Inside of a week, Maryland’s robust business economy was rocked by government-mandated restrictions on events and public gatherings to slow the spread of Coronavirus.
According to business experts and economists, the repercussions will be unprecedented.
Maryland Governor Larry Hogan joined other elected officials around the world in closing schools and certain businesses and ordering significant restrictions on public interactions.
Throughout Maryland, all bars and restaurants will remain closed with the exception of carryout or delivery service until the state of emergency has ended.
The governor also announced that bars, restaurants, distilleries and wineries could initiate delivery or carryout sales to customers subject to local laws in order to minimize the negative economic impact.
BWI Thurgood Marshall Airport access was limited to ticketed passengers and badged employees, and the governor urged that all public transportation modes be re-stricted to essential travel, limited to emergency personnel, front line health care providers and workers with jobs essential to the supply chain.
Hogan waived legal weight limits for trucks to facilitate delivery of important equipment and supplies, and designated emissions testing facilities as drive-through Coronavirus testing locations.
Johns Hopkins University, Morgan State University and McDaniel University made plans to finish their spring semesters online, and the governor asked the University of Maryland to take the same steps throughout its system.
“We’re trying to avoid locking down society and keeping things as normal as possible,” Hogan said. “This is a race against time and we must take action now.”
To the greatest extent possible, businesses across the state transitioned to telework and virtual operations.
“We have received guidance from the federal government on how to [begin producing] hand sanitizer,” said Brad Blackwell, co-founder of Lost Ark Distillery in Columbia. “We are waiting to hear from the county executive’s office on what needs we can fill.”
The Howard County Chamber (HCC) entreated members to donate money to support the staff of Howard County General Hospital.
“Right now, our most immediate need is for meals for the [hospital] staff,” said Leonardo McClarty, Chamber president and CEO. “With a cost of approximately $6,000 a day, we will give local restaurants some needed business, too.”
Local governments continue to function and offer services, but under severe constraints.
In Howard County, Anne Arundel County and Laurel, public hearings were conducted online via web conferencing, and government buildings and offices were closed to the public with specific services limited to appointments.
In response to an economic standstill, President Donald Trump announced plans to seek an $850 billion stimulus package that would begin delivering direct payments to Americans within a few weeks, but it’s questionable what effect that might have on the economy.
“The cures that we implemented during previous downturns don’t work on this occasion,” observed Anirban Basu, an economist and CEO of the Sage Policy Group. “Those efforts were taken to stimulate demand, but this is not a demand shock, this is a supply shock. Ultimately, lower interest rates don’t solve the issue, which is that people can’t gather.”
As a result of precautions being taken to mitigate the spread of COVID-19, “Shipments are not flowing neatly through the global economy, and many ports are suffering a dearth of activity which ultimately translates to fewer goods in shopping centers and grocery stores,” he explained.
“We’re going to see lots of businesses fail as a result of this extended quarantine,” said Karyl Leggio, professor of Finance at Loyola University of Maryland’s Sellinger School of Business. “Hair salons and similar small businesses that depend on a steady stream of customers, that’s the kind of business that won’t come back. It just depends on how long the markets stay closed and how long we self-quarantine.”
Other companies will likely struggle when business returns because earnings have tapered off and hiring issues will follow if laid off employees have found other jobs, she added.
Hoping for a miracle
Vulnerability is one of the greatest economic concerns facing the nation right now, Basu said.
Despite a 10-yeer expansion period, “Household and corporate indebtedness has never been greater, and the national debt has never been greater,” he said. “This supply shock … renders various economic actors, including companies like Boeing, more fragile because of their enormous indebtedness.”
The fallout of restaurants closing in great numbers following a lengthy period of forced temporary closures could create a multiplier effect in terms of lost jobs and lost spending power, he cautioned, driving even more retailers and restaurants into bankruptcy.
“We’re talking about a very negative dynamic,” Basu said. “My belief is that this economic downturn will be short and vicious. I’m not so sure about the short part, I am quite sure about the vicious part.”
Consequently, he said, the most important companies in the world at this moment are not Apple or Microsoft, but the life sciences enterprises working to develop a COVID-19 vaccine.
“Our global hopes rest with them bringing a solution to market faster than anyone can possibly imagine,” Basu said. “The devastation to the economy is unimaginable, and we need Regeneron or some similarly situated enterprise to pull off a miracle.”
By George Berkheimer | Senior Writer | The Business Monthly | April 2020 issue