From restaurants to retailers, virus transformed economies

It would be just a temporary precaution.

When the viral pandemic erupted in March, employees of the small insurance firm Thimble fled their Manhattan offices. CEO Jay Bregman planned to call them back soon — as soon as New York was safe again.

Within weeks, he’d changed his mind. Bregman broke his company’s lease and told his two dozen or so staffers they could keep working from home — possibly for good.

The gains were at once unexpected and immediate. Bregman is saving money on rent. He no longer has to persuade recruits to relocate to a crushingly expensive city. He’s increased his staff by 20% and for the first time added new hires in Texas and California.

“I was very skeptical at first that we could conduct business this way for a long time,” Bregman said. But having employees work from home proved a “huge benefit” for everyone.

Like no other event in memory, the pandemic has upended economies in the United States and across the world — transforming how people work, travel, eat, shop and congregate. It has changed how students are educated, how people communicate, how households are entertained and which industries, geographic areas and categories of people will thrive and which will suffer.

It has widened a gap between educated and affluent people who can work from home and the less fortunate — people in lower-income households without college educations or high skills who depend solely on wages rather than stock or home equity gains — who now stand to be left further behind. And it’s forced many working mothers to quit their jobs for lack of child care.

The economy shed a shocking 22 million jobs after the pandemic struck. Many employers have since recalled some of their furloughed workers. Yet the recovery has slowed. Not until the end of 2023 does Moody’s Analytics foresee the U.S. economy regaining its pre-pandemic employment level. In the most bruised sectors — hotels, for example, and retail — changing economic habits mean that employers may never need as many workers as they did before the pandemic.

Even after vaccines have conquered the virus, economies have restored their health and jobless people have found work again, the economic landscape will almost surely look different.

“We’re not going back to the same economy,” Federal Reserve Chair Jerome Powell told a European Central Bank forum last month “We’re recovering, but to a different economy.”

Economists say it’s far from certain which of the myriad changes will prove permanent and which may fade as people who’ve been holed up at home for months return to their pre-pandemic routines.

For the economy’s vast retail sector, the urgent question is: Will customers want to shop in physical stores in numbers anywhere near what they used to be?

Retailers like Lisa Shah are holding out hope. Shah has been hurt by a plunge in tourism in Massachusetts and New Hampshire, where her three LIT Boutique stores are located. Before the pandemic, her women’s clothing stores combined would see about 600 customers each weekend. Government-mandated restrictions and the anxiety of customers have slashed that figure essentially in half.

Shah has since built up her online store, changed the brands she offers and dangled discounts. She keeps asking herself what else she can do.

“I don’t know where else to pivot,” she said. “We’ve pivoted so much.”

Optimistically, some experts detect a collective hunger to return to the old ways, at least for people with the means to do so — to the familiar and comfortable routines of gathering at bars, dining in restaurants, strolling in stores, flying off on vacation.

“I don’t think you should overestimate how much will be permanently changed” by the pandemic, said Jacob Kirkegaard, senior fellow at the German Marshall Fund of the United States. “The idea that COVID will be a fork in the road for a lot of things — I am personally skeptical.”

Missing the office, not the commute

Uncertainty about COVID’s lasting impact is evident in how companies and workers have spent months weighing the pros and cons of remote work.

Thimble’s head of product, Mitch Kushinsky, enjoys the flexibility of working at home. He has an old dog that needs to go out every hour to relieve himself. If he didn’t work at home, Kushinsky would probably have had to put the dog down. He doesn’t exactly miss the commute downtown from the Upper West Side.

Then again, Kushinsky has to share the home workspace with his wife, who can be noisy. Then there’s the unexpected: When a pipe burst in his building, he found himself working alongside construction workers who had to tear down a wall in his apartment to make the repair.

Sometimes, he just misses being with co-workers.

“You learn a lot just being around people,” Kushinsky said. “You lose that working remotely.”

For all the attention focused on employees who can work effectively from home, they are hardly a majority. According to a McKinsey Global Institute study of 800 jobs in nine countries, only a fraction of people work in jobs that can effectively be done remotely — fewer than 30% of workers in the United States, for example, and fewer than 12% in India.

Still, a McKinsey survey of 800 corporate executives worldwide found that 38% of them expect their employees who are now working remotely to continue to do so at least two days a week after the pandemic. That compares with 22% in surveys before the pandemic, according to McKinsey.

The shift is big enough to have far-reaching implications — improving the quality of life for some, while deepening inequality and hurting some urban economies. Emptier cities are a grave threat to downtown restaurants and retailers that depend on office workers. Rents in cities like San Francisco and New York are sinking as more people move out. Municipal governments will struggle to collect enough taxes to provide services.

Some employees now working remotely express mixed feelings about the arrangement. A body of studies indicates that most of them oppose giving up the workplace environment entirely.

The ghost in the kitchen

The pandemic has caused an unimaginable nightmare for the restaurant industry. Some of the scars will likely linger.

In pre-pandemic days, Brenda’s French Soul Food was always hopping. A popular restaurant in downtown San Francisco, it drew tourists and locals alike with its beignets and other Southern foods.

Everything slammed to a halt on March 16, when San Francisco banned indoor dining to stop the spread of the coronavirus. Suddenly, 150 employees were jobless. Chef Proprieter Brenda Buenviaje couldn’t bear to break the news in person.

It’s a story that has happened again and again this year. The National Restaurant Association estimates that one in six U.S. restaurants — more than 100,000 — have closed. Many that stayed open shifted to takeout and delivery, but they need fewer staff. The association estimates that 2.1 million U.S. restaurant workers remained out of work in November. Hudson Riehle, who leads research for the association, predicts that U.S. restaurants will collect $659 billion in revenue this year — down 27% from the roughly $900 billion the association had forecast earlier this year.

Independent restaurants were hit hardest, said Rick Camac, a dean at the Institute of Culinary Education in New York. Loans from the government’s Payroll Protection Program helped initially. But that money has long run out. After an anemic holiday season, Camac expects another big wave of closures early in 2021.

By contrast, some fast food chains have mainly recovered, thanks to a growing customer use of drive-thru and curbside service. In China, the world’s second-largest economy after the U.S., spending at restaurants was up 0.8% in October from a year earlier. But customers are still uneasy. Some bring their own utensils, and restaurants keep jugs of hand sanitizer at the front door.

“Now, I will be more careful,” said Chen Luping, a 38-year-old mother of two in Beijing.

The pandemic has accelerated a trend toward takeout and delivery that was already well underway before the virus hit. In February, 63% of U.S. restaurant goers were eating their food elsewhere; by the third quarter of the year, that figure reached 90%, Riehle said.

Buenviaje kept afloat in several ways. Brenda’s French Soul Food reopened for takeout and delivery. And she’s now shipping meals nationwide through a service called Goldbelly. Buenviaje sold out of Thanksgiving dinner kits and is creating some for Christmas.

Smaller takeout-focused branches elsewhere, including Brenda’s in Oakland, which opened just before the pandemic, are thriving. And soon, Buenviaje will start delivery in Silicon Valley through a ghost kitchen. She’s been able to rehire 75% of her staff.

“Out of necessity,” she said, “we figured out a new path together.”