Industry Groups Warn About States Returning to Lockdowns
A number of state and local governments are re-imposing restrictions on economic activity in a bid to stem the rise in coronavirus infections. Some retailers and their trade associations are pleading with local officials not to go to the extreme of widespread, mandatory closures.
According to the Wall Street Journal:
New Mexico [for example] has issued a stay-at-home order and told nonessential stores to shut their doors to customers through Nov. 30, which would include the Black Friday sales weekend. Supermarkets and other retailers that get more than 30% of revenue from food sales could stay open, but big-box chains like Best Buy Co., Hobby Lobby, Dick’s Sporting Goods Inc. or department stores could only offer curbside services.
Forced closures of state-determined “non-essential” businesses forced some file for bankruptcy:
Department-store chains have been especially hard-hit by the pandemic, which has reduced spending on apparel for work and events. Neiman Marcus, Lord & Taylor and J.C. Penney Co. filed for bankruptcy protection this year. Penney agreed to be acquired by two big mall owners and is closing a third of its stores. Neiman has emerged from bankruptcy and reopened its locations. Lord & Taylor is liquidating.
The economic disruption rippled through the economy, and didn’t spare hundreds of small companies that applied for and received federal loans:
About 300 companies that received as much as half a billion dollars in pandemic-related government loans have filed for bankruptcy, according to a Wall Street Journal analysis of government data and court filings.
Many of the companies, which employ a total of about 23,400 workers, say the funds from the Paycheck Protection Program weren’t enough to keep them going as the coronavirus and lack of additional stimulus payments weighed on their businesses.
The total number of companies that failed despite getting PPP loans is likely far higher. The Journal only analyzed the big borrowers from the program, which accounted for about half of the overall loans though only about 13.5% of the total participants. And many small businesses simply liquidate when they run out of cash rather than file for bankruptcy.
Governments should think very hard before reimposing shutdowns. There will be consequences.