Layoffs Begin With Workers Who Can Least Afford A Crisis
Like thousands of service-sector workers across the state, Joe Smith said he's scared.
Smith has lived in Durham for seven years. He worked in front of house customer service at Joe Van Gogh, and for the past 18 months at the Cafe at Smith Warehouse and Geer Street Garden. But he suddenly found himself unemployed after Governor Roy Cooper ordered all restaurants to cease dine-in services as a measure to prevent the spread of COVID-19.
"I still do not know how I will pay my rent and utilities next month," Smith said Thursday. "I am aware that there have been funds started for those like me, but I fear that these funds won't be able to provide for all of us that have found ourselves in this situation through no fault of our own… Most all of us work paycheck to paycheck and can't afford to miss even one shift, let alone two weeks without pay."
I still do not know how I will pay my rent and utilities next month... Most all of us work paycheck to paycheck and can't afford to miss even one shift, let alone two weeks without pay. - Joe Smith
Already, initial unemployment claims have surged. The state Division of Employment Security said the number of initial jobless claims filed just last week topped a staggering 83,000. For comparison, the number of overall claims prior to the pandemic has been roughly 3,500 per week, said Larry Parker, a division spokesman. Some 85% of those claims cited COVID-19 as the reason for the unemployment.
Despite how it has affected him, Smith said he agrees with the governor's decision to dramatically limit gatherings of people.
"I wholeheartedly agree that it was in everyone's best interest to close bars, restaurants, and cafes in order to flatten the curve," he said. "However, many of us are going to be in need of funds immediately for food and bills. In terms of being able to buy groceries to stock our homes for two weeks, many of us were unable to afford it. My employer allowed us to take things from the restaurant, mostly perishable items, which has helped tremendously."
In an effort to keep the economy from sinking into more turmoil, the Trump administration has proposed a $1 trillion stimulus package, including sending up to $500 billion directly to U.S. households. While details are still being negotiated with Congress, the administration has proposed sending households an initial payment of $1,000 per adult and $500 per child around the first week of April, with another $1,000 per adult and $500 per child six weeks later.
That kind of stimulus – and especially the scale of the proposal – has economists cautiously optimistic. Getting cash out to those who need it immediately is one of the first and most important steps a government can take, said T. William Lester, an associate professor in the UNC-Chapel Hill Department of City and Regional Planning.
"The main response in times of economic crisis has been for the federal and state governments to provide stimulus," Lester said. "This is important not only to keep money flowing, but also for the government to serve as a backstop for households' financial wellbeing."
In addition to the federal stimulus, North Carolina state government has acted. Cooper acknowledged that his executive order to ban all dine-in services would cost jobs, but said it was necessary in an effort to try to mitigate the spread of the virus. Anticipating layoffs as a result of the directive, Cooper also loosened unemployment regulations. Individuals seeking relief will no longer have to wait one week before applying for benefits, or be required to seek other employment if receiving benefits. People can also apply on line.
The state has close to $4 billion in its unemployment reserves, a significant cushion to provide support for workers with lost wages. Still, it is unclear just how dire the employment picture could get in North Carolina. The unemployment rate recently dropped to nearly 3.5%. At the very least, officials are preparing for tens of thousands of unemployment applications. It is possible the needs will reach, or surpass, the spikes in applications following 9/11 and the Great recession.
One wrinkle unique to this crisis is the limited effects of stimulus, said Lester. One of the quickest ways to get money circulating in the economy is for people to go to bars, restaurants and retail stores. At least in the near term, that's off the table.
"In this situation, with bars and restaurants closed, it can be difficult for that stimulus to have the same effect, because we typically expect stimulus payments to be spent in things like restaurants and bars," he said. "This is really uncharted territory. We are worried that in the short run, a large number of restaurants are just going to go under. And that's a huge concern not only for the restaurant owners and employees, but for our ability to bounce back from this economic crisis."
Furthermore, because it will be the companies with the deeper pockets that can more easily survive extended periods without revenue, this crisis could wipe out the local bars and restaurants that give cities like Raleigh and Durham their character.
"I'm worried that the larger chain restaurants will be better positioned to recover after this crisis is over. They typically have higher profit margins and better access to capital," he said. "The family run establishments are going to have a harder time coming back. And government aid should be focused on these locally owned small businesses."
Lester encouraged workers in other industries who keep steady employment to patronize these restaurants that are most affected.
"If you have a favorite sit-down restaurant, where you've shared family memories, try to order takeout if you can afford it," he said. "Buy gift cards if they offer them. That puts cash directly in their hands today, and when this crisis is over, go back and spend money at these establishments that you love."