How a summer of “yes” ends in a cloud of uncertainty for companies

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It started out as the summer of opportunity. At the beginning of this year the queues outside the restaurants were long and the bars were full of sober night owls. People started shopping for clothes to look presentable again after more than a year of pandemic isolation.

And why not? It looked safer: by the end of April around 100 million people had been vaccinated. The worst days are behind us, said a top public health expert. Shortly thereafter, the relatively risk-averse Centers for Disease Control and Prevention told Americans that they could take off their masks at indoor gatherings as long as they were fully vaccinated.

There was a dizzying feeling in the air.

How quickly the tide has turned. The masks are put back on in many places as the latest variant of the coronavirus has increased significantly in the United States. Buyers are afraid again, travelers will stay at home – and the economy is on shaky feet again.

“The increase in infections and hospitalizations this summer has been worrying,” Moody’s Analytics chief economist Mark Zandi said in a research note this week. “Concerned households suddenly became more cautious when they got on planes and went to restaurants.”

On Wednesday, the Harris Teeter supermarket chain announced it would close its doors earlier, in part in response to the recent surge in the Delta variant. Another local grocery chain, Publix, did the same in the Charlotte, NC area. With fewer customers showing up, the store decided it was time to call back.

This type of withdrawal is repeated across different types of businesses in the US economy.

After an early summer travel surge, people are reverting to flight schedules

Southwest Airlines recently warned that bookings were starting to drop and cancellations were starting to rise.

That came just weeks after Gary Kelly, CEO of Southwest, said the demand from vacationers was so great that traffic in July was expected to exceed levels in the same month in 2019, before the coronavirus pandemic.

In fact, the airline was planning bigger and better days ahead of it.

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“We plan to resume new aircraft deliveries next year, with a desire to restore our route network to pre-pandemic levels if necessary,” Kelly said on a conference call that same month.

This optimism is now clouded by uncertainty for so many companies. It can be seen in the flurry of decisions by various companies to postpone their back-to-office plans despite preparations for the grand reopening in September and October. Microsoft even stayed away from giving a new date last week when it postponed its plans to reopen in October.

All of this has resulted in a dramatic slowdown in attitudes. After the US created around 1 million jobs in June and July, only 235,000 jobs were added in August, less than a quarter of the previous two months.

Airbnb’s revenue skyrocketed, but shortly afterwards things slowed down.

The uncertain path of the coronavirus has resulted in whiplash in many parts of the economy. The worst hit are restaurants and bars that were previously on a recruitment tour. In July they created nearly 300,000 jobs. But in August they cut 42,000 jobs.

Nowhere is this more visible than in companies that rely on people to leave the safety and comfort of their home and travel to new places.

At the beginning of summer, when airline bookings skyrocketed and rental cars ran out in many places across the country, vacation rentals were hard to find.

“This was Vrbo’s best start to a year in the US so far,” said Melanie Fish, travel expert at vacation home rental company Vrbo.

Rival Airbnb’s revenue for the months of April, May and June combined increased 300% year-over-year and exceeded the same period in 2019 by 10%. But when Airbnb CFO David Stephenson announced these results, he warned that the company was already experiencing a “decline in demand”.

This is the path of the unpredictable, unforgiving and relentless virus.

In view of the writing on the wall, the economist Zandi has significantly lowered his forecast for economic growth this year. Zandi now expects the economy to grow 6%, which is 14% below his earlier, more optimistic estimate of 7%.

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