By Judy Loy
Registered Investment Advisor, ChFC® and CEO of Nestlerode & Loy, Inc.
The economy and individuals continue to struggle this year due to pandemic lockdowns preventing a normal business environment. The latest figures are staggering.
In the last seven weeks, there have been 33.5 million applications for unemployment in the United States. This eliminates all the employment gains in the past decade in two months. The unemployment rate in April grew to Depression-era levels, reaching 14.7%. The good news is the claims are decreasing and Pennsylvania was one of the states which saw a 70% decline in initial claims in the first week in May. Twenty-four counties in Pa., including Centre, moved into the “yellow phase” on Friday. Restrictions remain but many small businesses will be able to reopen with restrictions in our area. Difficulties still abound: How to do personal business in a mask? How to keep everything clean between clients? Pure Maintenance of Central PA is one option, which uses antimicrobial and antiviral surface protector and sanitizer for businesses to keep clients and employees safe. We plan on using them when our main office reopens.
The main engine to Centre County’s economic picture is Penn State University. It is how we gained the moniker ‘Happy Valley’ in the Great Depression. The university has kept us insulated from many business downturns, but this time is different for our town. The loss of the student population in March has devastated many downtown businesses that depend on the income from students. Rental spaces are left empty with students demanding relief from their rent. The economic picture for many universities is uncertain. Penn State announced 50% pay cuts for employees of the Office of the Physical Plant and Auxiliary Services from May 4 through the end of June. A decision on whether classes will be virtual or in person is vital for fall 2020 and the university indicated that would be announced by June 15. This decision will decide for many downtown businesses whether they thrive, stay open or close their doors.
Oil is on a crazy ride. This is due to two classic price determiners: supply and demand. The memes on social media say it all, “Gas is cheap but I have nowhere to go.” Average gas prices in the U.S. are now under $2 a gallon. The demand for oil around the world has plummeted. With new innovations, the U.S. has become the largest oil producer in the world. With the additional supply and lack of demand, we stand at the perfect storm for low oil prices. The supply and demand became so unbalanced the producers were paying to offload their supplies because of lack of storage, thus putting a barrel of oil in negative territory.
This leads us to the stock markets, a leading indicator of the economy, which means it typically is a predictor of future performance. After a steep fall in March, stocks have rebounded significantly in April and so far in May. This bodes well for the future. However, another downturn is expected in the indices, but the markets are notoriously hard to predict. The good news is that we have probably seen the bottom in stocks, so we possibly have seen the bottom in economic activity.
The fear now is that the longer people go without paychecks the less likely they are to spend. The U.S. consumer is the largest part of our economy. Many questions remain as we reopen: Will people feel comfortable going to a restaurant? A movie theater? A retail store? For me, it is not so much fear of the coronavirus but the uncomfortableness of a mask, everyone else wearing a mask and the looks you get if you accidentally get too close. What used to be enjoyable for me is no longer with the changes that are implemented. Also, everyone is on edge and it leads to unnecessary conflicts.
As the economy reopens, small businesses, particularly restaurants, will need the support of consumers. Takeout right now is their lifeline so take time if you are out to make a stop locally. Champs, Otto’s, Overlook Grill and Kelly’s are a few of the many local restaurants that have gotten takeout and safety right. Go downtown and shop at Harper’s and pick up beer or essential groceries at McLanahan’s. Need a new refrigerator? Shop Mike’s Video, TV & Appliance. The list goes on, so keep that locally owned and operated business in mind as we get back to normal.
I think one of the most important things we can do for each other is kindness and understanding. Some face fear of illness because of underlying conditions while others wish to get back to work because they need rent and food money. We are all under additional anxiety so be kind to others and yourself.