MNI INTERVIEW: Business Scarring Under Way--Minn. Fed Analyst

The economy is already scarred by the first nine months of the pandemic even with many firms hopeful adaptations since the first wave will help them them carry on until in-store visits return to normal, Minneapolis Federal Reserve regional outreach director Ron Wirtz told MNI.

"I don't think there's any question there is scarring going on. We don't have a great handle on how many businesses have gone out of business," Wirtz said in an interview on Friday. "Exactly where the scarring is, we're going to learn over time."

The district had some of the worst Covid-19 hotspots before a recent decline in case loads that should boost sentiment through the holidays, Wirtz said. But the relationship between confidence and actual consumer spending isn't obvious even with the real-time trackers of foot traffic and travel introduced this year.

"I'm generally hearing about a cautious optimism among a lot of retailers," he said. "If they can have anything close to last year, especially many small retailers would be thrilled," Wirtz said. "They are trying to get through to the other side."

OPEN IN DIFFERENT WAY

Firms are having different levels of success with changes to help them carry on amid social distancing rules, but overall the second wave hasn't been as damaging as the first, he said.

"You're seeing restaurants really get good at delivery at the curb or takeout or delivery itself. So you're seeing a lot of businesses really make very significant changes to react to the current environment, so they can be open to customers but in a different way."

Some families are also buying more gear to get outside in a region known for winter sports. The most recent Beige Book showed "strong demand for recreational and powersport vehicles" and rising visits to national parks. "From a couple of contacts that I have in the auto industry, what I'm hearing is that they are expecting a decent December, especially if they can get inventories of trucks," Wirtz said.

Overall, "there has been very uneven recovery" he said. Some firms are going ahead with wage reductions often seen in a traditional recession, some have canceled them, and others like busy construction firms are raising wages, he said.

SHOWING SCARS

"There are just so many challenges to businesses in this environment, and the resiliency I see is frankly heartening, even as bad as things are for some."

That backdrop of the pandemic still hangs over managers even with signs the second wave has slowed down and progress is being made on vaccines. "The reality is that the case loads are still high," he said.

"Business that serves crowds, those are going to be the businesses that have been struggling, that are struggling, and in terms of scarring, I don't think there's any question are going to carry those scars forward," Wirtz said.