Economic pain from new COVID-19 restrictions will be uneven, after Inslee’s order

By Paul Roberts

By Paul Roberts

The Seattle Times

With a second wave of business shutdowns and other restrictions barely a day from taking effect, business leaders and economists were bracing for new economic shocks with only modest prospects for significant government aid. And some of the worst pain will strike sectors already hard hit during the pandemic.

On Sunday, Gov. Jay Inslee ordered sweeping new rules for many business sectors as the state races to confront a COVID-19 caseload that is rising almost exponentially.

Although less severe than last spring’s stay-at-home of restrictions, the second round is expected to deal a harsh economic blow to many sectors that have already suffered heavy losses and massive layoffs, and had been desperately eyeing the holiday season as a chance for some small recovery.

In the state’s hospitality sector alone, “this devastating decision will lead to 100,000 or more jobs lost overnight,” Anthony Anton, president of the Washington Hospitality Association, predicted in a statement Sunday about Inslee’s new directives.

The state’s leisure and hospitality sector lost nearly 200,000 jobs — or more than half its pre-pandemic total — during the worst of the layoffs last spring, but it has since regained around 100,000 of those, according to the state Employment Security Department (ESD).

Such predicted losses would compound the crisis in the state’s job market, which has recently seen a slump in job growth and is still beset by steady layoffs. As of last week, 271,436 Washingtonians, or around 7% of the state’s workforce, were collecting unemployment benefits, according to the ESD.

Those losses have not been equally distributed. Many office-based employers largely have avoided heavy layoffs by adopting a remote, work-from-home model. Exhibit A is the state’s information sector, which includes tech firms, and which has lost only around 5,300 jobs during the pandemic, ESD data show.

By contrast, many sectors that depend on in-person transactions, such as restaurants, hotels and airlines, have seen staggering losses and huge layoffs.

Inslee, acknowledging the additional hardship his new restrictions will cause, said he hopes to soften the blow with government aid. On Sunday, he announced a plan to distribute $50 million in federal funds to affected businesses and workers.

But that’s a relatively modest relief package, especially compared with several federal pandemic-relief programs, which brought the state more than $12 billion in forgivable small-business loans and more than $6.4 billion in enhanced unemployment benefits before they expired.

The $50 million Inslee proposed is “a drop in the bucket of what’s really needed,” said Thomas Gilbert, an associate professor of finance and business economics at the University of Washington Foster School of Business.

Inslee also said the state was looking into other ways to help workers and employers — and also hinted that the state was considering ways to use state funds to replace those expired federal relief programs.

But Inslee offered few specifics on how the state would fund that replacement relief and acknowledged that the state “would have to be very creative on how to finance it [given that] we already have a billion-dollar hole in our budget.”

He said the only practical solution was for Congress to extend the lapsed federal relief programs. “The federal government has resources that dwarf any state, obviously,” Inslee said. “And they’re able, frankly, to go into the bond market and borrow money so that we can finance this, and they definitely should do that.”

Because of the uncertain prospects for such support, some experts fear the relief that businesses can realistically expect will likely be too little to prevent major losses.

Without substantially more state or federal relief, employers are facing more closures and layoffs, Gilbert said. “It’s the same thing” as last spring, he said. “If you’re going to shut [businesses] down, you need to take over their payroll and their fixed expenses — otherwise, these businesses will go bankrupt.”

Gilbert said the governor and state lawmakers should have agreed to a larger aid package before the new restrictions were announced.

During Sunday’s news conference, Inslee was asked whether he would convene a special session of the state legislature to address issues such as additional business relief, as some Republican state lawmakers have called for.

Inslee said he believed the relief programs he has proposed could be implemented via executive order, without legislative action. “But if it is necessary, we can do that, and I’ll be talking to legislators,” he said.

Inslee also urged small business owners to take advantage of federal relief programs that are still available — though the advice he offered contained an error. Inslee mistakenly suggested that business owners could still apply for forgivable loans under the federal Paycheck Protection Program (PPP), which actually closed in August.

A spokesperson later said the governor meant to say that borrowers were still eligible to have their PPP loans forgiven. Small businesses and nonprofits also can apply for a federal Economic Injury Disaster Loan (EIDL) if they’ve been significantly hurt economically by the pandemic, the governor’s office said.

As employers and workers digested the news of the new restrictions, reactions were predictably varied. At businesses in sectors such as restaurants, which will lose all of their indoor business, there were predictions of multiple closures and heavy layoffs.

In some other sectors, such as retail, which face less onerous restrictions, forecasts were, if not more hopeful, at least more philosophical.

“To be honest…it doesn’t feel like a huge hit because we’re down so much as it is already,” said Jamie Munson, owner of Simply Seattle, a retailer with two downtown locations. “I can’t remember the last time we had to limit someone coming into our store because we were at capacity already.”