...and Around.
My turn to apologize for a late post - despite spending all my time at home these days, I'm actually finding myself less productive on the home front, rather than more. As the boundaries between work and home blur I am finding it harder to work on things in the middle.
For me, the economic consequences of all of this can be split into a few buckets. First, there are firms experiencing short-term impacts that will basically return to the original trend as soon as possible: demand builds up during social distancing, but as soon as limitations are eased the industry recovers. Hairdressers and pet groomers are clearly this (I don't think people are suddenly realizing they enjoy cutting their own hair or their dog's), and more controversially I suspect restaurants and broader leisure are too. I think a lot of people are pining to go out for dinner, and will do so as soon as they can. Firms with little liquidity or safety margin may still go bankrupt in this bucket, but if they can make it through, then they should be ok. Natural resources and manufacturing are also in this group for me: the broader economic slowdown mean they are in bad shape in the short term, but in the long term the economy will also recover. This is also the group I'm most interested in seeing government aid flow to as a backstop: though there are surely weak firms that could be winnowed out, overall these sectors are not structurally damaged, just short term crunched.
The second bucket is industries for whom this is a period of forced experimentation for their consumers, and they may never return to original patterns. I suspect cinemas are in this bucket: some movie-goers will start going to the cinema again as soon as they can, but I suspect a lot of households have now invested in the netflix account, home projector, or whatever else and may have realized they actually don't mind not going to the movies that often. The habit is broken, and it may be hard to put it back together again. I suspect transport is in this bucket, though I'm not sure how - I think people's transportation habits may change as a result of this (see comments on remote work below). Also some forms of retail: people who refused to shop online have now been forced to try it, and I imagine some have liked it. Governments don't really have a way to identify these firms, so they get aid too, but it's a waste since they will likely go bankrupt anyway.
A nuance to the second bucket is that I suspect there are some firms who aren't yet feeling as much pain as they will: firms who are fine in a short-term crunch, but are badly affected in a long term. Gyms are my example for this: if the crisis only lasts a couple months, people may not bother cancelling their memberships, and gyms may be ok (though not great). If it looks like it will last longer than that, as it does now, then people start cancelling their memberships and those consumers may never come back, especially if they find an alternative (e.g. a home gym).
Finally, the third bucket is those who are unaffected or doing better. Many tech firms are in this bucket: Zoom is doing just fine, thank you very much. Healthcare too.
The most interesting industries are those for whom the bucket is unclear. Airlines and hotels, for example: will people crave travel and demand rebound as soon as this is over? I hear cruise bookings for 2021-22 are as high as last year. Or will people find alternatives to oversees holidays, such as virtual museum trips or camping? If I had to guess I think I would say that demand will take a while to recover, since people will be nervous, but eventually will be as high as ever: the desire to travel, especially for countries where that hasn't been an opportunity until recently, is strong. Perhaps it will be a cohort effect, since young people often want to travel and also believe themselves indestructible.
Remote working and knock-on industries are also unclear to me: I know remote worker true believers think that everyone will work remotely all the time after this, but for me the jury is still out. There will clearly be more than before, but will it be enough to take the hammer to public transit, for example? Is this the end of buses and light rail, and by extension probably municipal solvency? I suspect not, but I wouldn't rule it out. Actually, my best guess would be that this creates a huge window for self-driving cars, which lack the exposure to other people of public transit.
I'm not sure that answers any of your questions, since I basically just categorized the most interesting industries as hard to predict. Somehow not answering your questions has taken an enormous amount of text, though. Sigh. If I had longer, it would be shorter.
How about you? Where is your mind at in the recovery? And how do you think a second wave will affect all of this, if one occurs?
For me, the economic consequences of all of this can be split into a few buckets. First, there are firms experiencing short-term impacts that will basically return to the original trend as soon as possible: demand builds up during social distancing, but as soon as limitations are eased the industry recovers. Hairdressers and pet groomers are clearly this (I don't think people are suddenly realizing they enjoy cutting their own hair or their dog's), and more controversially I suspect restaurants and broader leisure are too. I think a lot of people are pining to go out for dinner, and will do so as soon as they can. Firms with little liquidity or safety margin may still go bankrupt in this bucket, but if they can make it through, then they should be ok. Natural resources and manufacturing are also in this group for me: the broader economic slowdown mean they are in bad shape in the short term, but in the long term the economy will also recover. This is also the group I'm most interested in seeing government aid flow to as a backstop: though there are surely weak firms that could be winnowed out, overall these sectors are not structurally damaged, just short term crunched.
The second bucket is industries for whom this is a period of forced experimentation for their consumers, and they may never return to original patterns. I suspect cinemas are in this bucket: some movie-goers will start going to the cinema again as soon as they can, but I suspect a lot of households have now invested in the netflix account, home projector, or whatever else and may have realized they actually don't mind not going to the movies that often. The habit is broken, and it may be hard to put it back together again. I suspect transport is in this bucket, though I'm not sure how - I think people's transportation habits may change as a result of this (see comments on remote work below). Also some forms of retail: people who refused to shop online have now been forced to try it, and I imagine some have liked it. Governments don't really have a way to identify these firms, so they get aid too, but it's a waste since they will likely go bankrupt anyway.
A nuance to the second bucket is that I suspect there are some firms who aren't yet feeling as much pain as they will: firms who are fine in a short-term crunch, but are badly affected in a long term. Gyms are my example for this: if the crisis only lasts a couple months, people may not bother cancelling their memberships, and gyms may be ok (though not great). If it looks like it will last longer than that, as it does now, then people start cancelling their memberships and those consumers may never come back, especially if they find an alternative (e.g. a home gym).
Finally, the third bucket is those who are unaffected or doing better. Many tech firms are in this bucket: Zoom is doing just fine, thank you very much. Healthcare too.
The most interesting industries are those for whom the bucket is unclear. Airlines and hotels, for example: will people crave travel and demand rebound as soon as this is over? I hear cruise bookings for 2021-22 are as high as last year. Or will people find alternatives to oversees holidays, such as virtual museum trips or camping? If I had to guess I think I would say that demand will take a while to recover, since people will be nervous, but eventually will be as high as ever: the desire to travel, especially for countries where that hasn't been an opportunity until recently, is strong. Perhaps it will be a cohort effect, since young people often want to travel and also believe themselves indestructible.
Remote working and knock-on industries are also unclear to me: I know remote worker true believers think that everyone will work remotely all the time after this, but for me the jury is still out. There will clearly be more than before, but will it be enough to take the hammer to public transit, for example? Is this the end of buses and light rail, and by extension probably municipal solvency? I suspect not, but I wouldn't rule it out. Actually, my best guess would be that this creates a huge window for self-driving cars, which lack the exposure to other people of public transit.
I'm not sure that answers any of your questions, since I basically just categorized the most interesting industries as hard to predict. Somehow not answering your questions has taken an enormous amount of text, though. Sigh. If I had longer, it would be shorter.
How about you? Where is your mind at in the recovery? And how do you think a second wave will affect all of this, if one occurs?
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