What Spanos was describing is the new reality now facing entire clusters of American businesses — restaurants, movie theaters, airlines, gyms — and the economy more generally: Consumer anxiety over the continued spread of the pandemic is holding back the recovery by making it impossible to get back to business as usual. In the spring, the economy was crushed in large part by the lockdowns and restrictions imposed by states, which created what economists call a supply shock: businesses literally could not supply goods and services, because they were shut down.
But as lockdowns have been lifted in most of the country and businesses have been able to reopen, that supply shock has waned, only for a new problem to emerge: weak demand. In other words, a supply shock has been replaced by a shock to demand.
Some of the weakness in demand is because we’re on the verge of a classic recessionary cycle: Since the stimulus payments to unemployed workers ended in July, people either have less money to spend or are worried about spending it, which means businesses have less revenue, which makes them cut back on hiring and investment, which means less spending.
But what makes this demand shock exceptional is that the U.S. still has 40,000 to 50,000 new Covid-19 cases and 600 to 700 deaths every day, and as a result lots of Americans are still leery of doing normal, not particularly indulgent things like eating out, going to the gym, or going to the movies. A recent survey by research firm Datassentials, for instance, found that 58% of those surveyed described themselves as “uncomfortable” with dining indoors, and 36% described themselves as “very uncomfortable.” Not surprisingly, then, no matter how creative restaurants get, traffic is still down sharply in most places, and 2.5 million restaurant workers who lost their jobs in April remain unemployed. Similarly, gyms have been open in most states for months now. But a recent survey of 5,000 gym-goers by RunRepeat found that 70% haven’t returned and 43% said they had no plans to go back. Half a dozen gym chains have filed for bankruptcy in recent months, including 24 Hour Fitness, the owner of New York Sports Club, and Gold’s Gym, with many of them permanently shuttering a majority of their locations.
This shouldn’t be a revelation. In fact, myriad studies have now shown that in the early days of the pandemic, people began voluntarily socially distancing and avoiding places they perceived as risky even before lockdowns were put in place. And if you go further back in history, during the 1918 Spanish flu pandemic, businesses stayed open in most cities, yet economic activity still fell sharply, and contemporary accounts suggest that the economy only started to rebound when people became less afraid of catching the flu.
The point is that lifting stay-at-home orders and opening restaurants isn’t enough: Until consumers feel safe, they’re going to stay away.
In the wake of the spring lockdowns, a popular narrative emerged that the only thing holding back the U.S. economy were busybody government officials who insisted on keeping stuff shut down. And, to be sure, government-imposed restrictions are still playing a role in holding back the economy, particularly in states like California — which has yet to allow Disneyland, or movie theaters, to open. But what the experience of restaurants and gyms and theme parks is telling us is that the problem now isn’t lockdowns. It’s something more basic: justifiable fear.