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Home / World

Covid-19 coronavirus: After the crisis fades, service industries may be changed forever

By PAUL WISEMAN and ANNE D'INNOCENZIO
Other·
6 Apr, 2020 11:33 PM7 mins to read

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A cyclist wears a bandana over his face as he travels past a boarded up business in downtown Austin, Texas. Photo / AP

A cyclist wears a bandana over his face as he travels past a boarded up business in downtown Austin, Texas. Photo / AP

For years, personal trainer Amanda Tikalsky didn't have to worry much about her job.

The United States economy's record-breaking 11-year expansion offered security to service workers like her.

Then came the coronavirus, which closed the Milwaukee athletic club where she worked for 15 years.

She scrambled to organise online exercise sessions to keep money coming in. About 25 per cent of her clients made the jump with her.

"It's an adjustment for everybody,'' she said. "We are used to being face to face."

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But even when the virus threat is gone, Tikalsky predicts that many customers will continue to exercise from home.

The shutdown is also likely to change her own shopping habits. She has a new appreciation for the ease of buying groceries online.

With billions on lockdown, domestic violence has risen, as seen in reports from France, Australia, Turkey, Malaysia - and in South Africa, where the first week of lockdown alone brought 90,000 reports of violence against women. #CoronavirusPoliticsDailyhttps://t.co/AS4rk6nCxm

— ian bremmer (@ianbremmer) April 7, 2020

The pandemic is almost sure to leave a mark on the way people work, shop and socialise, perhaps permanently shifting the way many service industries operate.

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Consumers will think harder about the health implications of squeezing into crowded restaurants and movie theatres.

More businesses will accept the effectiveness of employees who work from home, and the move to online shopping will accelerate.

"We've never had a crisis where we couldn't socially gather with people," said John Gordon, founder of Pacific Management Consulting Group in San Diego, which advises restaurants.

Until March, service workers — from dishwashers to real estate agents — had been enjoying a record winning streak in the job market. US service jobs had risen for a decade.

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The sector appeared almost immune to blips in the economy. Not even low-wage competition overseas or automation seemed to threaten service jobs that require direct contact with customers.

Then the virus arrived. It upended the service economy, which accounts for 84 per cent of US private-sector employment. It wiped out 659,000 service jobs in March — 94 per cent of the jobs that vanished last month as the US economy plunged into recession.

It is sure to claim many more. In an interview today on CNBC, former Fed Chair Janet Yellen predicted that unemployment rates could climb to Great Depression levels.

But because the economy was in solid shape before the outbreak, she added, the return to normal employment could happen much faster than during the Depression or after the 2007-2009 Great Recession.

The coronavirus pandemic could leave an economic impact including higher wages and lower interest rates for decades, special research looking at past disease outbreaks has found https://t.co/FJ0RZQhzsg

— The Sydney Morning Herald (@smh) April 7, 2020

When the economy goes into a nosedive, manufacturers, not services providers, are usually hit first and hardest.

Not this time. The virus has been a gut punch to businesses that depend on social gatherings — restaurants, cinemas, theatres, hotels, airlines, gyms, shopping centres.

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More than 250,000 stores are now temporarily closed, accounting for nearly 60 per cent of retail square footage, according to Neil Saunders, managing director of GlobalData Retail, a research firm.

The situation is similar in many other countries. In Wuhan, China, where the viral outbreak began, consumers are still reluctant to go out shopping as conditions slowly head back to normal.

Josh Rivas is among the millions of job casualties in the US. He works at a Subway at a rest stop in Connecticut where he and co-workers were laid off because of the virus amid dwindling traffic at the plaza.

How the Black Death, from the eras of Shakespeare and Defoe, shaped our thinking about contagion. How the plague is woven into our language, our communication, even the geography of many cities.
via @guardian
https://t.co/UV67EVdZgY

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"We can't afford for us to miss a day of pay because we have families that we need to take care of and bills we need to pay," he said.

In recessions, factories are often the first to slash jobs, and they don't always bring them back. American manufacturers still employ 918,000 fewer workers than they did before the Great Recession. Over the same period, service employment is up by nearly 14 million.

Economists are divided over whether service employees will face the kind of economic disruption factory workers have endured.

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Much depends on the rescue efforts being put together by the Government and the Federal Reserve. Congress and the White House are throwing at least US$2.2 trillion at American businesses and households in a desperate attempt to keep them from going under before the health crisis is over.

"As long as we do the policy right, we should get a pretty strong recovery," said Heidi Shierholz, senior economist at the liberal Economic Policy Institute and former chief economist at the Labour Department. "When the lockdown is over, I think we'll get a pretty decent bounce back."

Shierholz does not expect a "transformative'' change to service sector jobs.

Making and using a homemade face covering to help prevent the spread of coronavirus -- dvice from the US Centers for Disease Control and Prevention@AFPgraphics pic.twitter.com/HCqiekz6xD

— AFP news agency (@AFP) April 7, 2020

Still, some effects of the outbreak are likely to linger, analysts say.

Cooped up in their homes, people have discovered anew the convenience of shopping online — something that is likely to accelerate the decline of traditional retail stores, said Diane Swonk, chief economist at the accounting and consulting firm Grant Thornton.

Restaurants have closed their dining rooms and reduced service to takeaways, delivery and pick-up. Swonk expects the trend towards grab-and-go dining to continue after the health crisis.

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Restaurant consultant Gordon predicts that local governments will reduce restaurant seating capacity to keep diners from being on top of each other. "Some of the places we used to go were just armpit to armpit. Can you see us doing that now?'' he said.

Millions have spent weeks working from home, and the experience has been eye-opening for many, and for their bosses. Meetings and even virtual after-hours cocktail parties can be organised on Zoom, WhatsApp or other programmes.

Fox News host Laura Ingraham and two doctors who frequently appear on her show met with President Trump to advocate for an unproven anti-malarial drug as a treatment for the novel coronavirus https://t.co/sZFq0tY9gf

— The Daily Beast (@thedailybeast) April 7, 2020

"We're just discovering that we can have amazing seminars and conferences online much easier. We don't have to travel anywhere," said Arindrajit Dube, economist at the University of Massachusetts, Amherst.

That's troubling for airlines and hotels that depend on business travel, sometimes to subsidise discounts for holiday travellers.

The enhanced appeal of home offices could also have implications for real estate markets, giving more workers expanded housing options because they won't need to travel to their jobs.

But there may be limits to our enthusiasm for isolating ourselves at home.

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Becky Ahlgren Bedics, 49, of Fishers, Indiana, has been working out via Zoom since her fitness club closed temporarily in mid-March.

But she plans to trek over to the club when it reopens. She misses the camaraderie.

"There's such a connection that you have with people," she added.

- AP

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