Wednesday's Market Minute: Earnings Outlook: The US Economy Can't Handle Another Lockdown
Thursday, last week after work. I jump on the last remaining Divvy bike outside my office and ride across the city to Chicago’s Gold Coast. I’m looking for a new suit. The first place I go to is completely slammed. Men are getting fitted for a return to their office for the first time in a year, and one group is getting prepared for a wedding. I check out the selection then call another outlet across the street.
There are no open appointments for a week. I make my way over to Nordstrom, where all the available stylists are busy taking care of customers. Clearly, I’m not good at planning things, but the store is also frustratingly short-staffed. On my way out, I see Nordstrom (NYSE: JWN) has taken over the seating area next to the store with hiring managers interviewing people on the spot. I count at least seven applicants.
Time for me to go home. I order some Indian food for pickup and have time to kill, so I look for a place to grab a drink while I wait. There’s a new tapas restaurant that opened across the street from my destination, and it’s packed. The margarita is good, but that’s not why this place is slammed.
Lively chatter and wandering eyes make it clear everyone is here to see what everyone else is doing. They’re out to interact with other humans for the first time in a year, and the new place that just opened is an obvious choice. I chat with two people next to me who tell me they’re bartenders for an event company traveling state to state for the upcoming music festival season. After Lollapalooza’s COVID success, they’re prepping for a festival every weekend for at least the next month.
I get my food and text my buddy to set up a Call of Duty: Warzone session for later that night. He can’t do it – he’s out driving Uber for the first time in months. Easy call: he says he’ll average $40-$50 per hour.
The thrust of the economic reopening is past the point of return. Commitments have been made by business owners, event planners, and consumers under the assumption that the current state of physical freedom and mobility will remain. If the government imposes strict lockdowns like the original quarantine, the economy will collapse under its own weight.
There are already signs that the power of recovery is waning. Despite a strong employment report last month, economic data has been missing analysts’ expectations for weeks now. The labor market is strained by a lack of workers. Inflation is already at 5.5% and proving sticky enough for policymakers at the Federal Reserve to ramp up the talk about tightening policy.
If we cut off demand and re-introduce supply chain bottlenecks by sending everyone home, growth will slow, but inflation very well may not. That’s the absolute worst scenario and could very well cause the stock market to crash. Handing out more checks will make the long run even worse. The labor market is already strained by a lack of workers. Extending more benefits when there are 10 million jobs available will only increase the odds of a major faceoff between labor and workers, leading to strikes, unionization, and protests that slow the recovery.
All of this is to say nothing of the emotional response that people will have if they’re told they did all the vaccinations for nothing.
We can’t put this genie back in the bottle. The economy must keep going.
Image by gautherottiphaine from Pixabay
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