Coronavirus Cost to Businesses and Workers: ‘It Has All Gone to Hell’

A week ago, Mark Canlis’s restaurant in Seattle was offering a $135 tasting menu to a bustling dining room every night. Eileen Hornor’s inn on the Maine coast was booking rooms for the busy spring graduation season. And Kalena Masching, a real estate agent in California, was fielding multiple offers on a $1.2 million home.

Then the coronavirus outbreak changed everything.

Today, Mr. Canlis’s restaurant is preparing to become a drive-through operation serving burgers. Ms. Hornor is bleeding cash as she refunds deposits for scores of canceled reservations. And Ms. Masching is scrambling to save her sale after one offer after another fell through.

“Last week, I would have told you nothing had changed,” she said. “This week, it has all gone to hell.”

For weeks, forecasters have warned of the coronavirus’s potential to disrupt the American economy. But there was little hard evidence beyond delayed shipments of goods from China and stomach-churning volatility in financial markets.

Now the effects are showing up in downtown nightspots and suburban shopping centers from coast to coast.

Not since the attacks of Sept. 11, 2001, has a crisis enveloped so much of the economy so quickly. Broadway is dark. The college basketball tournaments are canceled and professional sports are on indefinite hold. Conferences, concerts and St. Patrick’s Day parades have been called off or postponed. Even Disneyland — which stayed open through a recession a decade ago that wiped out millions of American jobs and trillions of dollars in wealth — is shuttered.

“This hits the heart of the economy, and it hits the economy on all sides,” said Diane Swonk, chief economist at Grant Thornton. “It’s not just that we’re slowing down things. We’re actually hitting the pause button, and there is no precedent, there is no mold for that.”

The effects are being felt even in places that the outbreak itself has not yet reached. Maine had not had a single diagnosed case of the virus when Ms. Hornor learned Wednesday that Bowdoin College, which accounts for 80 percent of her business, was calling off in-person classes and sending students home. Yet by midday the next day, she had lost 84 bookings, with more cancellations all but certain. At a somber staff meeting on Thursday, she told her 10 employees that she would try to avoid layoffs but that cuts in hours were inevitable.

“I have people who rely on me to be able to pay their rent,” she said. “Not only do I have no money coming in, I’m kind of hemorrhaging cash in terms of refunds for everyone.”

Now that the outbreak is hitting the consumers, the damage is all but certain to spread. JPMorgan Chase said Thursday that it expected the U.S. economy to contract in the first two quarters of the year, which would meet a common definition of a recession. A survey of prominent academic economists, also released Thursday, found that a majority thought the outbreak was likely to cause a “major recession.”

For caterers, function halls and others whose business depends on large groups of people gathering together, business dried up nearly overnight.

“It started Tuesday,” said Elizabeth Perez, the co-owner and marketing director for the Pavilion Grille in Boca Raton, Fla. “They were canceling Thursday night with a dinner for 47 people, and that was the first one.” Then an Ultimate Chefs’ dinner for 120 scheduled for March 22 was postponed. A bar mitzvah for 150 on May 30 canceled. “That’s at least $10,000,” Ms. Perez said. She normally employs 20 people at an event to serve food and bus tables. Since they are hourly workers, if there is no event, there is no pay.

It isn’t just the outbreak itself that is causing damage. The turmoil it has caused in the financial markets is also starting to spill over into the real economy.

Last weekend, Ms. Masching, a broker with Redfin in Silicon Valley, got three offers on a $1.2 million home she had listed in Mountain View. But by Monday, two people had rescinded their offers and the third tried to back out, citing stock market losses, after her client had accepted. At the same time, she said, prospective buyers are deciding to hold back offers on the belief that the carnage could eventually lead to lower home prices.

“Most of our clients are using stock for their down payment, and they don’t have the purchasing power they did even two weeks ago,” she said.

In much of the country, offices remain open, restaurants remain full and day-to-day life remains relatively normal, albeit with fewer handshakes and more hand washing. But in places where the virus is already widespread, the downturn is well underway.

In Seattle, the place hit hardest so far by the outbreak in the United States, the normally bustling South Lake Union neighborhood has been eerily quiet since Amazon and other tech companies with headquarters in the area told their employees to work from home. That has been a disaster for Tom Douglas, a local chef with a dozen restaurants. Business is down 90 percent from usual.

On Wednesday, Mr. Douglas told his staff that dinner service on Sunday would be the last for two or three months. He was shuttering his restaurants and laying off almost all of the roughly 800 employees. He planned to apply for unemployment himself and research federal disaster or small business loans.

“This is a serious natural disaster — I don’t think a lot of people are thinking about it that way just because there’s no winds and there’s no floods,” he said. “But this is a real natural disaster that’s affecting people at the most basic level.”

The pullback from public life is sending shock waves beyond the hospitality industry. When restaurants close their doors, they no longer need tablecloths delivered by linen services or beer from local brewers. When people stop flying, they no longer need taxis to the airport or $5 bottles of water from the airport newsstand.

Baden Sports, a sporting-goods manufacturer in the Seattle suburb of Renton, provides basketballs and baseballs for youth leagues and college tournaments, many of which are now being canceled. Jake Licht, who runs the company, has imposed a hiring freeze and is drawing up a budget in preparation for a recession.

“This is moving so fast,” Mr. Licht said. “We had meetings and planning sessions three days ago that have already been invalidated. This is an hour-by-hour management challenge.”

The speed of the crisis has outpaced economists’ ability to track it. As the stock market gyrated in recent days, economic data — most of it from February, before the outbreak was widespread in the United States — continued to look rosy. Even indicators that usually serve as early-warning systems have yet to catch up: New claims for unemployment insurance actually fell last week and remain near a multidecade low.

Still, there are early signs of a crisis that is still gaining steam. Measures of consumer sentiment fell sharply in early March, and indexes of business conditions have cratered. Airlines, ports, hotels and other directly affected industries have already announced layoffs or employee furloughs. Postings for restaurant jobs were down 26 percent last week compared with the same week a year ago, according to data from the job marketplace ZipRecruiter. Job listings in catering were down 39 percent and those in aviation down 44 percent.

“The behavior changes that could set off an economic cascade that will eventually be seen in the labor market are really being put into motion now,” said Julia Pollak, a labor economist at ZipRecruiter.

The workers who are feeling the effects of the pullback first are the ones least able to afford it: low-wage, hourly employees, many of whom aren’t paid if they miss work. Only one-third of leisure and hospitality workers have access to any paid time off, according to data from the Bureau of Labor Statistics.

Wallace McLeod has worked at TapWerks Ale House in Oklahoma City’s Bricktown district for five years, but he had never seen business as slow at the bar as it was on Thursday night. With 212 taps split between two stories, the pub would have been rocking with patrons heading to the Cher concert at the Chesapeake Energy Arena a few blocks away. “I wouldn’t be able to talk to you right now if the concert were going on,” he said in an interview.

Instead, Cher’s event was postponed, the bar was largely empty and a night that should have brought in as much as $13,000 in sales would be lucky to reach $4,000 if the regulars toughed it out. Bartenders expecting to make over $200 for the night would be lucky to bring home $80, Mr. McLeod said — which meant they, too, would rein in their spending.

“You have less money,” Mr. McLeod said, noting he would have to put off a birthday party for his daughter. “You can’t do as many things as you’re used to doing.”

The strength of the economy before the coronavirus hit may provide some protection. Companies that have spent recent years struggling to attract and retain workers may be reluctant to lay them off, especially if they expect a relatively rapid rebound.

Many businesses are doing whatever they can to hold on until then.

Canlis is one of Seattle’s highest-end restaurants, with a piano player who entertains customers at the bar and a four-course tasting menu that runs $135 a person. But when the outbreak began to spread in Seattle, business started to dry up. Mr. Canlis, one of the owners, realized that his business was “one headline away” from putting 100-plus employees out of a job.

So over a three-hour meeting in an apartment overlooking the city, the managers worked out a new plan. This week, the restaurant will start selling bagel sandwiches in the morning, running a drive-through serving burgers and veggie melts for lunch and delivering dinner to the doorsteps of Seattle residents.

“Fine dining is not what Seattle needs right now,” the restaurant said in an Instagram post announcing the change.