In the last three weeks, over 15 million people have filed jobless claims. This is sharpest employment loss in history. The unemployment rate will surpass 15% in short order and could even go to 20%+. Optimists say that when the economy re-starts, jobs will return; however, we are concerned that not all jobs will come back right away and employment will take time to recover.
In our thinking, there are challenges ahead. For one, the re-opening will likely come in stages and won't be as simple as flicking on a light switch. There will be less demand so employers may not re-hire every employee at once. Secondly, employers are likely to reassess all aspects of their businesses including office space and number of employees.
Disney will be forever changed
Here is an excerpt from Disney's Chairman Bob Iger's interview with the NY Times.
Mr. Iger also sees this as a moment, he has told associates, to look across the business and permanently change how it operates. He’s told them that he anticipates ending expensive old-school television practices like advertising upfronts and producing pilots for programs that may never air. Disney is also likely to reopen with less office space. He’s also told two people that he anticipated the company having fewer employees. (Mr. Iger said in an email on Sunday evening that he had “no recollection of ever having said” that he expected a smaller work force. “Regardless, any decision about staff reductions will be made by my successor and not me,” he added.)
Many CEOs may take this unusual time to find ways to cut costs out of their businesses. In recessions, this is the norm as they try to stabilize profits against reduced revenues.
Las Vegas in big trouble
Las Vegas could struggle for an extended time as it relies on tourism, conferences, and casinos. It is hard to come up with a scenario where these can be opened quickly. Even if they do, employment could be slow to return.
The American Gaming Association estimates that nearly 650,000 casino employees are out of work nationwide with 206,000 in Nevada alone. About 320,000 Nevada workers are at risk, twice the number in the late 2000s and could push the Nevada unemployment rate above 30 percent.
Even when the casinos reopen, they will be severely impaired. That said, casinos are taking reservations for May and hoping for the best. Nevada's COVID cases do seem manageable at 2836 and new cases are growing at 5%.
But looking at the Chinese example, the road to normalcy could be a difficult one for Las Vegas. The casinos in Macau reopened after being closed for two weeks in February. The month after reopening, only 250,000 visitors arrived in Macau, down 92% compared to 2019! In addition, visitors are subject to temperature checks and face masks are required on the gaming floor. Gamblers are not allowed to stand or congregate and tables require more spacing with fewer players allowed at a time.