Stagnant Wages, Pay Cuts, Closing Businesses: Stats Worse Than The Last Recession, Due To Covid-19.
Everywhere we look, it seems as though another local business has shut its doors, or is struggling to stay open. Many businesses were unable to survive the quarantine restrictions in the spring. When quarantine was lifted and PPP loans were issued, many thought the worst was over. Although restrictions were eased, the effects lingered.
Many businesses that suffered were smaller "mom-and-pop" businesses- the businesses that make up the backbone of American life.
Meanwhile, business giants like Amazon and Apple saw tremendous increases in profit during Covid-19: Amazon's sales was up 40 percent from a year ago and its profit doubled; Apple had 11.25 billion in profit; Facebook had a 98 percent increase in profit.
Now, the statistics are in and, sadly, what we feared is true: the economic toll of Covid-19 on businesses is worse than the last recession:
Nationally:
According to USA Today, "More than 25 million U.S. workers have been laid off or furloughed
Employers froze the wages of 58% of their workers, up from 36% during the same period last year, according to a recent study by the University of Chicago
In the second quarter, the wages and salaries of private-sector workers edged up 0.4%, the smallest increase in five years, according to the Labor Department’s Employment Cost Index.
About 40% of furloughed employees have returned to work, according to Gusto, a payroll and benefits provider to more than 100,000 small businesses. Of those, 29% have come back to fewer hours or lower wages
Among all workers, including those who weren’t laid off or furloughed, 8.8% saw their hours reduced in August, up from 6% a year earlier, the Gusto data shows.
Among employees who weren’t laid off during that period, 6.2% suffered wage cuts, up from 1.6% during the same period last year, the study says. During the Great Recession of 2007-09, 6% of workers took wage cuts but many firms may still slice pay this year, the report says, suggesting the eventual share could be far higher."
In Colorado:
The annual Colorado Business Economic Outlook (CBEO) released in December originally predicted the state would add 40,100 jobs this year. However, that number was updated midyear to reflect coronavirus to a loss of 128,500 jobs (-4.6%) for the year in their annual midyear update.
Further, the report indicated the leisure and hospitality sector will be the most impacted, losing 76,700 jobs in 2020 (-22.3%):
The latest survey by the Colorado Restaurant Association found that "56% of restaurant members fear that if coronavirus conditions don’t improve, they’ll permanently close within three months."
The Colorado Sun reports that, "according to the latest data from the state’s Department of Revenue, the number of food and drinking establishments filing sales tax returns dropped 19.3% between March and May, to 10,604. That indicates that about 2,500 have either closed temporarily or for good."
Further the Colorado Sun reported, "The trade, transportation and utilities sector—which includes retail trade and the airline industry—is projected to lose 13,000 jobs (-2.7%).
Professional and business services are projected to have the lowest jobs decline (0.2%).
The Denver-Aurora-Lakewood area had the highest unemployment at 11%."
Business and offices are closing. Most recently, Regus is filing bankruptcy:
As of late 2019, Regus leased more than a half million square feet in Denver metro, second only to WeWork among coworking operators.
With just $100,000 of cash on hand at the end of 2019, RGN experienced significant challenges during the second and third quarters of 2020 as the pandemic disrupted the business plans and operations of certain locations within its U.S. portfolio.
According to Thinknum, "With 'near universal adoption of work-from-home policies,' RGN faced lower occupancy rates than the company anticipated when it decided to make investments in office buildings,
RGN intends to use the Chapter 11 process to obtain a “breathing spell” from landlords' collection efforts to restructure new lease terms. If unsuccessful, RGN plans to wind down the operations of the applicable office centers.
Other Regus affiliates, including RGN-National Business Centers and H Work, also filed for Chapter 11 protection. "
Peak Properties, LLC also filed for bankruptcy. Peak Properties is a property management and real estate group.
BC Chalet, LLC filed for bankruptcy. BC Chalet offers mountain vacation rental properties.
ProSource Of Denver, a wholesale flooring company that has been in operation since 1990s, also filed Chapter 11 bankruptcy this week.
Where do we go from here?
Whenever possible, support local businesses.
Even small things help, like eliminating third-party vendors. For instance, call your local restaurant and ask if you can place an order directly with the restaurant for delivery, rather than using a third-party vendor that takes away a large portion of money from the restaurant and delivery driver (And make sure to inquire with the restaurant that the delivery driver gets 100 percent of the delivery tip). Steps like these help local restaurants stay open. You will likely save more money on fees in the process, as well.
Direct businesses in need to local, state and national resources. Write local congresspeople and representatives, urging them for help and more stimulus packages. Support your local community and neighbors. Be kind to one another- these are the most difficult and trying of times when strength of character and kindness towards others is of the utmost importance.
If your business needs assistance during these times, visit the Colorado COVID-19 Business Resource Center for information on grants and funding opportunities.
If you need legal assistance for your business, call our experienced and knowledgeable business attorneys for help. Located in Denver and serving clients throughout all of Colorado, we have assisted clients with many business issues that have arisen due to COVID-19, including lease negotiations, settlements, Force Majeure issues, contract renegotiations, contract enforcement issues, evictions, debt negotiation and more.
Gantenbein Law Firm also practices Tax Law, Real Estate Law, Probate Law, Wills & Trusts, Estate Planning, Foreclosure Defense, HOA Defense, and Credit Dispute/Repair.
For more information, or to schedule a consultation of your case, visit www.gantenbeinlaw.com, or call 303-618-2122.