Last Updated: Mar 24, 2020
COVID-19, the novel coronavirus, recently designated a global pandemic by the World Health Organization, is harming the U.S. economy. Following a February peak of 29,000, by mid-March, the Dow Jones Industrial Average fell to nearly 19,000 — a 35% drop. On March 16, the Dow fell by almost 3,000 points, the most significant single-day drop in history.
In a federal effort to stem the spread of COVID-19, everyday life in the U.S. has ground to a halt — and with it, significant sectors of the economy. Nationwide, all industries have been affected by efforts to contain the virus, but the downturn has impacted some sectors significantly more than others.
Service Industry Workers Dealt a Devastating Blow
On March 15, the Centers for Disease Control and Prevention (CDC) said that gatherings of over 10 people should be avoided. Deeply vulnerable to major upheaval as a result of the pandemic, the restaurant industry has been dealt a double blow as dining rooms close and restaurants switch to takeout only. Whether implemented by owners or enforced at a municipal or state level, the food service industry will be facing the effects of this pandemic for months to come, with millions of jobs in the sector lost or severely impacted by the outbreak.
A surge in unemployment claims reveals that countless American workers have already been laid off or furloughed, and continuing job cuts are likely. As social distancing policies gain a foothold in the workplace, white-collar workers will more easily adapt to working from home. At the same time, hourly employees in sectors such as retail and hospitality may be let go as company revenues shrink. The pandemic overwhelmingly threatens some of the least financially secure workers in America — jobs which are typically part-time and pay low wages.
1. The Airline Industry
As domestic and international flights grow increasingly restricted, the U.S. airline industry stands to be particularly hard hit by the pandemic.
According to analysis by the International Air Transport Association, U.S. and Canadian airlines could lose as much as $21.1 billion in revenue. Under an extensive spread scenario, the industry worldwide could see a drop in passenger revenue of nearly 20% — an estimated $113 billion in lost revenue. The CAPA — Centre for Aviation predicted that “by the end of May, most world airlines will be bankrupt.”
On March 18, Delta Airlines announced revenue had dropped by $2 billion as a result of COVID-19 and decreased passenger demand. In an internal memo filed with the U.S. Securities and Exchange Commission (SEC), Delta CEO Ed Bastian noted that in response to the virus, Delta would “make significant capacity reductions with a 70% system-wide pullback planned until demand starts to recover.”
Other U.S. airlines are gauging similar actions, in addition to hiring freezes and asking employees to take unpaid leave. As of 2018, there were over 445,000 workers in the airline industry. Airlines for America, an industry trade group representing many of the country’s largest airlines, has requested $58 billion in grants, loans and tax breaks to respond to the economic blow.
2. The Gaming Industry
The American Gaming Association issued a statement this week declaring that the $260 billion casino industry is at a “near standstill,” adding that additional funds are needed to support casinos and casino employees. Largely shuttered following measures to contain the spread of the coronavirus, casinos in Las Vegas, Atlantic City and other major gaming destinations have closed, with staff members — some 1.8 million nationwide — indefinitely furloughed or laid off.
Online Gaming Beats the Odds
One winner amid the social isolation: online gambling. While casinos in about three dozen states have either been shut down by government order or done so voluntarily, revenues for casino games and poker in states that offer internet gambling — New Jersey, Nevada, Delaware and Pennsylvania — have soared.
Since its November 2013 debut, internet gambling has proved a boon in New Jersey. Last year, Atlantic City casinos netted nearly $483 million online, an increase of nearly 62% over 2018 levels. The trend gives industry leaders optimism for recovering at least some of the lost revenue from real-world casinos.
3. Live Sports
For the sake of public health, major U.S. sports leagues like the NBA, NHL and MLB have postponed or suspended all games. The move has spurred a vacuum not just for leagues and players, but also the broad ecosystem that has risen around them.
According to FiveThirtyEight estimates, a 21% reduction in games could cost the NBA between $350 million and $450 million from lost ticket sales alone. Non-ticket revenue loss also appears substantial, with the league forfeiting some $200 million from sources such as concessions, merchandise, parking and more.
Players and Owners Step Up
Many NBA franchises — including their owners and players — have committed millions of dollars to ensure that arena staff hourly workers are paid during this unprecedented outbreak. An average of 300 staff workers maintains a 20,000-seat arena. Security staff, concessions cooks, ticket takers and cleanup crews not only depend on the game-day wages but are also required to work a certain number of hours to qualify for union health insurance — a critical consideration during a public health crisis of this scale.
Other sports face similar challenges. The NHL, which suspended its season with 15% of the schedule left, nets less than the NBA annually, but its salary cap is based on a share of league revenues, aligning the NHL to be in the same situation as the NBA next season. And while MLB pulls in more revenue than the NBA, the league suspended spring training while pushing back opening day by a minimum of two weeks. As gate receipts make up nearly 30% of MLB team revenues, the economic effect of a truncated baseball season could quickly rival that of basketball’s shortened season.
4. Cruise Lines
Following the devastation aboard a luxury Diamond Princess Cruise ship — leaving 705 passengers and crew infected with COVID-19 and eight dead — the cruise industry has taken a substantial hit. More recently, a Grand Princess cruise docking in Oakland resulted in CDC confirmation of 28 cases of the virus.
As of mid-March, at least seven cruise ships remained in dockside or coastal limbo because passengers tested positive or were showing symptoms of the virus as ports closed worldwide, and countries debated how to contain the virus.
In the wake of the COVID-19 pandemic, shares of three major cruise companies — Royal Caribbean, Norwegian Cruise Line Holdings and Carnival Corp. — dropped more than 50%. According to industry group Cruise Lines International Association, the cruise industry generates $53 billion U.S. annually. The White House has signaled its intentions to aid the industry in weathering the pandemic as part of a proposed $8.3-billion relief bill.
5. The Construction Industry
As COVID-19 eviscerates the U.S. economy, companies have already begun scaling back on expansion, leaving a substantial gap in the construction industry. Delta Airlines and United Airlines respectively announced plans to reduce capital investment by $2 billion each as a result of the pandemic’s economic impact. At the same time, companies in other major sectors are projected to follow suit.
As trade disruption influences material delays from China and other nations, smaller construction companies may be compelled to lay off workers. An estimated 7.6 million workers working in the U.S. construction sector stand to be affected by these changes.
6. The Fitness Industry
Already facing industry disruption by home-exercise companies like Peloton and streaming fitness programs like Daily Burn and Barre3, the $94 billion gym and fitness-class industry has been crippled by the specter of coronavirus. Government-mandated social distancing recommendations and the fear of COVID-19 contagion means gyms nationwide have temporarily shuttered to weather the outbreak.
In New York, New Jersey and Connecticut, all Equinox gyms closed their doors, while Barry’s Bootcamp halved its capacity. Los Angeles mayor Eric Garcetti ordered closures of all gyms citywide, while Orangetheory and Gold’s Gym shuttered all corporate-owned locations.
For gym-goers seeking a stress-relieving workout in tumultuous times, the Planet Fitness franchise began streaming free classes this week on the company’s website, Facebook page and YouTube channel. And online fitness company Beachbody on Demand has come a long way since its 1998 founding, now reaching 1.7 million subscribers.
Potential Economic Recovery
Regarding federal assistance for coronavirus-impacted industries, Trump noted that any response would have to be significant, and members of Congress on both sides of the aisles tend to agree, for the most part.
Uncertainty can be unbearable, especially when people’s livelihoods are at stake. Even if you don’t work in one of these sectors, you probably work in one that could be directly or indirectly affected by the devastation these industries are facing.
For now, the best thing we can do to help is stay home, keep our families safe and donate to causes that are working on the frontlines to help combat this public health crisis. When the crisis passes, we can help workers and industries impacted by the coronavirus by going back to our lives as they were before and doing the things we love: traveling, dining out, working out, volunteering and socializing, but with a renewed sense of gratitude and empathy.
Published at MoneyGeek