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This page offers all of Delaware Public Media's ongoing coverage of the COVID-19 outbreak and how it is affecting the First State. Check here regularly for the latest new and information.

Business survey provides snapshot of layoffs, closures as COVID-19 shutdown bites harder

Delaware Public Media

The list of businesses struggling as COVID-19 pandemic forces them to close or severely limit their operations is growing – along with the number of people who find themselves out of work or furloughed.

So bad is it in Delaware?  Contributor Jon Hurdle takes a closer look a survey that provides some insight.

The economic pain inflicted by the Covid-19 pandemic is intensifying as the crisis continues, according to a new survey of more than 400 Delaware businesses.

The survey, conducted from March 31 to April 3, found more layoffs and more closures than in an earlier survey from March 20 to 24, and more companies reporting declining revenue as the state-ordered shutdown of non-essential businesses stretches into its third week.

The new survey by Delaware Prosperity Partnership, a public-private economic development group, found the share of employees across all 419 companies contacted surged to 13 percent, or almost 1,700 people, from only 3 percent in the first survey.

There was also a big increase in the number of businesses that have closed: 37 percent said in the latest survey that they have ceased operating, up from 22 percent in the first survey. The hardest-hit sectors were arts, entertainment and recreation businesses, where 78 percent shut their doors, followed by education, primarily child-care providers, where 77 percent have stopped operating.

And the share of businesses reporting decreased revenue rose to 83 percent from 72 percent in the first round. The biggest declines were seen in accommodation and food services and retail, where most respondents reported a drop of 91-100 percent in revenue.

Many more small businesses responded to the second survey than the first, resulting in a big decline in the aggregate number of workers employed by participating companies: 11,400 in the new survey compared with 24,000 in the first one.

The data, released the day before the federal government reported another unprecedented 6.6 million people across the country filed for new jobless claims last week, magnifies worries about the devastating economic impact of the COVID-19 crisis.

In Delaware, the latest jobless data for the week ending April 2, showed 18,863 new claims, close to almost 19,000 the previous week, but sharply higher than 10,700 the week before that. Those numbers compare with claims of around 500 in each of the previous three weeks, before businesses began to shut down, according to Department of Labor figures.

Credit Univ. Of Delaware
Univ. Of Delaware
University of Delaware Economics professor Jim Butkiewicz.

“It’s a very serious and devastating situation for many, many people,” said Jim Butkiewicz, a professor of economics at the University of Delaware. He said the current pace of job losses is much more severe than during the Great Depression of the 1930s when unemployment rose from 3 percent to 25 percent in over three and a half years.

“We’re doing it in a month or two, we’re falling off a cliff right now,” he said. “Nothing like that has ever happened in our history, so, yes, it’s a very bleak situation for all those people who have lost their jobs and lost their incomes.”

Asked whether Delaware would now be in a recession if it could be considered a separate economy, Butkiewicz said the economic downturn is pervasive across the globe.

“The whole world is in recession now,” he said. “When you shut down major segments of economic activity, people don’t have incomes, many people are very concerned about how they’re going to pay their bills. It’s as serious as we’ll ever have experienced in our lifetimes – worse than 81-82 or 2008-09.”

He fears that the economic damage will persist even after the state lifts its business-shutdown and stay-at-home orders, because consumer finances have been so badly hit that people will be reluctant to resume spending in stores and restaurants, and because they will fear a return of the coronavirus even if the infection rate subsides.

“A lot of people are going to fall behind in their finances because they’re not earning income,” he said. ‘How long will it be before I catch up on my mortgage payment, my car loan? Until then, I’m maybe not willing to spend on things like dining out or entertainment.’ We know from other recessions that people tend to increase their saving and try to recover from financial losses.”

The many shuttered Delaware businesses include Two Stones Pub, a six-location restaurant chain, with Delaware sites in Wilmington, Newark, Middletown and Hockessin, plus two in Pennsylvania.

Credit Delaware Public Media
Delaware Public Media
Two Stones Pub's North Wilmington location sits closed during the COVID-19 pandemic

Owner Michael Stiglitz said his revenue dropped to zero since he shut all six locations completely on March 16, laying off 140 Delaware employees, nearly all of whom have applied for jobless benefits. The company is continuing to pay their healthcare, and has worked out payment plans with some of its landlords and vendors, all of whom have been very flexible in the crisis, he said.

Stiglitz estimates that he can survive in the current situation until August, at which point he would have to close the business, which he started in 2011. “If I hit August without any more loans or assistance, everything has to stop,” he said.

But whenever the shutdown order is lifted, Stiglitz is expecting some social distancing restrictions to remain in place to guard against a possible resurgence in the virus. For the restaurant industry, that may mean a partial reopening with tables at least six feet apart or every other bar stool removed, he said.

More than anything, he wants his employees to come back to work.

“The most important part of this is to get to the other side, and get our people back to work,” he said. “If we don’t get them back to work, the economic side of this whole thing turns much more grim than just being uncomfortable for three to six months.”

Meanwhile, the new DPP survey found that businesses that remain open were working at 61 percent of capacity, on average. Operating capacity was higher for finance, insurance, manufacturing and construction than it was in other sectors, and was higher for large companies than it was for small ones.

Larger companies reported both higher capacity and smaller declines in revenue than small businesses, while businesses said on average they could survive the current slowdown/closure for 12 weeks, slightly less than the average 13 weeks reported in the first survey. The median response for the time in which businesses could survive current conditions was eight weeks.

“[That’s] not a lot of time for a company to get to the next lily pad, if you will.  And some were less than a month,” said Delaware Prosperity Partnership president Kurt Foreman. “And I don’ think it’s from now.  I think we were already in that cycle.” 

Only 22 percent of respondents said they had applied to their banks for bridge financing, while 27 percent said they had asked the U.S. Small Business Administration for an Economic Injury Disaster Loan.

DPP president Kurt Foreman expressed some surprise at those figures, and urged companies to talk to their lenders about financial support during the shutdown.

“It’s really important for companies to reach out to their financial institutions and look into bridge financing,” he said. And he encouraged them to investigate sources of government support.

“Some of the latest programs involve both grant and loan, and they don’t have to accept every part of it but they should definitely be doing that as a way to give themselves as much flexibility as possible,” he said.

But among businesses that were still open, supply chains remained relatively intact, with most respondents saying they were able to ship and receive some 70 percent of goods and services.

Foreman says that could bode well for businesses’ ability to recover.

“We don’t know if it’s going to be a quick bounce back, or a hard challenge and slog, People are all over the map right now on that.” said Forman. “But the best way for us to get back out of this is to have that ability take on the order when the come.”

“I’m optimistic that many of our companies with get through this, maybe not unscathed, but will get through this and have positive momentum relative quickly after this,” Foreman said.




Jon has been reporting on environmental and other topics for Delaware Public Media since 2011. Stories range from sea-level rise and commercial composting to the rebuilding program at Prime Hook National Wildlife Refuge and the University of Delaware’s aborted data center plan.
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