COVID-19 vaccines will give economy a shot in the arm
Annual macroeconomic outlook Q&A with Michael Knetter
Vaccines crucial to Fight pandemic, Fix economy
Notable Women in HR
It may be difficult to imagine a time when you’ll once again sing along to your favorite song at a packed concert or high-five the stranger sitting next to you after a Bucks slam dunk at Fiserv Forum, but that day is getting closer.
Thanks to the ongoing rollout of COVID-19 vaccines, though progressing slower than expected, an end to the pandemic is in sight. And so is a wave of pent-up demand likely to wash over certain industries that bore the brunt of government-imposed restrictions since March: entertainment, restaurants, travel and activities that gather people together.
Exactly when the majority of the population will feel comfortable going out again and spending money on in-person activities isn’t certain, but when the time comes, consumers will “have the wherewithal to buy things,” said Jim McGibany, chair of the Department of Economics at Marquette University.
McGibany points to a few key indicators. From February to November 2020, total checking account deposits increased 75% and total savings deposits increased 26%, according to Federal Reserve data.
Some of that cash could be attributed to the first round of federal stimulus checks, precautionary balances for year-end property tax bills or rainy day funds, but not all.
“That’s a lot of additional money in these accounts that aren’t earning any interest,” said McGibany. “That stuff is sitting there waiting and it’s going to be spent.”
What’s more, a December consumer expectation survey by The Federal Reserve Bank of New York shows an expected 3.4% median increase in household spending over the next year, the highest projected increase since May 2019. That’s despite continuously low expectations of growth in both household income and earnings, according to the survey.
“They think they’re going to spend more and you couple that with the fact that there’s money in their checking accounts. … That’s a pretty good sign for what’s to come I think,” said McGibany.
Still, consumer-facing businesses should expect a gradual return to pre-pandemic sales and activity due largely to consumers’ “slow psychological recovery” from the social environment created by the pandemic, said Stephen Saunders, chair of the Department of Psychology at Marquette.
Saunders believes consumer confidence and spending will not come back at the flip of a switch, at least for most.
“There will be some people who would insist on going to see a movie every night of the week for a month or going to every concert that they can, but I expect the vast majority of people will simply slowly start to reintroduce things,” he said.
That’s because people have developed new habits over the past 10 months: cooking at home instead of dining out, elbow bumps instead of handshakes, Zoom calls instead of in-person meetings.
Saunders said the lack of socialization as a result of lockdowns and stay-at-home orders will only contribute to a slow return for businesses like restaurants and entertainment venues. Groups of friends or family members who regularly got together prior to the pandemic to dine out or see a show have gotten out of the habit of going out together and making plans to do so.
But humans are social creatures by nature, he said, so large gatherings and social activities will inevitably make a comeback. But perhaps not handshakes.
“I could see handshakes disappear in the business world, almost as a sign of politeness and respect for your health,” said Saunders.
All told, Saunders thinks “back to normal” won’t happen for another year from when health officials deem it safe to gather again.
For Milwaukee-area businesses that stand to benefit from pent-up demand, there’s still a long road ahead.
That’s especially true for The Pabst Theater Group, whose four Milwaukee venues have sat empty since the start of the pandemic. Now, the hope is to be back up and running by the fourth quarter of 2021, but that would require the state’s vaccine distribution effort to pick up speed, its chief executive officer Gary Witt said.
“If we keep underperforming on vaccines, then I would say it’s highly unlikely that we’d come back this year,” he said.
While relief grants from the state and federal government helped keep the business afloat, Pabst has upgraded its venues’ HVAC systems and devised safety plans for operating at both limited and full capacities.
As for how business will look once deprived concert-goers are able to attend shows again, Witt isn’t letting his expectations soar too high.
“It’s not to over-assume that because we haven’t been (open), everyone’s going to have this wild demand to want to come back and go to concerts,” he said. “I think for me, it’s more realistic to understand the fact that our business is still going to be there because it hasn’t been impacted by COVID in a way that people have decided to go do something else and stay at home and watch concerts on their television or live stream it on their computers.”
At Potawatomi Hotel & Casino, operations are currently limited to slot machines, beverage service on the casino floor, carryout-only at three of its restaurants, and 200 of its 500 hotel rooms.
“It will stay that way until the vaccine is widely distributed throughout the city and the country,” said Rodney Ferguson, chief executive officer and general manager at Potawatomi.
Next to open at the casino – but likely not until late spring – will be table games, bingo and dine-in service. Ferguson said he believes there’s demand for those services, as well as weddings and small group meetings.
Since partially reopening in June, there’s been a steady increase in repeat customers returning to Potawatomi, which Ferguson chalks up to effective health and safety measures and lack of in-person entertainment options in the city. Patrons are anxious for the remainder of the facility to reopen as soon as possible, he said.
But that won’t mean pandemic-era protocols will suddenly disappear. Hand sanitizer stations and increased cleaning throughout the property are now standard practice and necessary precautions against future contagious viruses. And, Potawatomi is considering a ban on indoor smoking in portions of the casino where it had been permitted prior to COVID.
As he continues to gradually bring his 17-property fine dining empire back to life, Paul Bartolotta factors in the “human cost” of pandemic-era hospitality.
“We’ve always thrown our heart on the plate,” said Bartolotta. “Now, we have to limit the amount of times we go to the table, we have to learn to smile with our eyes behind a mask. … We want to bring back what got us to the dance in the first place.”
Since July, operations have resumed at its three catering venues and five of its restaurants, with heavy emphasis on stringent COVID protocols and refreshed, price-fixed menus. The pandemic in some ways forced the business to be better and adopt new best practices that apply to a post-pandemic world, he said.
But Bartolotta expects it’ll take time for both diners and employees to readjust to the intimate style of service the restaurant group is known for, and he plans to err on the side of caution until then.
“I will not be the first one to say ‘we’re done with the masks because we don’t really have to (wear them),’” he said. “I’m going to wait until I know that the consumer and the health professionals say it’s good.”
As consumer confidence gradually rises, Bartolotta expects first to see locals coming out more often, followed by corporate dining once people return to office buildings. He likened it to layering a cake.
“We’re going to continue to build from the bottom up and every day there’s going to be a new layer and hopefully a little bit more frosting,” he said.