019, expected to be dramatically less in 2020. U.S. travel industry estimates between foreign and domestic travel, the U.S. could lose $910 billion and 6 million jobs in 2020. Fifty-four percent of NBC/Wall Street journal respondents said they were uncomfortable eating in restaurants, a mainstay for both employment and revenue for American small-and-large businesses. While Wall Street continues its bear market rally, corporate earnings continue to languish, demanding Congress work on a second CARS Act legislation, focusing on cities, counties and states that have run out of cash due to the steep decline in tax revenues. California, the nation’s biggest state economy, now runs a $54 billion budget deficit.
Watching Wall Street and last week’s Labor Department report showing that the economy added 2.5 million jobs in May, gives a deceptive picture that the economy is on the mend. Federal Reserve Board’s 67-year-old Chairman Jerome Powell slashed interest rates of zero March 15, anticipating a serious recession in the months ahead. If you look at Wall Street, rising from 21,200,62 March 11 to today’s close at 27,535.00 today, it’s only 2,000 points from its Feb. 12 record high of 29,551.42. Where the Dow or other market averages go is anyone’s guess. But if the disconnect between Wall Street and Main Street continues, it’s likely markets will sell off sometime soon. Wall Street insists that earnings drive the market but clearly earnings in a wide sector of the economy are nowhere near pre-Covid-19 levels. Trump watched his reelection chances head south shutting down the economy.
Showing that Covid-19 fear persists around the country, 50% of parents feel uncomfortable sending their children under 18 back in the classroom. School administrators and teachers all don’t feel ready to return to the classroom, preferring at great cost to education conducting classes in Zoom Conferencing or Google Classroom. What the NBC/Wall Street Journal survey shows is that elected officials and the media did a real number of ordinary citizens to stay sheltered in place. Widespread street protests where crowded demonstrators violated social distancing rules exposing themselves to oronavirus has shown no second wave of outbreaks yet. While open-air transmission is more difficult, it’s time for elected officials, health experts and the media to give the green light to citizens to resume the new normal before more lasting damage to the U.S. economy.
Whatever happens on Wall Street, Main Street must get back to business as usual with consumers getting out, going back to their normal routine, eating out, family vacations, flying on planes, going in cruises and staying in hotels. With the public gun-shy, it’s going to take a major PR effort by elected officials, public health experts and the media to get people back to the normal routines. Unless there’s a major reversal the economy could stay in recession for the remainder of 2020, if not longer, boding poorly for the stock market. Rising like a rocket since March 11, Wall Street knows how to make profits, rising without any foundation only hoping for better days. When the recession sinks in an corporate profits, aside from Amazon, Ebay or other online retailers, it’s going toe sink share princes that have returned to unrealistic price-to-earnings multiples, signaling to Wall Street it’s time to take profits.
