Sector Impacts of Coronavirus (COVID-19)

While individual industries feel the impacts of coronavirus and the subsequent economic impacts very differently, looking at the impact of industry sectors allows us to draw conclusions and see trends across various industries operating in a similar space in the overall economy.
Each economic sector of industries includes a summary developed by our research team and information pertaining to the industries within that sector.

The SBA compiles information on PPP loans and presents them in many different ways. View further breakdowns in the full report by clicking on the image above.

How US Sectors Are Affected

May 3, 2021

Some segments of the management and administrative services sector are benefitting and others are hurting significantly by the fallout from coronavirus. All states have taken steps toward reopening. As of May 2, the 7-day average for new cases was about 49,000 – more than five times lower than they were in early January. Hospitalizations and deaths are also trending downward. On April 30, all but seven states were mostly open, according to The New York Times. Vaccine distribution in the US began in December, but the emergence of new, more communicable coronavirus variants has since led to increased travel restrictions in many parts of the world, including the US, the UK, and the European Union. While travel should rebound as more people receive vaccinations, travel-related industries face a lengthy recovery. Worldwide passenger traffic demand, as measured by revenue passenger kilometers (RPKs), fell nearly 65% in 2020 compared to 2019, according to the International Air Transport Association (IATA). Traffic in 2021 is expected to reach about 49% of levels seen in 2019, but will be up 26% over 2020. Domestic passenger traffic is projected to recover quicker, returning to 96% of pre-pandemic levels by the second half of 2021. Vaccination and testing regimens, primarily in the US and Europe, are expected to enable some international travel by the second half of 2021, but international traffic will still be only 34% of that seen in 2019. Airline industry revenue is forecast to reach $458 billion in 2021, only 55% of what it was in 2019 but 23% higher than the low point of 2020.

Several major US airlines, including Southwest, American, and United are bringing back pilots and flight crews in anticipation of a rebound in domestic travel demand over the summer, according to The New York Times. By July, the eleven largest US airlines plan to offer nearly as many seats as they did in July 2019, according to aviation data firm Cirium. Vaccinations, pent up demand, and stimulus checks are expected to help boost air travel. The Centers for Disease Control and Prevention (CDC) has said the coronavirus poses little risk for those who have been fully vaccinated. The US domestic airline industry is expected to be fully recovered from the effects of the pandemic by early 2022, according to aviation consulting firm Oliver Wyman. However, travel agencies and tour operators may see an uptick in demand before convention and trade show organizers do. Corporate and international travel are not expected to fully recover before 2023, according to Oliver Wyman.

A recent report by Deloitte ranked 20 major industry sectors according to the risks workers face in possibly encountering the coronavirus on the job. Risk factors taken into account include contact with others, face-to-face discussions, exposure to disease or infections, and physical proximity to others. The rankings run from 1-20 with 1 being the lowest risk and 20 being the highest. Administrative Services was ranked at 13, but risk varies among the 12 major occupations in the sector.

While many in the travel and tourism industry are hoping for an increase in travel over the summer, optimism is tempered by the continued spread of new variants of the coronavirus. In Europe, amid sluggish vaccine rollouts and the spread of variants, new cases rose in some countries in March. Restrictions in some areas have since eased, such as some portions of Italy and the UK, which has fared better on vaccines than many of its Continental neighbors. Travel restrictions remain in place in much of the world. In late January the US began requiring all travelers entering the country to show a negative COVID-19 test or prove they have recovered from COVID-19 in the last 90 days. Around the same time, the EU imposed similar requirements. However, in April, the European Union announced that fully vaccinated Americans would be able to travel to the EU starting this summer. According to the Deloitte rankings, administrative and support roles – which include travel arrangement and reservation services – have medium scores for physical proximity to others as well as for face-to-face discussions.

Travel-related firms are losing commissions amid travel demand weakness. Traffic remained poor in February 2021, falling nearly 75% compared to February 2019 (the IATA used 2019 as a baseline for comparison as 2020 monthly data reflect a demand pattern distorted by COVID-19). The TSA screened 1,184,326 airline passengers on April 28, 2021 compared to 2,256,442 the same day two years earlier. The same day in 2020 was in the middle of a nationwide lockdown and only 119,629 passengers were screened.

Employment services providers may see an uptick in demand as vaccines and an improving economy have contributed to a stronger labor market. As of April 23, 2021, job postings on Indeed were 22.4% higher than they were on February 1, 2020 – Indeed’s pre-pandemic baseline. Many sectors are experiencing a major boom in job postings, including loading & stocking (+65%), construction (+60.3), pharmacy (+55.8), and cleaning & sanitation (+42.9%). Hospitality & tourism, and sports continue to struggle; the sectors were down 9.2% and 10.3%, respectively. Sectors performing close to the average for all US postings included security & public safety (+32.7%), retail (+23.6%), software development (+19.3), and food preparation & service (+18.8%).

Temporary staffing revenue is expected to rise 11% to $134.7 billion in 2021 after a decline of 8% in 2020, according to a Staffing Industry Analysts (SIA) forecast released in April. The new SIA forecast expects strong GDP growth in 2021 as more people become vaccinated, the economy continues to reopen, and government stimulus helps drive economic growth. Temporary staffing revenue in education will see the strongest growth in 2021 with a rise of 25% after school closures reduced demand for most of 2020. A 16% increase in industrial staffing revenue will be driven by recovery in the manufacturing and hospitality sectors. Other key areas of temporary staffing growth will include travel nursing (+10%), and IT (+9%). Temp services have medium risk for face-to-face discussions and proximity to others, according to Deloitte.

With the exception of the lockdown early in the pandemic, demand for facility support services and janitorial work has remained steady. Cleaning services providers saw a bit of a slow start in 2021, but business indicators strengthened late in Q1 2021, according to the Home Service Economic Report: Q1 2021 released in April 2021 by Jobber, a job tracking and customer management software firm. Median revenue for cleaning firms in March was 20% higher than year-ago levels. New cleaning work scheduled was up 42% during the same period.

With most US states reopened, businesses that serve the public may hire additional security personnel to help ensure social distancing practices are observed. Key areas of demand include retail, branch banking, and healthcare. Security guard firms are also consulting with managers of offices and other facilities about distancing, enforcing the wearing of masks, temperature checks, and other safety measures as more people return to work. Protective services – which includes security guard firms – are high-risk due to the frequency of face-to-face discussions, according to Deloitte. Some states classified security guards as public safety workers which put them in a priority group for early vaccination. However, on April 19, all Americans over age 16 became eligible to be vaccinated. As cases fell and vaccine roll-outs progressed, some states lifted their mask mandates and left mask policy up to individual businesses. To prevent their employees from having arguments with customers over masks, many businesses hired additional security staff to enforce mask wearing and social distancing. As of April 29, 24 states had required wearing masks when indoors.

Segments less affected by the pandemic include landscaping services, and pest control services. Providers of lawn care and landscaping – “Green” – services performed well in Q1 2021 according to Jobber. Median revenue for Green companies was up 15% in March 2021 compared to the same month in 2020. New work scheduled increased 20% during the same period.

Some pest control services are supplementing their income by providing cleaning and disinfecting services. The US structural pest control market rose 2.9% to an estimated $9.6 billion in 2020 compared to 2019, according to a recent report by Specialty Consultants. The sustained demand growth for pest control services stood in contract to a 3.5% contraction in US GDP because of the pandemic. Total pest control revenues were driven by growth in the residential segment which offset steep declines in key commercial market segments, particularly restaurants and hotels. However, commercial demand expanded in other segments, including grocery stores, food and beverage manufacturing facilities, hospitals, and nursing homes. Amid continued a strong housing market and a rebound in commercial demand, the outlook for pest control services in 2021 is strong, according to investment banking and wealth management firm William Blair.

Services like pest control, landscaping, and janitorial services have medium scores for physical proximity to others as well as for face-to-face discussions, according to the Deloitte rankings.

During the lockdown, waste management services saw a shift in garbage volume from commercial to residential as people worked from home, sheltered in place and avoided public places like restaurants. As more businesses reopen, levels of residential and commercial waste may begin to shift back toward the pre-pandemic balance. Industry insiders suggest waste management companies may be pressured to reduce fees as municipal contracts are renegotiated and renewed. Local governments are expected to look for ways to trim budgets amid falling tax revenue. The third round of stimulus, the $1.9 trillion American Rescue Plan Act – includes $360 billion in aid to state and local governments. Local governments are projected to have a collective budget shortfall of $90 billion in fiscal 2021, according to the National League of Cities (NLC). Waste management and remediation services revenue rose 1.8% in the fourth quarter of 2020 compared to the third quarter, according to the US Census Bureau. Revenue was down 0.5% on a year-over-year basis.

According to the Deloitte study, industries involved in transportation and material moving – which includes waste management – are at medium risk for physical proximity and face-to-face contact.

Segments that will see increased demand as the epidemic subsides are collections agencies and repossession services.  Businesses and individuals who lost income due to shutdowns during the height of the epidemic may struggle to make payments on utilities, loans, credit and medical bills. The CARES Act, the stimulus package passed in December 2020, and the American Rescue Plan Act passed in March provide some safeguards for consumers in terms of payment forbearance. Businesses are also offering temporary forgiveness for late payments. Collections firms are considered part of the business services industry and therefore have medium scores for face-to-face contact and physical proximity to others, according to Deloitte.

May 3, 2021

Coronavirus impacts the agriculture sector largely in demand for food, food exports, biofuels, and farm labor. At the onset of the pandemic and the ensuing lockdown, the industry was challenged by school and restaurant closures and limitations on food service (drive-up or delivery).  As of May 2, the 7-day average for new cases was about 49,000 – more than five times lower than they were in early January. Hospitalizations and deaths are also trending downward. On April 30, all but seven states were mostly open, according to The New York Times. Amid accelerating vaccine rollouts and lower COVID-19 cases, some states have lifted their occupancy limits on restaurants. In March, President Biden signed the $1.9 trillion American Rescue Plan Act which includes $28.6 billion in grant funding for restaurants and bars – called the Restaurant Revitalization Fund. Each restaurant location is eligible for up $5 million in grants based on pandemic-related lost revenue. No restaurant group can receive more than $10 million. The aid is limited to independent restaurants and chains with fewer than 20 locations.

A recent report by Deloitte ranked 20 major industry sectors according to the risks workers face in possibly encountering the coronavirus on the job. Risk factors taken into account include contact with others, face-to-face discussions, exposure to disease or infections, and physical proximity to others. The rankings run from 1-20 with 1 being the lowest risk and 20 being the highest. The agriculture, forestry, fishing, and hunting sector ranked 20th – the lowest risk sector – because 70% of workers have low levels of face-to-face-contact.

Changes in the patterns of grocery buying – fewer shopping visits with larger cartloads – combined with greatly reduced sales to restaurants and schools pressured the supply chain. Changes in food packaging and distribution from commercial and institutional to household consumer created bottlenecks. Outbreaks of COVID-19 caused several large meat processing plants to shut down, and major meat producers warned of coming shortages. In these cases, livestock were diverted to other plants for processing. Temporary closures at meat packing plants led some livestock producers to cull herds. Critics of industrialized factory farming have called for a flatter farming system with fewer chokepoints where ownership and geographic footprint are more diverse.

A number of pandemic-related factors are expected to curb global meat consumption, including restaurant closures, reduced consumer buying power, and general wariness following COVID-19 outbreaks at meat processing plants. Worldwide per-capita meat consumption is estimated to have dropped nearly 2% in 2020, according to the UN.

Since the onset of the pandemic, agricultural exports have gradually improved. For the week ending April 22, export volume for soybeans increased 130% compared to the prior week, and corn was up 35%. Wheat exports declined 7%, rice was down 67%, cotton was off 25%, and beef exports were down 4%.

The US and China signed a trade agreement in January 2020. Starting March 2, 2020, under Phase One of the agreement, Chinese importers of US agricultural products could apply for exemptions to the nation’s tariffs on US goods, which makes US products more affordable. China’s imports of US agricultural products under Phase One were hindered by China’s lockdown early in 2020 but have since roared back to levels that are higher than before the US-China trade war began in 2018 amid China’s early recovery from the COVID-19 outbreak. US agricultural exports to China rose to more than 55 million tons in 2020, accounting for 25% of all farm exports, according to the USDA.

China began relying on more pork imports after a series of African swine fever outbreaks beginning in 2017 led to a significant culling of animals. China’s swine herd has begun to rebound, and China has been buying more US-grown soybeans and corn to feed its hogs. Increasing domestic production and slow import processing could reduce China’s 2021 meat imports by between 20% and 30%, according to Rabobank. China is by far the world’s largest national consumer of pork.

When the global market is flooded with cheap oil, biofuel becomes a more expensive source of energy and demand declines. On the other hand, lower prices for gas and diesel fuel benefit crop producers by reducing machinery operation costs. US fuel ethanol production declined 12% in 2020 compared to 2019, according to the Energy Information Administration. Fuel ethanol production is projected to rise 5.5% in 2021 over the prior year. Diesel prices have been creeping upward in 2021. For the week ended April 23, the spot price for ultra-low sulfur diesel was $1.87 per gallon, up from $1.48 in early January.

The agriculture sector has struggled with shortages of farm labor for years, but quarantines and closed borders may exacerbate the problem. Farmworkers have also been disproportionally affected by coronavirus. Many are undocumented and about 10% are in the US on H-2A visas which allow foreign workers – mostly from Mexico – to do seasonal work in the US. Infection rates in many US agricultural counties have been high as workers live in cramped quarters and some lack PPE. Another risk is the impact of the virus on senior farmers. The average age of farmers in the US is over 65 years, which puts many at higher risk of suffering severe effects if the virus is contracted. The fact that agricultural operations are largely rural does somewhat insulate farmers from contracting the virus.

US net cash farm income is projected to drop by $7.9 billion in 2021 to $128.3 billion, according to a February 2021. The USDA forecast suggests net farm incomes rose by $27.3 billion in 2020. Net cash farm income includes cash receipts from farming as well as farm-related income, such as US government payments. Cash receipts for animals and animal products are expected to rise $8.6 billion (5.2%) in 2021, while crop receipts are projected to increase $11.8 billion (5.8%). Direct government payments are forecast to be up more than 107% in 2020 compared to the prior year. Farm supports, which will total $46.5 billion for 2020, increased due to supplemental and ad hock COVID-19 relief payments. Most of the decline in 2021 net cash farm income is expected to be due to lower direct government payments to farmers.

As exports have been volatile, farmers have relied on various US government stimulus programs – including provisions of the CARES Act and direct aid by the USDA. Payments under the Coronavirus Food Assistance Program (CFAP) totaled more than $23.5 billion for 2020, according to the USDA. The Paycheck Protection Program (PPP) provided nearly $6 billion, according to FAPRI. Farmers also received assistance from Market Facilitation Program (MFP) payments. FAPRI estimates if programs such as CFAP, PPP, and MFP are not continued in 2021, net farm incomes could decline by $16 billion and net cash incomes would drop by almost as much. In late 2020, former President Trump signed a $900 billion stimulus bill that includes $13 billion in agricultural aid. The bill also revived PPP and includes $284 billion in funding for Small Business Administration (SBA) loans. The most recent round of PPP lets eligible borrowers get a second draw loan. It also simplifies loan forgiveness for loans under $150,000 and makes forgiven loans tax deductible.

The American Rescue Plan Act includes more than $10 billion for programs aimed at strengthening US agriculture and the food supply chain, according to analysis by the American Farm Bureau Federation. The bill includes $3.6 billion – or 35% of total agriculture appropriations – for pandemic-related food purchase and distribution. About $4 billion – or nearly 40% of the total – will provide debt forgiveness to socially disadvantaged farmers.

The Farmers to Families Food Box Program funded farmers to provide boxes of meats, dairy, and produce to families in need during the pandemic. Citing inefficiencies and high costs, the USDA is winding down the Farmers to Families Food Box program by the end of April 2021. It is being replaced by a new USDA food box program that will provide fresh produce through The Emergency Food Assistance Program (TEFAP) and be distributed to those in need by local foodbanks.

May 3, 2021

The construction sector has been less affected in the short-term as existing projects progress, potentially at a slower pace due to difficulties in some areas to secure materials. The sector is expected to see a slowdown in new projects as businesses assess the coronavirus impact on their revenue and their ability to invest in capital projects.

All states have taken steps toward reopening. As of May 2, the 7-day average for new cases was about 49,000 – more than five times lower than they were in early January. Hospitalizations and deaths are also trending downward. On April 30, all but seven states were mostly open, according to The New York Times. The shutdown caused a large drop in construction job losses – more than 800,000 construction jobs were shed in April 2020. The construction sector added 110,000 jobs in March 2021. The gains were broad-based across all construction subsectors, but residential and nonresidential specialty trade contractors, and heavy and civil engineering construction saw the strongest growth. Overall, sector employment in March was down 1.2% on a year-over-year basis. As of April 23, 2021, construction job postings on Indeed were 60.3% higher than they were on February 1, 2020 – Indeed’s pre-pandemic baseline.

The Federal Reserve has lowered interest rates in efforts to spur investment in construction, real estate and equipment. Construction firms are reviewing their contracts with customers regarding responsibility for cost overruns and project delays.

The pandemic has driven up prices for many types of construction materials including lumber and steel. In March 2021, US producer prices for softwood lumber were more 92% higher than they were a year earlier. Iron and steel mill producer prices rose more than 39% during the same period. Prices are rising because factories that slowed production earlier in the pandemic still haven’t ramped up to full capacity. There are still lingering kinks in global supply chains that have slowed the movement of goods. Some industry insiders worry that if higher materials prices persist, it could hinder the anticipated recovery in construction activity in the second half of 2021. If costs are too high, developers may postpone new construction projects until prices come back down.

Demand for some types of construction, such as retail, hospitality, and entertainment venues, has fallen as hard-hit industries take time to recover from lost revenue. Retailers and other businesses that fail or reduce their number of locations will leave a glut of commercial space unoccupied. This could negatively affect demand for new commercial space but will raise demand for commercial renovations as new or expanding businesses enter those spaces. However, some experts believe the trend of teleworking that began during the quarantine will remain and have long-term, negative effects on demand for office and commercial real estate in central-city locations.

The construction industry doesn’t have the luxury of allowing most employees to work from home. So, firms have stressed the importance of hygiene, social distancing, and staying home if sick to keep their employees and subcontractors on the job.  Firms are also cross-training employees, when possible, to take over functions for sick coworkers. Increased availability of vaccines will help make construction sites safer. on April 19, all Americans over age 16 became eligible to be vaccinated. As of May 3, more than 100 million Americans were fully vaccinated or 31% of the US population.

In a survey of contractors released in January by the Associated General Contractors of America (AGC), 78% reported project delays or disruptions because of the coronavirus. Only 35% said they expected their firm’s headcount to increase in 2021. Nearly two-thirds of contractors said projects are taking longer than they anticipated, and more than half reported costs have been higher than they estimated. Among specific construction segments, contractors are most pessimistic about retail, lodging, and private office construction.

Construction firms are eligible to apply for low-interest Economic Injury Disaster Loans (EIDL).  In late 2020, former President Trump signed a $900 billion stimulus bill that includes $284 billion in fresh funding for the Paycheck Protection Program (PPP) to provide Small Business Administration (SBA) loans. The most recent round of PPP lets eligible borrowers get a second draw loan. It also simplifies loan forgiveness for loans under $150,000 and makes forgiven loans tax deductible. In March, President Biden signed the $1.9 trillion American Rescue Plan Act which includes an additional $7.25 billion funding for PPP. The PPP is set to wind down on May 31, but funding could run out before then. As of mid-April, the program had $44 billion in funding left, according to the SBA. The American Rescue Plan also allocates $15 billion for targeted EIDL advance payments for businesses in low-income communities that have no more than 300 employees and have suffered financial losses of more than 30%.

Builder confidence hit a historic low in April 2020 as the epidemic took hold in the US, but then gradually built steam amid strong demand for new single-family homes and low mortgage interest rates. The National Association of Home Builders / Wells Fargo Housing Market Index (HMI) was 30 in April 2020, an all-time low. It then rose every month, hitting new all-time highs in September (83), October (85), and November (90). Any reading above 50 is an indicator of a positive market. The HMI in April 2021 was 83 as strong buyer demand offset concerns of rising construction costs, questions about housing affordability, and a lack of lots and inventory. In late April 2021, the NAHB noted that rising lumber prices over the last 12 months have added more than $35,000 to the price of the average new single-family home.

Construction spending in March 2021 increased 5.3% compared to the same month a year earlier. Residential spending increased 23.3% and nonresidential fell 7.4%. Of all nonresidential construction subsectors, only two saw spending growth in March: public safety (+3.7) and sewage and waste disposal (+1.1). The weakest segments for nonresidential spending were lodging (-23.3%), amusement and recreation (-13.8%), conservation and development (-12.6), and highway and street (-10.9%).

The construction sector’s comeback since the onset of the pandemic has been fueled mostly by a strong residential market while the nonresidential building and infrastructure segments have been weak, according to the AGC. The pandemic has reduced demand for office and retail construction and budget cuts by state and local governments are expected to reduce construction spending for infrastructure projects. However, the American Rescue Plan Act includes $360 billion for state and local governments, with $10 billion specifically for infrastructure projects.

A recent report by Deloitte ranked 20 major industry sectors according to the risks workers face in possibly encountering the coronavirus on the job. Risk factors taken into account include contact with others, face-to-face discussions, exposure to disease or infections, and physical proximity to others. The rankings run from 1-20 with 1 being the lowest risk and 20 being the highest. The construction sector ranked 9th as workers have medium scores for contact with others, and medium-to-low scores for physical proximity to others.

May 3, 2021

While lenders are at risk of clients missing payments and defaulting on loans, they have opportunities to extend credit to borrowers and ease temporary cash flow worries resulting from the coronavirus pandemic. In the first half of 2020, Citigroup, JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America, and Wells Fargo set aside a combined $35 billion to brace for the potential of consumer and business loan losses. In the fourth quarter of 2020, five of the banks (Citigroup, JPMorgan Chase, Morgan Stanley, Bank of America, and Wells Fargo) cut their cash reserves set aside for loan losses by a combined $6 billion. In first quarter of 2021, Citigroup, JPMorgan Chase, Bank of America, and Wells Fargo further trimmed reserves by nearly $13 billion amid stronger commercial and household balance sheets, vaccination successes, and government stimulus. The five biggest banks – Citigroup, JPMorgan Chase, Goldman Sachs, and Morgan Stanley – reported higher first-quarter revenue from equities trading driven by the flood of new retail trading, and investment banking fees.

A robust housing market has boosted mortgage lending demand, but credit card and auto lending have been slow. Forbearances have so far staved off widespread defaults and losses. A fresh round of stimulus relief was passed in December. The $900 billion COVID-19 Economic Stimulus Relief Act included $600 stimulus checks per person, including children. The package also extends unemployment benefits of up to $300 per week. The bill also reauthorized the Paycheck Protection Program (PPP). The PPP extension includes $284 billion in funding for Small Business Administration (SBA) loans. The most recent round of PPP lets eligible borrowers get a second draw loan. It also simplifies loan forgiveness for loans under $150,000 and makes forgiven loans tax deductible.

In mid-March, President Biden signed the $1.9 trillion American Rescue Plan Act which includes $1,400 stimulus checks for most Americans. The bill also extends the $300 supplemental unemployment benefit through August 29, 2021. The plan also provides an additional $7.25 billion funding for PPP. It also allocates $15 billion for targeted EIDL advance payments for businesses in low-income communities that have no more than 300 employees and have suffered financial losses of more than 30%.

Insurers have seen an influx of business customers attempting to make business interruption claims because the coronavirus outbreak and quarantines affected their ability to conduct business. Securities brokers, investment advisors and portfolio managers are all riding the stock market waves and dealing with clients’ concerns over volatility, buyers taking the chance on undercut stocks, and increasing concerns about inflation as the economy heats up. Earlier in the pandemic, decreased business and consumer spending on travel, dining out, and entertainment hurt credit card companies’ revenues. However, government stimulus and the huge uptick in consumer ecommerce spending have since improved credit card companies’ fortunes. Finance and insurance sector employment saw steady monthly gains between April 2020 and January 2021, then dipped slightly in February. Sector employment rose in March 2021 and was slightly above pre-pandemic levels of February 2020.

During the quarantine and business shutdowns, income for many businesses and households declined, while expenses remained or even increased. Operating margins for businesses have tightened and cash reserves drew down. Household budgets have tightened, especially for hourly and commission-based workers that have experienced cuts in their workweek and sales opportunities. A rise in subprime borrowers who have fallen behind on their car payments could signal some consumers are under increased financial stress due to the pandemic, according to The Wall Street Journal. In February 2021, nearly 11% of subprime borrowers with outstanding auto loans or leases were more than 60 days past due, according to TransUnion. February marked the sixth straight month of monthly increases. Lenders could face repossessions of vehicles and equipment, and foreclosures on properties.

Customers that miss payments or default will suffer damaged credit ratings if lenders and the credit bureaus don’t make allowances. The Consumer Financial Protection Bureau recommends that lenders not report consumers as delinquent if they seek mortgage relief. Some lenders are reporting late payments to the credit bureaus which the bureaus are using to calculate consumers’ credit ratings. The CARES Act requires some companies that provide federally backed mortgages and student loans to offer payment deferrals. Other lenders have also offered consumers deferrals. In some cases, deferred payments have been erroneously reported as late to credit bureaus, which has hurt consumers’ credit ratings and loan affordability, according to Consumer Reports. Complaints to the Consumer Financial Protection Bureau about credit report errors have hit new heights during the pandemic, according to the US Public Interest Research Group, a consumer advocacy organization.

Consumer debt levels rose in February, according to the Federal Reserve. Revolving debt, which is mostly credit card debt, increased 10.1%. Nonrevolving debt such as mortgages and auto lending was up 7.3%. February’s rise was only the second time monthly revolving consumer debt has risen since the onset of the pandemic. Consumers’ willingness to spend with their credit cards may signal growing confidence in the economy. In a recent forecast, TransUnion said it expects consumer credit lending to rebound to pre-pandemic levels in the second quarter of 2021 as lenders are more comfortable with issuing debt and consumers are less anxious about taking on debt.

To assist customers who are struggling, some lenders and credit card issuers are waiving late fees, return check fees, and interest charges, allowing skipped payments, reducing interest rates, and extending credit limits. Financial firms are working with customers one-on-one to determine the appropriate relief for their account. Lenders may also extend lines of credit to fundamentally stable customers. The Federal Reserve cut interest rates in March 2020, which spurred a rush on mortgage refinancing and demand for title insurers.

The direct payments to consumers and further extensions of federal unemployment benefits included in the American Rescue Plan Act could reduce demand for short-term payday loans. The new stimulus bill also expands an existing tax credit that will give most families with children a monthly check of $300 per child. The benefit is set to expire after a year, but the Democrats aim to make it permanent. Such a financial safety net has the potential to lift many families with children out of poverty, but may also reduce demand for payday loans.

To hedge against large payouts, travel insurers generally excluded coronavirus in policies sold after mid-January 2020, deeming it a foreseeable event. However, some travel insurers provided benefits related to medical emergencies and evacuations.

Medical insurers are seeing a mix of activity as some customers seek testing, treatment for coronavirus, and vaccinations. Wellness exams and elective surgeries were cancelled or postponed during the quarantine. As individual states reopen, medical appointments and procedures resumed. As of May 2, the 7-day average for new cases was about 49,000 – more than five times lower than they were in early January. Hospitalizations and deaths are also trending downward. On April 30, all but seven states were mostly open, according to The New York Times.

Deaths caused by COVID-19 in 2020 drove the life insurance industry’s largest year-over-year rise in direct and net death benefits in 24 years, according to S&P Global Market Intelligence. In 2020, aggregate net benefits across all lines of business (whole life, term life, and universal life) rose more than 15% over 2019, reaching $87.5 billion.

The property and casualty (P/C) insurance industry is working with a coalition of industries on a new relief fund, the COVID-19 Business and Employee Continuity and Recovery Fund created for the Treasury under the CARES Act. The industry is trying to avoid states creating insurance regulations that would force insurers to pay business interruption losses resulting from the coronavirus epidemic even if their policies exclude communicable diseases.

As of late April, more than 10,000 COVID-19-related insurance lawsuits have been filed in the US, according to a litigation tracker maintained by law firm Hunton Andrews Kurth. Of cases where courts have ruled, most have been dismissed. The vast majority of business interruption lawsuits will be matters for state rather than federal courts, according to The National Law Review. It is expected to be a lengthy process before any state supreme court issues a binding procedural determination of that state’s view of coronavirus-related business interruption claims. It will take even longer for a majority view to materialize among all state supreme courts.

Life insurers are making changes to how they write policies during the pandemic. The inability to obtain medical exams led some life insurers to deny policies to people age 70 or older. Life insurers relied more heavily on data from electronic health records, prescription databases, medical billing claims, and motor vehicle reports when writing policies, since medical exams were not feasible. Short term policies are available but insurers are cutting back on long term policies.

Use of online banking is expected to increase as consumers avoid public spaces, like banks. Some banks are hiring technology and information security personnel and others are hiring mortgage modification lenders. As retail banking and credit unions reopen, industry experts expect significant changes in policies that define social distancing protocols. In markets with heavy foot traffic that were hard-hit by the epidemic, facilities will likely be retrofitted or remodeled to ensure customers and workers can maintain safe distancing.

The CARES Act allows homeowners with federally backed mortgages, that can claim a hardship, to apply for a six-month forbearance. Concern regarding a potential mortgage industry crash could trigger another round of stiff lending regulation, aimed at nonbank mortgage lenders. As of April 27, 2.33 million homeowners remained in active forbearance plans, according to mortgage technology and data firm Black Knight. More than 200,000 forbearance plans expire at the end of April 2021. Some of those borrowers may exit their plans and others may extend their participation in available forbearance plans.

A recent report by Deloitte ranked 20 major industry sectors according to the risks workers face in possibly encountering the coronavirus on the job. Risk factors taken into account include contact with others, face-to-face discussions, exposure to disease or infections, and physical proximity to others. The rankings run from 1-20 with 1 being the lowest risk and 20 being the highest. The finance and insurance sector ranked 11th as more than half of workers (including office, administration, and sales positions) have medium scores for face-to-face discussions and physical proximity. Other roles in the sector – including management, business and financial operations, and technical positions have lower levels of physical contact.

May 3, 2021

The healthcare sector has faced a myriad of challenges including increased demand for coronavirus tests and speed of lab processing, spikes in demand for beds and ventilation equipment, shifts in handling patient care, shortages of masks and other medical supplies, greater facility sanitation to prevent virus spread, inadequate staffing, and appointment cancellations.

Hope for ending the pandemic intensified in December as two vaccines began being distributed. Both of the vaccines (one developed jointly by Pfizer and Germany-based biotech firm BioNTech, and the other developed by Moderna) proved more than 90% effective in clinical trials, and require two doses to achieve full effectiveness. In late February a third single-shot vaccine developed by Johnson & Johnson’s Janssen Pharmaceutical division received emergency use authorization by the USDA and began being distributed. As of May 3, 2021, more than 100 million Americans were fully vaccinated or about 31% of the US population, according to the Centers for Disease Control and Prevention (CDC). The CDC initially issued phased guidelines for prioritizing vaccine distribution but on April 19, all Americans over age 16 became eligible to be vaccinated.

Two other vaccines have completed phase 3 clinical trials – one from Novamax, and another by a partnership between AstraZeneca and Oxford University – and both are expected to apply for emergency use authorization from the FDA. The AstraZeneca vaccine has been approved in many places outside the US and is being widely deployed in Europe, Asia, and Latin America. Optimism on the rollout of vaccines has been somewhat tempered by the emergence of mutated coronavirus variants than are more contagious than the original virus and may be more resistant to vaccines. Some health experts suggest vaccine administration is in a race against the spread of the new virus variants. To accelerate the pace of vaccinations, in February the Biden administration launched a pilot program to ship vaccines directly to Walgreens, CVS, and other retailers. The program, which is administered by the Centers for Disease Control and Prevention (CDC), began with the government shipping about 1 million doses per week to about 6,500 pharmacies. The program has since been expanded to include more pharmacy locations in more states.

Supplies of tests are ramping up as pharmaceutical manufacturers boost production. A spike in the number of severely affected patients, who require hospital beds and ventilators, overwhelmed some hospital systems. Hospitals, physicians’ offices, medical clinics and other healthcare providers saw an increase in patient volume and related revenue for coronavirus testing, but experienced a loss of revenue related to postponed wellness appointments and elective procedures which are more profitable than routine care.

The healthcare industry is continually issued updated guidance from the Centers for Disease Control (CDC), Food and Drug Administration (FDA) and Centers for Medicare & Medicaid Services (CMS). Healthcare companies are also developing and implementing internal policies for detection, reporting, care, and sanitization to prevent spread.

All states have taken steps toward reopening. As individual states reopen, medical appointments and procedures have resumed. Social distancing measures for office visits include spacing office furniture further apart, mandatory masks, and patients waiting in their cars instead of waiting rooms. Daily new COVID-19 cases began rising rapidly in the fall and winter. In early January 2021, the seven-day average for daily new cases were sometimes as many as 250,000.

The large increase in new cases overwhelmed some hospitals, especially smaller ones in rural communities. Small hospitals typically transfer patients with complicated medical conditions to large hospitals in nearby urban areas but as new cases rose, urban hospitals often didn’t have room, according to the American Hospital Association. In other cases, large hospitals were able to ramp up bed space quickly but were understaffed as medical personnel were increasingly sick with COVID-19, were in quarantine, or were on leave caring for an ill family member. As of May 2, the 7-day average for new cases was about 49,000 – more than five times lower than they were in early January. Hospitalizations and deaths are also trending downward. On April 30, all but seven states were mostly open, according to The New York Times. Health researchers think pooled testing can improve testing efficiency. With pooled testing, tests are done in small batches. If the pooled test comes back negative, everyone in the batch is negative. If the pooled test is positive, unused portions of the original samples are retested individually. Pool testing is thought to be of the most use in areas with low rates of infection where most pooled tests would come back negative, thereby getting quicker results while conserving resources. The efficiency of batch testing makes it a useful tool for reopening schools and workplaces.

Healthcare providers with senior populations such as nursing homes, assisted living facilities, and continuing care and retirement communities (CCRC) are at high risk of elevated mortality rates due to high concentrations of patients with weakened immune systems and underlying conditions that can be exacerbated by respiratory illnesses like coronavirus. However, older adults who live in crowded settings (including nursing homes and assisted living facilities) were included in Phase 1a of vaccine rollouts. As of April 23, nearly eight million vaccine doses had been administered in long-term care facilities. On March 10, the Centers for Medicare and Medicaid Services accompanied by comments from the CDC, released updated guidelines for nursing home visits, allowing guests to visit with residents indoors. However, the guidelines note that outdoor visits are still preferable.

Physicians, nurses, mental healthcare practitioners, home healthcare services, pharmacists, and other healthcare providers are using telehealth to connect with patients at home over video or phone to assess their conditions while limiting their exposure to the public. In some cases, medical equipment at the patient’s home can be accessed remotely to monitor their vitals.

The FDA gave the greenlight for healthcare providers to treat severe coronavirus cases with medicines already on the market that suppress the immune system and prevent it from attacking the respiratory system. Respiratory distress from the lungs filling with fluid and subsequent lack of oxygen to the blood system is the major cause of death in coronavirus patients. The healthcare industry is waiting for medications designed specifically to treat the virus but the development, testing and approval process is lengthy. Stopgap medications include remdesivir, dexamethasone, and monoclonal antibodies. Some drugs in development have shown promise in treating COVID-19. GlaxoSmithKline in partnership with Vir biotechnology have developed an antibody treatment which showed an 85% reduction is hospitalization or death in initial clinical trials. The companies are seeking emergency use authorization in the US and in other countries. Ridgeback Biotherapeutics and Merck have developed an experimental antiviral oral medication called molnupiravir which in a preliminary study showed effectiveness in preventing the novel coronavirus from replicating itself in the body.

In late-December 2020, former President Trump signed a new $900 billion COVID-19 stimulus package. The bill includes $20 billion for vaccine purchases, $9 billion for vaccine distribution, and $22 billion to help states with COVID-19 testing, contact tracing, and other mitigation efforts. The legislation also contains a measure that will ban “surprise” medical billing. The new law, which would take effect at the beginning of 2022, aims to prevent consumers from receiving unexpected bills for care that’s outside their insurance network. The law requires fair payment rates to be negotiated between providers and insurers by an arbitrator who must take into account local, in-network rates.

In mid-March, President Biden signed the $1.9 trillion American Rescue Plan Act which includes several key healthcare provisions. The bill has $123 billion in funding to COVID-19-related policy, including $50 billion for testing and contact tracing, $16 billion for vaccine distribution and supply chain enhancements, and $10 billion for use of the Defense Production Act to distribute medical supplies. The bill also increases subsidies for the Affordable Care Act (ACA) for nearly everyone who buys their own healthcare coverage. The expansion also offers subsidies to individuals with incomes too high to have participated previously. Low-income people who live in states that have not opted to expand Medicaid via the ACA will not qualify for the subsidy increases.

To ensure poorer countries have access to vaccines that prove effective, the World Health Organization (WHO) has set up the Covax initiative which pools money and vaccine development efforts to ensure poorer nations have access if an effective vaccine is developed. Nearly 80 wealthy countries have signed on to help fund Covax. Wealthy nations would have to pay full price for a vaccine, in part to help subsidize poorer ones that cannot afford to vaccinate their entire populations. The Biden administration has pledged to work closely with the global community – including the WHO and Covax – to ensure developing countries have access to vaccines. Covax aims to deliver about two billion doses in more than 90 low- and middle-income countries in 2021, according to The New York Times. In late February, Ghana became the first country to receive vaccine from Covax. In April 2021, the World Health Organization (WHO) Foundation along with the Bill & Melinda Gates Foundation announced the launching of a global mass fundraising campaign to help Covax, the international effort to distribute COVID-19 vaccines to low-income countries. The “Go Give One” drive aims to raise billions of dollars in small donations with the help of corporations, religious organizations, and world leaders. Covax was initially funded by the WHO, UNICEF, and other global health agencies. The Go Give One campaign will cooperate with healthcare systems and mass vaccination sites to advertise the program. The campaign also aims to work with corporations to help them promote Go Give One to their employees and customers through corporate social media platforms.

The global healthcare sector is a major target of cybercrime and hacking. Experts expect attempts to increase during the pandemic as healthcare systems are stretched thin. Ransomware attackers have accessed patient medical records and not only gone after healthcare companies but the patients themselves, threatening to expose their private medical data. In the final three months of 2020, as US COVID-19 cases rose dramatically, the healthcare industry suffered more ransomware attacks than any other industry, according to Coveware Inc, a firm that aids victims in negotiating ransoms.

Incidence of depression, anxiety, stress and anger related to social distancing and job losses are on the rise and are driving fears that affected people will commit suicide, homicide, domestic violence, turn to drugs or alcohol or commit crimes. The mental health and substance abuse segment of the healthcare industry is seeing increased demand for services and is offering telehealth options for counseling remotely. Government resources dedicated to fighting opioid addiction have been reallocated during the coronavirus epidemic.

The CARES Act allows hospitals to receive an advance on expected Medicare reimbursements and provides $100 million to reimburse eligible healthcare providers for expenses or lost revenue directly related to COVID-19. Despite the cash infusion, more than 20 US hospitals closed down in 2020, according to Becker’s Hospital Review. Higher costs from the COVID-19 pandemic combined with significant drops in surgeries and outpatient treatments have put a huge strain on hospital finances. US hospitals are expected to lose between $53 billion and $122 billion in revenue in 2021, down between 4% and 10% compared to pre-pandemic levels, according to consulting firm Kaufman Hall for the American Hospital Association. In addition to higher costs associated with treating COVID-19 patients, hospitals may miss out on revenue as more patients skip routine care due to virus concerns. Nearly 40% of Americans delayed healthcare visits during the pandemic, according to a survey by Insure.com.

A recent report by Deloitte ranked 20 major industry sectors according to the risks workers face in possibly encountering the coronavirus on the job. Risk factors taken into account include contact with others, face-to-face discussions, exposure to disease or infections, and physical proximity to others. The rankings run from 1-20 with 1 being the lowest risk and 20 being the highest. The healthcare and social assistance sector ranked as the highest-risk industry group due to 61% of the workforce having high levels of physical contact with others and very high scores for exposure to disease or infections.

May 3, 2021

Coronavirus has affected the information sector in unique ways. Movie theaters in all but a handful of states have begun to reopen but were closed for months. This cut profit to the bone in an industry with already thin margins. Major theater chains AMC, Regal Cinemas, and Cinemark began opening some of their locations in August. However, there are not very many high-profile films to attract theatergoers. Some chains require customers to wear masks, others will only require masks if mandated by state or local regulations. To promote social distancing, theaters are operating at a fraction of their total capacity. In October, Cineworld – the parent company of Regal Cinemas – closed more than 660 of its theaters in the US and the UK. The company made the decision to close temporarily as studios continue to push back the release dates of blockbuster films and audiences have been slow to return. Cineworld began phased reopenings with limited theater capacity in April 2021.

The rollout of vaccine distribution in December 2020 has provided hope that by the second half of 2021 the movie industry might be able to return to some semblance of normalcy. In early March, New York City allowed cinemas to reopen at 25% capacity. Los Angeles theaters have also reopened with capacity limits.

Continued success with vaccine distribution is key to full reopening of theaters, sporting events, and other forms of in-person entertainment. As of May 3, 2021, more than 100 million Americans were fully vaccinated or about 31% of the US population, according to the Centers for Disease Control and Prevention (CDC). The CDC initially issued phased guidelines for prioritizing vaccine distribution but on April 19, all Americans over age 16 became eligible to be vaccinated. Optimism on the rollout of vaccines has been somewhat tempered by the emergence of mutated coronavirus variants than are more contagious than the original virus and may be more resistant to vaccines. Some health experts suggest vaccine administration is in a race against the spread of the new virus variants.

As of May 2, the 7-day average for new cases was about 49,000 – more than five times lower than they were in early January. Hospitalizations and deaths are also trending downward. On April 30, all but seven states were mostly open, according to The New York Times.

TV and game shows that are continuing to film are doing so mostly without live studio audiences. Some production and broadcasting of live events, such as collegiate and professional sports, have resumed but with fewer if any fans in the stands. Some news and talk programs have returned to studios with in-person guests and much smaller, socially distanced live studio audiences. After the outbreak and concerns over public crowds have subsided, there could be a rush to see movies, concerts, sporting competitions, and other televised events, as quarantined consumers are eager to leave home, be entertained and socialize.

Persistent outbreak conditions in California have complicated the state’s efforts to resume entertainment production activities. The Los Angeles movie and TV industry had restarted productions then shut back down in early January as a wave of new cases threatened to overwhelm hospitals. Productions have since resumed. Through the Industry-Wide Labor Management Safety Committee Task Force, various unions that represent television and film production personnel have created a set of guidelines to keep sets as safe as possible. The strategies include daily temperature checks, extensive testing, masks and other PPE for all cast and crew not on camera, and cleaning protocols.

Most professional sports including NASCAR, professional golf, the National Hockey League, and the NFL, the NBA, WNBA, and Major League Baseball had games and events in 2020. Most returned without live spectators. Some NFL games allowed spectators. Major League Baseball’s (MLB) 2021 season opened on April 1. Fans will be allowed in some ballparks, but there are significant variations in capacity limitations based on state and local regulations, COVID-19 spread, and vaccination rates, according to MLB.

Subscription programming services such as Hulu, Netflix, and Disney+ are gaining subscribers at the expense of cable and satellite pay TV services. In 2020, about 6 million pay TV subscribers in North America cut the cord, according to Digital TV Research. However, the rate of cord-cutting is expected to slow in the coming years. Between, 2020 and 2026 pay TV services are expected to lose about 16 million North America subscribers. Satellite will fare the worst with a loss of 7.5 million, followed by digital cable TV which is expected to shed about 5 million. Internet protocol (IPTV) TV subscriptions are to drop by about 3.4 million. Consumers are cutting the cord on their pay TV services citing high prices compared to streaming alternatives. To stem their losses, pay TV providers have shifted focus to their more lucrative internet offerings.

In the earlier days of the pandemic, news organizations and magazine publishers, large and small, dropped their paywalls to allow non-subscribers to access coronavirus-related coverage. More recently, news publishers have begun reinstating their paywalls as they became savvier about designing offers that attract new subscribers and as advertising dollars became scarcer.

With more people working from home, use of virtual private networks (VPN) to access company computer systems has risen significantly. Data centers are experiencing a surge in traffic as more people access data remotely. They are also encouraging customers to use the data center’s in-house technical staff to manage hands-on work with servers and systems, rather than risk infected clients entering the data center. Due to more people working remotely, incidence of phishing emails, ransomware and hacks have risen. Cloud-based services are scaling up defenses. Cloud services are forecast to see greater IT investment as the economy recovers and businesses explore more remote-friendly work platforms for their employees. Global end-user spending on public cloud services is expected to increase more than 18% in 2021, according to Gartner.

As states reopen their economies, libraries will open as well with local officials providing guidelines for proper distancing and other precautions.

Radio and TV stations are keeping listeners and viewers informed on coronavirus updates, closures, vaccine distribution, and local resources. Field crews are assessing situations and taking precautions when performing interviews and covering events outside the studio.  As more states have reopened and eased restrictions, local TV and radio news have kept viewers and listeners informed about rapidly changing regulations about reopening schedules, what types of businesses are reopening, mask-wearing requirements, and vaccination information.

The information sector shed 279,000 jobs in April, 85% of which were in the motion picture and sound recording industries, according to the Bureau of Labor Statistics. The sector lost another 39,000 jobs in May, with more than a quarter of the losses coming from the motion picture and sound recording industries. Sector employment has continued to gradually recover. Much of the information sector proved resilient because employees can work from home or use social distancing in the workplace. In March 2021, sector employment was down nearly 8% compared to a year earlier.

Local and national television programming is experiencing a jump in viewership as more people are home and tuning in for entertainment and coronavirus updates. However, local advertising spending has declined as many independent and small businesses cut back on nonessential expenses, like advertising. National and cable broadcasters experienced drops in advertising spending related to broadcast events, like college and professional sporting competition, although some of that revenue may bounce back as sports broadcasts have resumed. Total TV advertising revenue in 2020 fell nearly 9% to $66 billion, according to media research firm Kantar. National TV ad sales dropped 13.3% to $50 billion. Local TV ad sales were a bright spot, rising 8.3% to $16 billion, driven mostly by record spending for political advertising. National TV ad spending grew 13% in March 2021, but that was not enough to offset the 17% decline seen in March 2020. However, industry watchers suggest strong ad-spending activity in March is a good bellwether for TV networks as they plan their 2021-2022 upfront ad season, according to MediaPost. Total US TV ad spending is expected to increase 9.3% to $62.5 billion in 2021. National TV ad sales will rise 6.6% to $42.6 billion while local TV advertising will be up 16% and reach $19.9 billion according to ad agency GroupM.

Sales of books have skyrocketed, especially online, as consumers look for entertainment at home. Book publishers are moving promotions for new books online because traditional promotion in bookstores and libraries, as well as book tours, have been canceled.

A recent report by Deloitte ranked 20 major industry sectors according to the risks workers face in possibly encountering the coronavirus on the job. Risk factors taken into account include contact with others, face-to-face discussions, exposure to disease or infections, and physical proximity to others. The rankings run from 1-20 with 1 being the lowest risk and 20 being the highest. The Information sector ranked 14th as about 40% of industry workers (management, and business, financial, and technical roles), have low scores for contact and/or proximity with others. The remaining segment of the information workforce (including art, design, media, sales, and office and administrative support) have medium scores for contact with others.

May 3, 2021

The effects of coronavirus on the leisure and hospitality industry are largely related to travel restrictions and cancellations, and reduced foot traffic due to social distancing. Hotels, airlines, resorts, cruises, restaurants and bars, theaters, amusement parks, convention centers and sports arenas are all suffering from revenue losses as consumers and businesses avoid travel, events, and conferences.

All states have taken steps toward reopening. After the pandemic subsides, the leisure and hospitality sector hopes to see a surge in demand as consumers become more confident about spending time in public and traveling. Amid the lockdown, some companies and venues refunded tickets, waived cancellation fees or issued credits. Hospitality and leisure venues closed to reduce operating costs, reserve cash, and take time to sanitize their properties and equipment.

Flights within and outside of the country have been limited. Aside from airlines and hotels, less travel also hurts airport operations, food service providers, ridesharing, and taxi and limo services.

There were glimmers of air travel recovery during the summer but as 2020 neared its close worldwide spikes in new cases and tighter travel restrictions put even more downward pressure on travel demand. However, as of May 2, the 7-day average for new cases was about 49,000 – more than five times lower than they were in early January. Hospitalizations and deaths are also trending downward. On April 30, all but seven states were mostly open, according to The New York Times. The rollout of vaccine distribution in December 2020 has provided hope that the leisure and hospitality sector might begin returning to normal in 2021. As of May 3, 2021, more than 100 million Americans were fully vaccinated or about 31% of the US population, according to the Centers for Disease Control and Prevention (CDC). The CDC initially issued phased guidelines for prioritizing vaccine distribution but on April 19, all Americans over age 16 became eligible to be vaccinated. Optimism on the rollout of vaccines has been tempered by the emergence of mutated coronavirus variants than are more contagious than the original virus and may be more resistant to vaccines. Some health experts suggest vaccine administration is in a race against the spread of the new virus variants.

As states reopen, so too have some restaurant dining rooms. To remain as safe as possible, distancing guidelines for restaurants include positioning tables farther apart, hand sanitizing stations, disposable menus, and operating at reduced capacity – in some cases 25%-50%. Amid accelerating vaccine rollouts and lower COVID-19 cases, some states have lifted their occupancy limits on restaurants. While more restaurants are open, it remains to be seen when customers will be ready to visit restaurants in pre-pandemic numbers. Some states have also moved to reopen bars under similar distancing guidelines that apply to restaurants.

In March, President Biden signed the $1.9 trillion American Rescue Plan Act which includes $28.6 billion in grant funding for restaurants and bars – called the Restaurant Revitalization Fund. Each restaurant location is eligible for up $5 million in grants based on pandemic-related lost revenue. No restaurant group can receive more than $10 million. The aid is limited to independent restaurants and chains with fewer than 20 locations.

Many workers in the sector are part-time and paid hourly. Restaurant and bar workers in particular rely on tips that can’t materialize when traffic slows or establishments shutter. The leisure and hospitality sector lost more than 7.2 million jobs in April, according to the Bureau of Labor Statistics. Foodservices and drinking places accounted for 70% of the jobs lost. All segments within the sector have since rebounded, but not completely. As a whole, leisure and hospitality employment in March was still more than 14% below pre-pandemic levels. In the arts, entertainment and recreation segment, February employment was off by 25% compared to the same month a year earlier. Accommodation employment was down 27% during the same period, and food services and drinking places employment was off 10%.

The sector benefited from federal funding and employment tax breaks that helped businesses weather the downturn without laying off workers. A fresh round of stimulus relief was passed in December. The $900 billion COVID-19 Economic Stimulus Relief Act included reauthorized the Paycheck Protection Program (PPP). The PPP extension includes $284 billion in funding for Small Business Administration (SBA) loans. The second round of PPP lets eligible borrowers get a second draw loan. It also simplifies loan forgiveness for loans under $150,000 and makes forgiven loans tax deductible. The American Rescue Plan Act extends the $300 supplemental unemployment benefit through August 29, 2021. The plan also provides an additional $7.25 billion funding for PPP. The PPP is set to wind down on May 31, but funding could run out before then. As of mid-April, the program had $44 billion in funding left, according to the SBA. It also allocates $15 billion for targeted EIDL advance payments for businesses in low-income communities that have no more than 300 employees and have suffered financial losses of more than 30%.

Businesses in this sector may run on very thin profit margins and require additional access to capital to maintain operations, pay suppliers, and meet payroll obligations. These firms may also struggle to pay creditors on schedule until revenue returns.

By late April 2021, nightly hotel rates were just 5% below year-earlier levels, according to travel booking technology firm Koddi. Accommodations near high-demand destinations, including beaches and national parks were above pre-pandemic levels in April, according to Koddi. Demand for accommodations is expected to keep building over the summer as bookings for 31 days out began to surpass historic levels in April and cancellations were dropping.

Nightclubs have moved to online platforms, like Zoom, to hold virtual club experiences. They sell tickets online for access and may have dress codes. The clubs are hiring celebrity guest DJs to boost interest. Nightclubs are also getting corporate sponsors to pay for and promote virtual events. Industry watchers expect nightclubs to be among the last businesses to reopen and the nightlife industry might not fully return to normal until a vaccine is available. Some nightclubs with outdoor facilities have announced plans to reopen on a limited basis.

A recent report by Deloitte ranked 20 major industry sectors according to the risks workers face in possibly encountering the coronavirus on the job. Risk factors taken into account include contact with others, face-to-face discussions, exposure to disease or infections, and physical proximity to others. The rankings run from 1-20 with 1 being the lowest risk and 20 being the highest. The accommodation and food services sector ranks 3rd as about 80% of industry workers are employed in tasks including food preparation, cleaning, and/or personal care activities that all have high scores for contact with others and require face-to-face interactions.

May 3, 2021 – Sluggish Supply Chains Slow Production

  • President Biden signed an executive order that launched a 100-day review of supply chains for four critical products: semiconductor chips, large-capacity batteries for electric vehicles, rare earth minerals, and pharmaceuticals. Biden is also seeking $37 billion in funding for legislation to increase semiconductor chip manufacturing in the US. A pandemic-related shortage of semiconductors has forced US automakers and other manufacturers to cut production.
  • US semiconductor companies account for 47% of global chip sales, but only 12% of global manufacturing is done in the US, according to the Semiconductor Industry Association.
  • The Institute for Supply Management (ISM) expects manufacturers to record a 6.9% year-over-year net revenue increase in 2021, reversing a 1.3% decrease during pandemic-plagued 2020. Fifteen of 18 industry sectors tracked by ISM are expected to record increases.
  • The federal Equal Employment Opportunity Commission said in late December that employees may be barred from the workplace if they refuse the COVID-19 vaccine. “Requiring a vaccine is a health and safety work rule, and employers can do that,” said Dorit Reiss, a professor at the University of California Hastings College of Law. There are, however, some exceptions to a blanket requirement. A collective bargaining agreement may require negotiating with a union before mandating a vaccine. The Americans with Disabilities Act allows workers who don’t want to be vaccinated for medical reasons to request an exemption.
  • New orders for durable goods increased 3.5% the first two months of 2021 compared to the same period a year earlier, according to the US Census Bureau. New orders for nondurable goods were down 1.4% during the same period. Excluding transportation, new orders for all manufactured goods increased 1.9%. Excluding defense, new orders for all manufactured goods rose 1.1%. New orders increased 1.6% month over month in February, marking the tenth consecutive month-over-month increase.
  • The Institute for Supply Management’s monthly Purchasing Managers’ Index (PMI) decreased to 60.7% in April from 64.7% in March. While April’s index reading fell, it still signaled expansion in the manufacturing sector, just at a slower pace. Any reading above 50% indicates expansion compared to the prior month, while anything under 50% indicates contraction. The New Orders Index registered 64.3%, down from March’s reading of 68%. The Prices Index increased four percentage points to 89.6. The Production Index fell to 62.5% from 68.1% in March. Manufacturers are having difficulty meeting demand amid widespread supply constraints for parts and materials. Tighter supplies are helping to drive prices higher.
  • Manufacturing employment increased 0.4% year over year in March 2021 and was up 7.6% from the pandemic-related low of April 2020, according to the US Bureau of Labor Statistics.
  • Manufacturing output increased 2.7% month over month in March, according to the Federal Reserve.

May 3, 2021

An oil glut and plummeting global petroleum consumption sent oil prices into a tailspin in April 2020. By the fourth week of April the price of West Texas Intermediate (WTI) crude oil hit $3.32 per barrel. Agreements by OPEC and other major producers to cut production and gradual improvements in demand have since stabilized global oil markets; the WTI crude spot price in the fourth week of May was $62.18 or 1,173% higher than a year earlier.

Higher oil prices have provided a boost to US shale producers’ bottom lines amid recent cost reductions and flat output. As prices have risen, drillers increased production to take advantage of the recovery. Shale firms are expected to pump any price-related margin improvements into debt reduction or improving investor returns rather than pour it back into production.

Longer-term, oil demand will depend on the world getting back to driving and flying in large numbers. That felt a little closer in December when several countries, including the US, began distributing COVID-19 vaccines. Optimism on the rollout of vaccines has been somewhat tempered by the emergence of mutated coronavirus variants than are more contagious than the original virus and may be more resistant to vaccines. Some health experts suggest vaccine administration is in a race against the spread of the new virus variants. Industry watchers are concerned that resurgent outbreaks in Brazil and India could slow a full global rebound in oil consumption. However, the gradual lifting of restrictions in Europe is expected to drive an uptick in motor vehicle and aircraft fuels. In April 2021, the International Energy Agency (IEA) upwardly revised its 2021 global oil demand forecast to 96.7 million barrels per day (b/d), a rise of 230,000 barrels (b/d) over its prior forecast. The IEA said the global oversupply in oil inventories has eased and economic conditions are improving amid vaccine distribution, especially in the US.

As of May 2, the 7-day average for new US cases was about 49,000 – more than five times lower than they were in early January. Hospitalizations and deaths are also trending downward. On April 30, all but seven states were mostly open, according to The New York Times.

The number of oil rigs in operation is down significantly. The US rig count as of April 30 was 440, up two from the prior week but down 32 from a year ago, according to Baker Hughes Rig Count. However, as oil prices have improved, rig counts have gradually ticked upward, especially in the Permian Basin. Platts Analytics forecasts the rig count will continue to rise, reaching 630 by the end of 2021. During an investor presentation in March, Chevron said it planned to boost its investments in the Permian Basin through 2052.

Five oil producing firms filed bankruptcy in Q1 2020, 18 did so in Q2, another 17 filed in Q3, and six filed in Q4, according to Houston-based law firm Haynes and Boone. In Q1 2021 eight oil producers filed for bankruptcy. More bankruptcies may occur if small and highly leveraged firms fall under the financial pressure.

Exploration and production (E&P) companies slashed capital expenditures in 2020. Together, 2020 writedowns by BP, Royal Dutch Shell, and Exxon totaled $51.4 billion, according to Bloomberg. In 2021, US E&Ps are expected to further reign in spending, reducing capex by about 8% compared to 2020, according to a recent Raymond James survey of mid-to-large E&P firms. Firms outside the US are expected to increase capex by about 6%. Capex strategies could change quickly in the second half of 2021 if oil prices move higher. As the pandemic has worn on, energy firms have been under pressure from investors to curtail expenditures in favor of paying dividends to shareholders. Some industry watchers believe that pressure may diminish as long as oil stays in the neighborhood of $60 per barrel.

Weak demand and low oil prices may be leading to further industry consolidation, especially in the shale oil segment of the industry, according to The New York Times. In October, Chevron completed its purchase of Nobel Energy Oil. Amid higher oil prices and vaccine rollouts, the first quarter of 2021 was marked by more consolidation as larger shale players used their equity to purchase smaller firms that have quality assets and low debt, according to The Wall Street Journal.

Natural gas prices are expected to maintain a slight upward trend in 2021, according to the Energy Information Administration (EIA). Total US natural gas consumption is expected to fall 0.4% in 2021 compared to the prior year as higher natural gas prices reduce gas use in the power sector. However, the rise in rig counts in April was primarily due to more gas drilling activity, which is being driven by stronger demand for natural gas exports.

Changes in demand for quarried products like stone and gravel may be affected by weak nonresidential construction spending. Construction spending in March 2021 increased 5.3% compared to the same month a year earlier. Residential spending increased 23.3% but nonresidential fell 7.4%. Of all nonresidential construction subsectors, only two saw spending growth in March: public safety (+3.7) and sewage and waste disposal (+1.1). The weakest segments for nonresidential spending were lodging (-23.3%), amusement and recreation (-13.8%), conservation and development (-12.6), and highway and street (-10.9%).

The pandemic has driven up prices for many types of construction materials including lumber and steel. In March 2021, US producer prices for softwood lumber were more 92% higher than they were a year earlier. Iron and steel mill producer prices rose more than 39% during the same period. Prices are rising because factories that slowed production earlier in the pandemic still haven’t ramped up to full capacity. There are still lingering kinks in global supply chains that have slowed the movement of goods. Some industry insiders worry that if higher materials prices persist, it could hinder the anticipated recovery in construction activity in the second half of 2021. If costs are too high, developers may postpone new construction projects until prices come back down. Postponed projects could put downward pressure on mined and quarried construction materials including iron ore and aggregates used in concrete and paving materials.

Total US electricity consumption is projected to rise 2.1% in 2021 after falling 3.8% in 2020 amid reduced demand from the commercial and industrial sectors, according to the EIA. However, industrial and commercial consumption are expected to rebound in 2021. Consumption in the commercial sector is expected to rise 0.7%, while industrial consumption will increase 3.7%. Colder weather in 2021 is forecast to increase demand for electricity used for residential heating and as consumers continue to spend more time at home. Residential electricity sales are projected to rise 2.7% in 2021.

The coal mining industry, which has struggled for years under environmental regulations and worker health and safety issues, could be hurt significantly. Nearly all of the coal mined in the US is used to produce electricity, but energy producers are switching to natural gas and renewables that are cheaper and cleaner. In addition, highly contagious diseases like coronavirus have the potential to spread more easily in coal mines, due to their enclosed structure. Miners may also have underlying respiratory conditions, such as Black Lung, which could increase the severity of symptoms. Coal production for the week ended April 29, 2021 was up nearly 33% from a year ago. Full-year coal production in 2020 is estimated to have declined 24% amid reduced demand from electricity producers in the US and in coal export markets. Coal production is projected to rise 9% in 2021 as natural gas prices move higher and coal becomes more competitive for the electric power sector.

Sales of minerals used in pharmaceuticals could increase if the nation demands more drugs and components be produced domestically to reduce reliance on foreign suppliers, prevent shortages, and speed products to market. The CARES Act provides billions in funding for the domestic development and manufacture of coronavirus vaccines and treatments. A second stimulus package passed in late-December includes $20 billion for vaccine purchases, $9 billion for vaccine distribution, and $22 billion to help states with COVID-19 testing, contact tracing, and other mitigation efforts. In mid-March, President Biden signed the $1.9 trillion American Rescue Plan Act which includes $50 billion for testing and contact tracing, and $16 billion for vaccine distribution and supply chain enhancements.

A recent report by Deloitte ranked 20 major industry sectors according to the risks workers face in possibly encountering the coronavirus on the job. Risk factors taken into account include contact with others, face-to-face discussions, exposure to disease or infections, and physical proximity to others. The rankings run from 1-20 with 1 being the lowest risk and 20 being the highest. The manufacturing sector ranks 17th as only about 40% of the workforce has a medium score for contact with others.

May 3, 2021

The professional services sector could see a change in how it conducts business after the coronavirus pandemic. Firms are handling business in small isolated groups, are allowing employees to work from home, and are staying connected through the use of telecommunications and technology.

For some professional services firms, remote working or working in an office with a small group of people who can social-distance is easy and so business continues with fewer physical disruptions. Other segments of the professional services sector are very hands-on with clients and frequently travel to work at their clients’ sites. Those industries have figured out ways to conduct business and stay connected with colleagues and clients while limiting or halting travel. Employees are calling and video chatting with each other and clients as well as sending documents electronically. Firms are also limiting meeting size.

Law firms are allowing employees to work from home. Courthouses have begun to reopen, depending on the jurisdiction. At the height of the pandemic civil trials were postponed and criminal trials continued but many courthouses limited visitors. Prisons are halting in-person visitations and using video conferencing technology instead. The filing of court documents, like wills, was delayed as courthouses operated with smaller staffs.

Legal and consulting work related to business mergers and acquisitions (M&A) is starting to pick up after deals were put on hold earlier in the pandemic. Global M&A activity finished 2020 with more than $3.1 trillion worth of deals, according to Mergermarket. US M&A activity in 2020 reached more than $1.2 trillion, down more than 20% from the nearly $1.6 trillion in deals seen in 2019. However, the value of US deals in Q4 2020 reached $545 billion, an all-time high. The pace of global deals kept up in Q1 2021 with a record $1.3 trillion, marking a rise of 94% compared to Q1 2020, according to financial data firm Refinitive. The strong activity in Q1 2021 was primarily due to deals involving special purpose acquisition companies (SPACs) and private equity buyouts. Deals targeting US firms in Q1 were valued at more than $670 billion.

After the pandemic subsides, legal and consulting services firms could see a more robust increase in demand for private-equity and restructuring services. Consulting firms will see a jump in business as clients look to recover their businesses and understand how their supply chains are affected. It’s also speculated that the legal services industry could experience a rush of M&A activity itself, as well-capitalized firms buy smaller struggling ones, and top employees are hired away.

Biological testing labs are helping government labs process test kits and speed results of coronavirus tests. Commercial and academic labs are also developing new coronavirus tests. Biotechnology firms are helping to develop vaccines.

Hope for ending the pandemic intensified in December as two vaccines began being distributed. Both of the vaccines (one developed jointly by Pfizer and Germany-based biotech firm BioNTech, and the other developed by Moderna) proved more than 90% effective in clinical trials, and require two doses to achieve full effectiveness. In late February a third, single-shot vaccine developed by Johnson & Johnson’s Janssen Pharmaceutical division received emergency use authorization by the USDA and began being distributed. As of May 3, 2021, more than 100 million Americans were fully vaccinated or about 31% of the US population, according to the Centers for Disease Control and Prevention (CDC). The CDC initially issued phased guidelines for prioritizing vaccine distribution but on April 19, all Americans over age 16 became eligible to be vaccinated. Two other vaccines have completed phase 3 clinical trials – one from Novamax, and another by a partnership between AstraZeneca and Oxford University – and both are expected to apply for emergency use authorization from the FDA. The AstraZeneca vaccine has been approved in many places outside the US and is being widely deployed in Europe, Asia, and Latin America. In addition to the announced vaccines, there are 89 vaccines in clinical trials on humans, and 27 are in the final stages of testing, according to The New York Times. About 77 preclinical vaccines are being investigated using animals. COVID-19 antibody testing is a bright spot for biotech labs.

In recent months, testing capacity has improved. In mid-March, President Biden signed the $1.9 trillion American Rescue Plan Act which includes $50 billion for testing and contact tracing and $16 billion for vaccine distribution and supply chain enhancements. Health researchers think pooled testing can improve testing further. With pooled testing, tests are done in small batches. If the pooled test comes back negative, everyone in the batch is negative. If the pooled test is positive, unused portions of the original samples are retested individually. Pool testing is thought to be of the most use in areas with low rates of infection where most pooled tests would come back negative, thereby getting quicker results while conserving resources.

Consumer-focused professional services firms such as veterinary offices, tax preparers, interior designers and portrait studios are at increased risk due to the high volume of clients encountered daily. Some are temporarily closing their doors, others are working remotely and connecting with clients virtually. On a 14-day rolling basis, Veterinarians experienced a 24.4% increase in daily revenue per practice the week ended April 30, 2021 compared to the same day a year earlier, according to Vet Success. The number of visits was up 15.7% during the same period. With less travel, demand for pet boarding is down.

Tax preparers may see a decline in demand as individuals and small businesses opt to file online to avoid contact. The IRS has modified tax regulations to ease the burden on the tax preparation industry, businesses, individuals and the IRS. CPAs are helping clients navigate the benefits and requirements of receiving funds through the CARES Act, managing their businesses with limited resources, and preparing financial records. The American Rescue Plan Act includes significant tax implications, which could drive demand for accounting services. The new law makes the first $10,200 in employment benefits tax-free in 2020 for those who make less than $150,000. The plan also provides tax credits for COBRA insurance continuation assistance, an increased child tax credit, and changes to the earned income tax credit.  Other provisions include changes to the premium tax credit, the employee retention credit, the child and dependent care credit, and student loans.

Architecture and engineering firms could see a delay in new business as clients assess their ability to build new homes, facilities and developments, as well as invest in machinery to bring newly engineered products to market. The pandemic has driven up prices for many types of construction materials including lumber and steel. Prices are rising because factories that slowed production earlier in the pandemic still haven’t ramped up to full capacity. There are still lingering kinks in global supply chains that have slowed the movement of goods. Some construction industry insiders worry that if higher materials prices persist, it could hinder the anticipated recovery in construction activity in the second half of 2021, especially for nonresidential projects.

Business for interior design services has slowed as corporate and individual clients temporarily limit outside contact and reassess their spending. A survey by the American Society of Interior Designers in early April 2021 found that 42% of designers felt their businesses had already recovered; about 32% felt it would take 1-6 months to recover. About 45% reported their current projects were delayed; an equal percentage said their projects were on track. Top concerns of interior designers included, product availability, procurement/delivery processes and timelines, and project timelines.

Advertising firms saw significant cuts in advertising and promotion spending in 2020. However, global digital ad spending is expected to rebound in 2021. After falling 4.1% in 2020 due to COVID-19-related pullbacks on marketing and advertising spending, global advertising is expected to rise 10.2% in 2021, reaching a value of $651 billion, according to Ad Age.

The professional and technical services sector lost nearly 540,000 jobs in April. The most affected industries included computer systems design, architectural and engineering services, management and technical consulting, and accounting and bookkeeping. Just over 10% of the jobs lost in April returned in May – about 65,000. Another 62,000 jobs returned in June. The June job gains were mostly for accounting and bookkeeping services and other professional and technical services. The computer systems design industry lost an additional 20,000 jobs in June. The sector added 170,000 jobs in July and another 197,000 in August. By January 2021, sector employment was only 1.4% below pre-pandemic levels. The professional and technical services sector gained 40,000 jobs in January. The sector added another 22,800 jobs in February. The biggest gains were in legal services (+7,200 jobs), computer systems design and related services (+6,200), scientific research and development services (+4,200), and business management and consulting services (+3,500). In March 2021, the professional and technical services sector added 27,500 jobs. The strongest gains were in management and technical consulting services (+7,600), architectural and engineering services (+7,400), and computer systems design and related services (+5,500).

As of May 2, the 7-day average for new cases was about 49,000 – more than five times lower than they were in early January. Hospitalizations and deaths are also trending downward. On April 30, all but seven states were mostly open, according to The New York Times. To keep workers and consumers safe, consumer-facing professional services firms such as veterinary offices, tax preparers, interior designers, and portrait studios may have to develop new policies that set guidelines and procedures for social distancing compliance while maintaining efficient customer service.

A recent report by Deloitte ranked 20 major industry sectors according to the risks workers face in possibly encountering the coronavirus on the job. Risk factors taken into account include contact with others, face-to-face discussions, exposure to disease or infections, and physical proximity to others. The rankings run from 1-20 with 1 being the lowest risk and 20 being the highest. The professional, scientific, and technical services sector ranks 13th. Most of the roles in the sector (science and computer operations, business and financial operations, management, and engineering and architecture) have medium-to-low scores for physical proximity. About 17% of sector jobs are office and administrative support positions and require some contact with others.

May 3, 2021

The retail sector has experienced mixed results stemming from the coronavirus outbreak and efforts to contain its spread. Retail sales fell nearly 18% in April 2020, but have since been on a gradual recovery trend. Full-year retail sales finished 2020 up 3.5% over 2019. Non-store retail – which includes ecommerce – led all retail categories with growth of more than 22% in 2020. Other strong categories included building material and garden equipment and supplies dealers (+14%), and food and beverage stores (+11.5%). Several retail industries suffered significant sales declines in 2020, including clothing and accessories stores (-26.4%), department stores (-18.1%), gasoline stations (-15.9%), electronics and appliance stores (-14.6%), and furniture and home furnishings stores (-5.4%). The retail sector continued its growth trajectory in January 2021 with a rise of 5.8%. Most retail subcategories saw sales rise, but some still faced challenges due to the pandemic, including clothing and clothing accessories stores (with a drop of 11.3%), gasoline stations (-8.8%), and food services and drinking places (-15.8%).

However, in the first three months of 2021 the retail sector saw strong gains as more of the US economy reopened; all major subsectors of the retail sector saw sales rise in Q1 2021. Major pockets of growth included motor vehicle and parts dealers (up 29% compared to Q1 2020); sporting goods, hobby, musical instrument, and book stores (+37.2%); building material and garden equipment and supplies dealers (+20.9); and furniture and home furnishings stores (+20.4).

As a whole, the retail sector lost more than 2 million jobs in April 2020. Among the hardest hit were clothing and clothing accessories stores; motor vehicle and parts dealers; furniture stores; sporting goods, hobby, book, and music stores; and department stores. Most retail segments saw employment gains in May as the overall sector added nearly 370,000 jobs. The sector added nearly 740,000 jobs in June. Nearly 260,000 retail jobs were added in July, and another 250,000 were added in August, and by that month all retail sectors had returned to positive job growth. Another 142,000 retail jobs were added in September, and sector employment rose by more than 100,000 in October. Retail sector employment declined by nearly 35,000 jobs in November. Then 135,000 jobs were added in December; the retail sector shed nearly 38,000 positions in January. Job losses in January were mostly in general merchandise stores, and electronics and appliance stores. The retail sector gained more than 41,000 positions in February, mostly in general merchandise stores, and health and personal care stores. Clothing and clothing accessory stores lost 20,000 jobs. In February 2021, retail employment was about 2% below the same month a year earlier. The sector added 22,500 jobs in March, led by 16,300 positions in clothing and clothing accessories stores. Motor vehicle and parts dealer employment rose by 13,000.

Early in the pandemic, grocery and drug stores as well as mass merchandisers like Walmart, Costco and Target struggled to keep products on the shelves as consumers and businesses stockpiled goods in fear of shortages. In most cases supply chains have since stabilized as some grocers reduced hours of operation, and limited quantities that a single shopper can purchase. Stores are also controlling traffic in the store to allow for social distancing. Some retailers have allowed customers to purchase in-stock merchandise online, then pick it up curbside. Industry watchers expect curbside pick-up to have a long-term effect on store-based retailer strategy even after the pandemic eases. Curbside offers a hybrid model between ecommerce and traditional retail that satisfies consumers’ desire to visit stores, and shoppers take care of the “last mile” – the delivery step that is most costly for retailers.

Stores located in malls that closed during the lockdown had no choice but to follow the malls’ leads and shutter. State and local governments also mandated closures, taking the option to remain open out of retailers’ hands. All states have taken steps toward reopening, including retail establishments. The lifting of restrictions come with social distancing requirements, such as retailers operating at reduced capacity. As of May 2, the 7-day average for new cases was about 49,000 – more than five times lower than they were in early January. Hospitalizations and deaths are also trending downward. On April 30, all but seven states were mostly open, according to The New York Times. As the pandemic has worn on, several major retailers are requiring customers to wear masks, but are instructing employees to not be confrontational with customers who refuse to comply. As of April 30, mandatory indoor masking orders were in place in 24 states, according to The New York Times. Twenty-five states had no restrictions regarding masks; masks were required in some areas in Colorado.

The retail workforce is largely comprised of part-time employees that are paid hourly wages. Employees of dealerships and showrooms often earn commissions based on sales value and volume, which has suffered due to low foot traffic. Retailers can benefit from federal funding and employment tax relief aimed at preventing permanent business closures and worker layoffs. However, retail employees tend to work in close proximity to consumers and have an elevated risk of exposure to the virus.

A recent report by Deloitte ranked 20 major industry sectors according to the risks workers face in possibly encountering the coronavirus on the job. Risk factors taken into account include contact with others, face-to-face discussions, exposure to disease or infections, and physical proximity to others. The rankings run from 1-20 with 1 being the lowest risk and 20 being the highest. The retail sector ranks 5th as about 90% of employees have medium or high scores for physical proximity and contact with others.

More consumers have turned to online shopping to order groceries and pick them up curbside or have them delivered. Analysts suggest the retail sector was in a downturn before coronavirus. The trend has likely accelerated, and brick and mortar stores could see greater declines in traffic after the epidemic as shoppers became more comfortable with online shopping during the quarantine. In 2020 the retail sector suffered its worst year for bankruptcies since 2010, according to S&P Global Market Intelligence. Malls and retailers of luxury and nonessential products – such as clothing, jewelry, and furniture – experienced steep declines in store traffic. In 2020 a number of high-profile retailers filed for bankruptcy, including high-end men’s suit retailer Brooks Brothers, Ascena Retail Group (owner of Ann Taylor and Lane Bryant chains), Tailored Brands (owner of Men’s Wearhouse and JoS. A. Banks), J.C. Penny, Neiman Marcos, Pier 1.

A fresh round of stimulus relief was passed in December. The $900 billion COVID-19 Economic Stimulus Relief Act included reauthorized the Paycheck Protection Program (PPP). The PPP extension includes $284 billion in funding for Small Business Administration (SBA) loans. The most recent round of PPP lets eligible borrowers get a second draw loan. It also simplifies loan forgiveness for loans under $150,000 and makes forgiven loans tax deductible. In mid-March, President Biden signed the $1.9 trillion American Rescue Plan Act which includes an additional $7.25 billion in funding for PPP. The PPP is set to wind down on May 31, but funding could run out before then. As of mid-April, the program had $44 billion in funding left, according to the SBA. The American Rescue Plan also allocates $15 billion for targeted EIDL advance payments for businesses in low-income communities that have no more than 300 employees and have suffered financial losses of more than 30%.

The surge in US imports demand that began in mid-2020 is expected to continue at least through the summer of 2021, according to the April 2021 Port Tracker report compiled by the National Retail Federation (NRF) and maritime consultancy Hackett Associates. The report covers 13 major US ports on the West, East, and Gulf coasts. The Port Tracker’s April report showed February’s imports were down 9.1% from January but increased 23.7% year-over-year. The NRF expects March imports to rise 50.7 compared to March 2020, but Hackett warned the numbers are a bit skewed due the drastic drop in imports early in the pandemic. April 2021 imports are projected to rise 26.9% year-over-year and May should increase 30.6%. The increased influx of goods moving through the ecommerce supply chain may increase demand for logistics consulting services. The NRF issued its annual forecast for US retail sales in February, and it expects 2021 retail sales to rise between 6.5% and 8.2% to more than $4.33 trillion as more people receive vaccinations and the economy reopens further.

The continued rollout of vaccines is key to consumers’ heading back to physical stores. The American Rescue Plan Act includes $50 billion for testing and contact tracing and $16 billion for vaccine distribution and supply chain enhancements. The aim to is to distribute large amounts of vaccine doses quickly and reduce levels of infection and serious illness. Fewer cases and eventual herd immunity will help those parts of the economy most hurt by the pandemic – including retail. As of May 3, 2021, more than 100 million Americans were fully vaccinated or about 31% of the US population, according to the Centers for Disease Control and Prevention (CDC). The CDC initially issued phased guidelines for prioritizing vaccine distribution but on April 19, all Americans over age 16 became eligible to be vaccinated.

The American Rescue Plan Act also includes several provisions aimed at putting more dollars in Americans’ pockets so they have the spending power to help the economy recover. Specific provisions include $1,400 stimulus checks for most Americans, and an extension of the $300 supplemental unemployment benefit through August 29, 2021. The new stimulus bill also expands an existing tax credit that will give most families with children a monthly check of $300 per child. The benefit is set to expire after a year, but the Democrats aim to make it permanent. The new law makes the first $10,200 in employment benefits tax-free in 2020 for those who make less than $150,000. The plan also provides an increased child tax credit, and makes changes to the earned income tax credit.  Other provisions include changes to the premium tax credit, the child and dependent care credit, and student loans.

May 3, 2021 – Ecommerce Boom Drives Warehousing Demand

  • Wholesalers are likely to be impacted by the pandemic-driven shift to a focus on resilient supply chains. Industry experts say that more emphasis is being placed on flexibility and less on cost reduction. Placing less emphasis on costs may seem an unlikely way to raise profits, but if a $2,000 product cannot be shipped because a $10 component was delayed in transit, then profits suffer. Wholesalers’ customers may choose to hold higher inventory levels on site rather than rely on just-in-time principles. They may also work with more wholesalers even though concentrating orders among a small number of suppliers typically lowers cost. Customers may also intensify supply chain reviews to avoid over reliance on a local wholesaler who is in fact importing products from far abroad.
  • Real disposable income, an indicator of consumer spending, increased 23% in March. Spending and incomes are expected to have surged in March following the additional $1,400 direct payments that were distributed to millions of Americans.
  • Some analysts expect consumer spending to continue rising in 2021 after federal stimulus programs end. “Pent-up demand, particularly coming from middle- and high-income households who have been aggressively saving throughout the crisis, is set to drive consumption spending throughout the year as the health crisis begins to abate,” said Matt Colyar, an economist at Moody’s Analytics in West Chester, Pennsylvania.
  • Total US wholesales sales decreased 0.8% in value month over month on an adjusted basis but increased 4.8% in value year over year on an unadjusted basis in February. Adjusted durable good sales decreased 2.2% in value month over month but increased 7.2% in value year over year in February. Adjusted don-durable good sales increased 0.5% in value month over month and 5.7% in value year over year in February.
  • Warehouse construction will lead the 3% growth expected in the nonresidential construction sector as e-commerce giants continue to build out their logistics infrastructure, according to the Dodge Data & Analytics 2021 Dodge Construction Outlook. Wholesalers may pay more for storage facilities because the pandemic-driven rise in e-commerce is driving up demand. GlobeSt.com expects demand for storage space to continue rising if firms follow through with plans to rely less on just-in-time logistics planning by increasing inventories.
  • The popularity of online grocery shopping has accelerated during the coronavirus pandemic, and the category is expected to boost demand for climate-controlled warehousing space, according to Commercial Property Executive. The majority of current online grocery fulfillment takes place in grocery retail locations, which is likely a temporary solution to meet the sudden spike in demand due to the pandemic. As the online grocery segment grows, more fulfillment is expected to move to warehousing locations that are more efficient and cost-effective. The cold storage real estate sector saw sales rise 22% in 2020 compared to the prior year, as the wider industrial real estate market fell 11% and the overall commercial segment declined 29%, according to Real Capital Analytics. Because cold storage facilities are three times as costly to build, such projects, historically, are rarely built on spec. However, the need for last-mile cold-storage fulfillment in large urban centers is attracting speculative warehouse investment, according to The New York Times.
  • Wholesale inventories increased 0.6% in value month over month on an adjusted basis and 2.3% in value year over year on an unadjusted basis in February. Durable goods inventories increased 0.3% in value month over month on an adjusted basis but decreased 0.5% in value year over year on an unadjusted basis in February. Non-durable goods inventories increased 1.1% in value month over month on an adjusted basis and 6.6% in value year over year on an unadjusted basis in February.
  • The pandemic fueled a huge spike in warehouse demand as consumers shifted to ecommerce. Total leasing of industrial space in 2020 was up nearly 12% compared to 2019, according to commercial real estate firm CBRE’s US Industrial and Logistics report released in March. As ecommerce has boosted warehouse demand, prices for space have driven upward. Warehousing asking rents jumped to a record $8.24 per square foot in the fourth quarter, up more than 8% compared to the same period in 2019. Warehouse space near seaports, intermodal rail hubs, and airports are seeing strong demand growth. Amazon and large retailers are snapping up most of the available warehouse space which is putting a squeeze on smaller retailers looking for space. Many of the smaller players are leaning on third-party logistics (3PL) providers to help them meet their warehousing needs. Industry watchers expect continued ecommerce growth – and demand for warehousing – to remain strong throughout 2021.

How Canadian Sectors Are Affected

Apr 19, 2021 – Rising New Cases Complicates Flow of Migrant Labor

  • Canada’s food industry relies on about 60,000 migrant workers. If workers become ill or their movements are restricted, food processers’ supplies could run short and prices may rise. Migrant agricultural workers have been one of Canada’s hardest hit groups. A year into the pandemic, migrant workers are returning to Canada for springtime farm work amid the country’s third wave of infection. In March 2021, Canada’s federal government announced a tailored solution to help temporary foreign workers (TFWs) travel to Canada and get to their job destinations safely. The plan creates a more streamlined testing and quarantining process upon entry to Canada, includes funding for organizations that aid TFWs affected by COVID-19, and steps up agricultural site inspections to ensure TFW working and living conditions are safe. The pandemic’s effect on migrant workers has led some advocates and industry insiders to call for reforms, including paths to permanent residency status.
  • Outbreaks of COVID-19 in Canadian meatpacking plants disrupted food supplies. Two of the affected plants in Alberta account for 85% of Canada’s beef slaughter capacity. To prevent further outbreaks, meatpacking plants have issued PPE to workers, staggered shifts and break times, and installed barriers between workstations. However, industry watchers wonder if meatpackers can remain profitable with such measures in place. Canada’s meat industry will likely increase automation as a longer-term solution. In the grip of a third wave of COVID-19 outbreaks, Canada’s provinces are shifting vaccination priorities from being based on age to focusing on frontline workers who are at the highest risk of contracting and spreading the disease at work. In April, Alberta offered vaccines to about 2,000 workers at a Cargill meatpacking plant and plans to expand the pilot program to other plants.
  • In March 2021, Canada’s agriculture employment was more than 248,000, down more than 20,000 jobs compared to March 2020. Forestry and logging employment was down about 2,000 jobs in March 2021 compared to a year earlier. Fishing, hunting and trapping employment peaked at 26,000 in May 2020, up more than 10,000 compared to March 2020 levels, but has since fallen back to about 17,000 by March 2021. On a monthly basis, agriculture employment was down 3% in March. Forestry and logging was down 3%. Fishing, hunting, and trapping employment rose 1%.
  • The Canada Emergency Response Benefit (CERB) provided payment benefits for seasonal workers, including fishermen and farm hands, who exhausted their Employment Insurance (EI) and can’t work due to COVID-19 closures. However, CERB expired in early October. In August, Canada’s federal government created a C$37 billion plan that increases accessibility to EI and provides three new relief benefits which aim to help workers who do not qualify for the EI expansion. The new benefits are the Canada Recovery Caregiving Benefit (for workers who need to stay at home to provide care to another person), the Canada Recovery Sickness Benefit (helps workers who are ill or must isolate due to COVID-19), and the Canada Recovery Benefit (for workers, including self-employed and gig workers, not covered under EI or the two other programs).
  • Despite the pandemic, housing booms in Canada and the US have driven up demand for logs used to make lumber, driving lumber prices higher. Low mortgage interest rates and housing upgrades as people spent more time in their homes have contributed to rising housing demand. Canadian residential construction investments rose 9.4% to $6.7 billion in February 2021, marking a record high, according to Statistics Canada. About 65% of Canada’s dimension lumber production is exported to the US for home construction; Canada’s homebuilders account for about 10%, according to Madison’s Lumber Reporter. US housing starts were up 19.4% in March 2021 compared to the prior month. In March 2021, the price for eastern softwood 2x4s was nearly C$1,500 per thousand board feet compared to C$500 per thousand board feet in April 2020, according to Natural Resources Canada. Western softwood 2×4 prices rose from US$300 per thousand board feet to more than US$1,100 during the same period.
  • In April 2021, the Canadian government announced the formation of a $21.8 million aid initiative to assist cattle and hog producers who were affected by slaughterhouse slowdowns and closures due the COVID-19 pandemic. The program will be administered through the AgriRecovery fund, a program that helps farmers weather disasters. Many of Canada’s livestock producers incurred extra costs from keeping animals on their farms longer because of outbreaks in meat processing plants.

Apr 19, 2021 – Home Sales Gain Steam In Q1 2021

  • Canadian housing starts declined 13.5% in February 2021 compared to January, according to the Canadian Mortgage and Housing Corporation (CMHC). Housing starts fell to just under 246,000 units in February compared to more than 284,000 the prior month. The value of Canada’s building permits rose 2.1% in February over January levels and topped the C$10 billion mark for the first time, according to Statistics Canada. A 14.2% month-over-month rise in nonresidential permits was more than enough to offset a 2.9% decline in residential permits. Institutional projects led February’s rise in nonresidential permitting, with an increase of 27.9%. Commercial permitting was up 11.4% and industrial projects saw a 1.9% boost. Nonresidential permitting was led by new projects in Ontario and Alberta. A rise in residential permitting in British Columbia was not enough to offset declines in Ontario and Alberta.
  • Canada’s home sales took off unexpectedly during the summer of 2020 and have remained robust since. With the exception of a small dip in October 2020, Canada’s home sales increased every month between June 2020 and March 2021, according to the Canadian Real Estate Association (CREA). Canada reached new record home sales in July 2020, and set all-time monthly sales records in January, February, and March of 2021. Canada’s home sales climbed 5.2% in March over February. The CREA suggests Canada’s housing market has had sustained pent-up demand throughout the pandemic, but supplies couldn’t keep up. More supply has come online in 2021 which helped drive strong home sales in the first quarter.
  • Nonresidential building construction investment rose 0.2% in February 2021 to C$4.5 billion after remaining flat at C$4.4 billion each month between October 2020 and January 2021. Investment in the institutional segment rose 0.6% in February compared to the prior month, primarily due to growth in Ontario and British Columbia. Industrial investment rose 0.5% after two straight months of declines. Commercial building investment in February was flat for the fifth consecutive month with growth in Ontario offsetting declines in seven other provinces.
  • The construction sector shed more than 25,000 jobs in March as slow vaccine distribution and higher COVID-19 infection rates led to tighter restrictions. The March drop in construction employment followed losses in February (6,800) and January (56,000). The losses followed a drop of 2,900 jobs in December, but more than 26,000 positions were gained in November. About 2,500 jobs were lost in October after construction employment fell by 7,000 in September. Construction employment rose by about 7,000 jobs in August, another 7,000 in July, 83,000 in June and 73,000 in May. Canada’s construction employment in March was just 1% lower than the same month a year earlier.
  • Construction firms that have experienced decreases in year-over-year gross revenue may apply for assistance under the Canadian Emergency Wage Subsidy (CEWS). The funds are to be used for payroll and business expenses. Originally set to expire the first week of June, CEWS has been extended four times and is now set to run through June 2021. In early January, Canada’s government made changes to the CEWS program that set the maximum top-up subsidy rate at 75% for companies with a revenue drop of 70% or more. The CEWS program has lower-tiered top-up subsidy rates for companies’ whose revenue declines have been less severe. As of April 11, 2021, the CEWS program had paid more than C$74 billion to more than 440,000 employers.
  • Large construction firms could benefit from the Large Employer Emergency Financing Facility (LEEFF) program. Announced on May 11, 2020, LEEFF aims to keep companies that have been hit hard by the epidemic operating and enable them to retain their workers.
  • The huge spike in Canadian ecommerce sales during the pandemic is expected to drive a warehouse space construction boom, according to real estate brokerage firm CRBE. Over the next five years, an additional 40 million square feet of warehouse space will need to come online to support the continued growth of ecommerce in Canada. As retailers have scrambled to develop logistics hubs, Toronto, Vancouver, and Montreal have become some of the tightest markets in North America for industrial space. Canada’s retail ecommerce sales in in 2020 increased more than 70% over the prior year, according to Statistics Canada.
  • In March, large construction firms in Ontario began giving up to 40,000 rapid antigen tests per week to help slow the spread of COVID-19 on jobsites. The testing initiative is part of the Ontario Ministry of Health’s COVID-19 Rapid Antigen Test Pilot, which included the testing of construction firm EllisDon’s workers since December. In the program, workers are tested twice per week at the start of their shift. The antigen test detects proteins associated with the virus and results are available in 15 minutes. The frequency of screening and the rapid test results should help with early detection among asymptomatic workers. In late March, the government of Ontario moved to include construction workers in phase two of the province’s vaccine rollout schedule. As more vaccine dose become available, construction workers will be able to receive vaccinations a month earlier than the general public. Amid alarming spikes in new cases, on April 16, Ontario’s premier imposed a stay-at-home order that would remain in place for at least six weeks amid rising cases, the spread of new variants, and spikes in hospitalizations. The fresh measures include a shut-down of all non-essential construction.

Apr 19, 2021 – Amid Higher Oil Prices, Producers Focus on Shareholder Value

  • On average, a Canadian oil sands producer can generate enough cash to operate with a US benchmark West Texas Intermediate (WTI) price of $37.30 a barrel, according to Canadian Imperial Bank of Commerce analyst Jon Morrison. The spot price for WTI crude was $59.35 the week ending April 9, 2021.
  • Less travel and commuting reduced global oil demand. However, production cuts and a slight uptick in global fuel consumption have helped oil prices recover somewhat. Employment in the mining, quarrying, and oil and gas extraction sector has gradually rebounded since the onset of the pandemic. In March 2021, sector employment was 3.6% above levels seen in March 2020. In January 2021, the Canadian Association of Petroleum Producers (CAPP) estimated 2021 capital spending in Canada’s oil and gas industry would rise 14% to $27.3 billion after notching $24 billion in 2020, the lowest level in more than a decade. Capital spending in Canada’s oil and gas sector rose 3.6% in the fourth quarter of 2020 compared to Q3, but was down more than 44% compared to Q4 2019, according to Statistics Canada. During the 2021 Scotiabank CAPP Energy Symposium, which was held virtually in April, representatives of some of Canada’s largest oil producers said that while rising oil prices have helped profits, firms are still focused containing costs, maintaining production, and returning value to shareholders rather than investing in growth projects.
  • The coronavirus pandemic has worsened the outlook for Canada’s oil sands. Environmentalists have argued against oil sands development and have slowed pipeline efforts to bring the oil to market. These pressures and low prices have prompted several international oil companies to cease their investments. In 2020, France’s Total wrote down the value of its oil sands assets by more than C$9 billion, cancelled its membership in CAPP, and said it considered Canada’s oil sands to be stranded assets, along with other high-cost, high-carbon resources that were to be produced after 2040. Altogether, 2020 write-downs in Canada’s oil sands reached more than C$14 billion. Capital investment in Canada’s oil sands is expected to reach C$7.3 billion in 2021 compared to C$20 billion for conventional oil and natural gas. In April 2021, the New York Sate Common Retirement Fund divested holdings in seven oil sands firms.
  • On his first day in office, President Joe Biden cancelled TC Energy Corp.’s permit to move oil sands crude into the US through the Keystone XL pipeline, according to Bloomberg. The Keystone XL pipeline was originally blocked by president Obama, but the permit was reinstated by President Trump during his first few days in office. Opponents of the Keystone XL pipeline argue it runs through environmentally sensitive lands and encourages further investment in oil sands, which have a higher carbon footprint than conventional light crude. Supporters of the pipeline say it would bring jobs and economic growth to both sides of the US/Canada border.
  • Oil markets have rebounded from the dramatic drop seen early in the pandemic, but global oil demand over the next several years could vary depending on what policies governments impose to address climate change, according to the International Energy Agency’s (IEA) Oil 2021 report issued in March. Absent behavior and policy changes that curb oil consumption – including rapid electric car adoption, higher fuel efficiency standards, and less oil use in the energy sector – oil demand is set to rise 4% by 2026 compared to 2019 levels. Conversely, less business travel and more teleworking combined with policy shifts to address climate change could reduce oil consumption by 5.6 million barrels per day by 2026. Regardless of climate policy outcomes, the EIA doesn’t think global gasoline consumption will ever recover to levels seen in 2019 amid rising acceptance of electric vehicles and improving fuel efficiency in internal combustion engine vehicles.
  • Large energy extraction & mining companies could benefit from the Large Employer Emergency Financing Facility (LEEFF) program. Announced on May 11, 2020 LEEFF aims to keep companies that have been hit hard by the epidemic operating and enable them to retain their workers. LEEFF comes with stringent environmental and climate change reporting requirements which industry watchers believe most oil and gas companies will be able to meet.
  • Maintaining social distancing in many mining operations is difficult. Miners work closely in confined spaces, and share communal living quarters in remote areas. Mines may also increase risks for nearby communities as workers commute.
  • EY’s Canadian Mining Eye index rose 9% in the fourth quarter 2020 after seeing a 10% increase in the previous quarter. Gold prices were off slightly with a decline of 0.1% in Q4 amid vaccine announcements and a weaker US dollar. Base metal prices – including copper, nickel, and zinc – have also enjoyed price gains on increased demand in China spurred by infrastructure stimulus spending. EY Canada expects gold prices to remain positive, supported by the weakness of the US dollar, expectations for inflation, and declining yields. Copper and zinc prices are projected maintain an upward trend due to COVID-19 vaccine breakthroughs and sustained demand from China.
  • Due to weakened demand caused by the COVID-19 pandemic, Canada’s oil imports fell 20% year-over-year in 2020, according to Canada Energy Regulator. While Canada is the world’s fourth-largest oil producer, it still imports some oil for processing in eastern refineries because it’s often cheaper than transporting from domestic supplies in western Canada. The pandemic also slowed refined product exports from eastern Canada amid tight COVID-19 restrictions and weak global demand.
  • A rapid rise in new COVID-19 cases in April 2021 complicated Canada’s oil sands spring maintenance season, according to Reuters. The rapid spread of more transmissible coronavirus variants in Canada is making it harder for oil sands firms to get enough skilled workers. Seasonal oil sands turnarounds usually attract tradespeople from all over Canada, but due to the third wave of COVID-19, many workers are unwilling to travel. Once workers arrive at oil sands sites, it can still be difficult to keep them safe. Firms are employing rapid COVID-19 screening tests but outbreaks have been reported at several oil sands sites. When COVID-19 began spreading in spring 2020, many oil sands turnarounds were scaled back. If turnaround work is postponed again, it would put oil sands operators out of compliance with regulatory and safety requirements.

April 19, 2021 – Fresh Lockdowns Amid Rising Cases, Hospitalizations

  • Canada’s federal government has allocated more than C$25.6 billion in health and safety spending to help mitigate the impact of coronavirus. The funding is largely devolved to the provinces and territories, and targeted to the health care system. Federal funding distributions include C$2 billion for personal protective equipment (PPE) and C$240 million for virtual healthcare programs for both primary care and mental health. Canada has budgeted more than C$1.1 billion for COVID-19 research and vaccine development, including purchases of COVID-19 vaccine doses abroad. However, Canada’s vaccine rollout has been slower than that of the US, primarily due to its dependence on imports. Late in 2020, Canada ordered enough vaccines for five times its population, but deliveries in the first quarter were slow. Vaccine rates have since ramped up and by mid-April 21% of Canadians had received at least one dose of vaccine. Due to its slow start, Canada is expected to lengthen the time between the two doses to as many as four months to help more Canadians get their first dose. Canada’s government is funding Quebec’s Medicago in its effort to develop a plant-based vaccine. Canada has also invested in the Novamax vaccine, but neither the Novamax nor Medicago vaccines are expected to be available soon. As of mid-April, Health Canada had no plans to limit use of the Janssen (Johnson & Johnson) or AstraZeneca vaccines after reports of post-injection blood clots. Officials inside Canada’s federal and provincial governments suggest the delays, and the emergence of new virus variants, highlight the need for Canada to reduce its dependence on foreign vaccine producers and develop its own manufacturing capacity.
  • Amid rising infection rates and the emergence of more virulent coronavirus variants, several Canadian provinces reintroduced tighter restrictions in January. In most parts of Canada, restrictions were eased through February. However, on April 16, Ontario’s premier imposed a stay-at-home order that would remain in place for at least six weeks amid rising cases, the spread of new variants, and spikes in hospitalizations. COVID-19 cases were also on the rise in Alberta, British Columbia, Quebec, and Saskatchewan. Quebec imposed lockdown measures in hard-hit regions through April 25. British Columbia and Alberta also announced tighter restrictions. Canada’s prime minister has urged Canadians to avoid travel. In December, Canada’s federal government began requiring travelers to have had a negative COVID-19 test at least 72 hours prior to boarding their flight. In late January, Canada announced further restrictions that requires travelers to also take a polymerase chain reaction (PCR) test upon arrival in Canada, then quarantine at their own expense in a hotel for up to three days pending test results. If the test is negative, Canadians can spend the remainder of their two-week quarantine at home. On February 21, 2020, Canada began curbing almost all essential travel into the country by foreign nationals.
  • The rise of the highly contagious UK variant of the coronavirus led to increased hospitalizations in Ontario in April, according to The Wall Street Journal. To make room for an influx of COVID-19 patients, Ontario hospitals cancelled scheduled surgeries and prepared for the possibility of having to ration care. By mid-April, the number of COVID-19 patients in Ontario ICUs was 44% higher than at the beginning of the month, according to Critical Care Services of Ontario. To meet the increased need, two Ontario children’s hospitals opened their acute-care facilities to adults.
  • Healthcare costs in Canada were rising prior to the pandemic, but the COVID-19 crisis is driving costs even higher, according to the Conference Board of Canada. Health care costs are projected to rise much faster than growth rate of the Canada Health Transfer – the federal government’s contribution to health care funding in Canada’s provinces. To keep pace with rising costs, Canada’s federal government will have to increase its share of total funding to 35% from the current 22%, according to Quebec Premier François Legault, Chair of the Council of the Federation. The Conference Board of Canada estimates that the added healthcare costs from COVID-19 will be between C$20.1 billion and C$26.9 billion in 2020-21 and between C$15.7 and $21.9 billion in 2021–22.
  • The healthcare and social assistance sector gained more than 41,000 workers in July (after adding more than 140,000 in May and June and losing more than 240,000 in April and March). Losses in March and April were largely related to closures of medical practitioners’ offices (i.e. physicans, dentists, chiropractors) during the quarantines. The sector added about 10,000 August then shed about the same number in September. More than 17,000 healthcare and social assistance jobs were added in October. The sector shed about 2,300 jobs in November and another 6,000 in December, then added 18,500 jobs in January 2021. The sector added 3,700 jobs in February, and another 47,000 in March. Healthcare and social assistance employment has been about on par with pre-pandemic levels since January 2021.
  • As of April 14 2021, 29.3 million people were tested for coronavirus in Canada. Over 1 million cases were confirmed and more than 23,000 deaths were reported.
  • Some health experts hope the lessons learned during the pandemic about the benefits of telehealth will prompt Canada’s healthcare system to make further investments in it. Proponents say expanding telehealth will increase timely access to care, especially in rural areas. Telehealth also allows clinicians to treat patients more efficiently and has the potential to significantly reduce costs for both patients and Canada’s healthcare system. In February, the Canadian Medical Association called out several specific steps to make virtual care a permanent part Canada’s healthcare system. Key steps include specific public funding for virtual care, building out internet connectivity to remote areas to ensure equitable access to virtual care, establishing patient privacy standards, and creating a framework of safety and quality-of-care regulations.
  • A high number of Canada’s deaths from COVID-19 have occurred in nursing homes, which has prompted some healthcare experts and policymakers to call for reforms. While Canada’s healthcare system is publicly funded, long-term care relies on a blend of public and private payment. About 15% of Canada’s total healthcare spending comes out-of-pocket, according to health research nonprofit The Commonwealth Fund. Some suggest the out-of-pocket expenses allow for gaps in quality of care, and contributes to low wages in nursing homes and high turnover.
  • Nearly 40% of Canadians who have been clinically diagnosed with a chronic disease – such as arthritis, cancer, heart disease, diabetes, or obesity – reported they were avoiding the healthcare system during the pandemic, according to a survey released in April 2021 and commissioned by pharmaceutical firm Novo Nordisk Canada. The survey is worrying as delaying care of chronic conditions can result in negative health outcomes. Canadian healthcare experts are urging patients that are concerned about visiting healthcare facilities for treatment to take advantage of telemedicine services which are available is every province.

Apr 19, 2021 – Semiconductor Shortage Slows Manufacturing Output

  • Canada’s manufacturing sales declined 0.8% in February 2021 compared to the same month a year earlier. Sales were down 1.6% from January. The dip in February followed year-over-year gain of 3.4% in January. Monthly declines in February were led by a drop in motor vehicle and parts manufacturing due to production cuts and factory shutdowns stemming from a global semiconductor shortage. Motor vehicle sales fell 14.5% in February compared to the prior month and motor vehicle parts sales were down 10.9%. The chip shortage also contributed to a 8.7% drop in plastic and rubber products sales as much of the industry is part of the automotive supply chain. Other segments of the transportation equipment subsector also saw monthly declines in February, including aerospace products and parts (-15.8%) and railroad rolling stock (-5.3%). Declines in transportation equipment sales were somewhat offset by increases in petroleum and coal products (+6.5%), wood products (+4%), and chemicals (+3.8%). Canada’s manufacturing capacity utilization fell to 75.7% in February compared to 76.5% in January on lower production. Unfilled orders were off 1.1% amid reduced orders for transportation equipment and chemicals. New orders for primary metals and wood products were strong.
  • Outbreaks of COVID-19 in Canadian meatpacking plants disrupted food supplies. Two of the affected plants in Alberta account for 85% of Canada’s beef slaughter capacity. To prevent further outbreaks, meatpacking plants have issued PPE to workers, staggered shifts and break times, and installed barriers between workstations. However, industry watchers wonder if meatpackers can remain profitable with such measures in place. Canada’s meat industry will likely increase automation as a longer-term solution. In the grip of a third wave of COVID-19 outbreaks, Canada’s provinces are shifting vaccination priorities from being based on age to focusing on frontline workers who are at the highest risk of contracting and spreading the disease at work. In April, Alberta offered vaccines to about 2,000 workers at a Cargill meatpacking plant and plans to expand the pilot program to other plants.
  • Canada’s food industry relies on about 60,000 migrant workers. If workers become ill or their movements are restricted, food processers’ supplies could run short and prices may rise. Migrant agricultural workers have been one of Canada’s hardest hit groups. A year into the pandemic, migrant workers are returning to Canada for springtime farm work amid the country’s third wave of infection. In March 2021, Canada’s federal government announced a tailored solution to help temporary foreign workers (TFWs) travel to Canada and get to their job destinations safely. The plan creates a more streamlined testing and quarantining process upon entry to Canada, includes funding for organizations that aid TFWs affected by COVID-19, and steps up agricultural site inspections to ensure TFW working and living conditions are safe. The pandemic’s effect on migrant workers has led some advocates and industry insiders to call for reforms, including paths to permanent residency status.
  • The Canada Markit manufacturing PMI index rose to 58.5 in March from 54.8 in February. The March PMI marked the ninth straight month of expansion in factory activity as well as the fastest growth pace in the history of the survey. Amid the easing of some COVID-19-related restrictions, new orders, output, employment, and purchasing all posted solid growth. However, coronavirus restrictions continued to slow supplier deliveries. While manufacturer sentiment regarding production outlook over the next 12 months reached its highest reading since May 2019, factories noted raw materials costs were on the rise, especially for steel and lumber.
  • Manufacturers that have experienced decreases in year-over-year gross revenue may apply for assistance under the Canadian Emergency Wage Subsidy (CEWS). The funds are to be used for payroll and business expenses. Originally set to expire the first week of June, CEWS has been extended four times and is now set to run through June 2021. In early January, Canada’s government made changes to the CEWS program that set the maximum top-up subsidy rate at 75% for companies with a revenue drop of 70% or more. The CEWS program has lower-tiered top-up subsidy rates for companies’ whose revenue declines have been less severe. As of April 11, 2021, the CEWS program had paid more than C$74 billion to more than 440,000 employers.
  • The manufacturing sector lost 2,400 jobs in Ontario and added 2,200 in Quebec in March. Ontario’s manufacturing employment in March 2021 was up 8.4% compared to year-ago levels; Quebec’s manufacturing employment was down 1.3%. The two provinces represent 73% of the nation’s manufacturing jobs.
  • The automotive industry is one of Canada’s largest manufacturing subsectors. Canada’s auto sales rose 10% in February compared to January, but were down 9.9% year-over-year, according to Scotiabank analysis of Wards Automotive and DesRosiers Automotive Consultants data. US sales saw a month-over-month drop of 5.8% in February, and sales were down 12.6% on a year-over-year basis. While many of Canada’s lockdowns eased by late January, greater Toronto – which accounts for a fifth of the country’s market – remained under tight restrictions in February. The semiconductor shortage put a damper on sales on both sides of the border as inventory shrank. The shortage is estimated to have contributed to a 10% drop in North American automotive production in the first quarter of 2021, according to Wards Automotive. US sales were also hurt by February winter storms in many parts of the country. Improving economic conditions, vaccine rollouts, and stimulus programs are expected to prop up North American automotive demand unless supply chain shortages persist.
  • The COVID-19 pandemic has exacerbated an existing labor and skills gap in Canada’s manufacturing sector, according to a Canadian Manufacturers and Exports (CME) survey released in December. About 80% of Canadian manufacturers surveyed reported having a labor and skills shortage. The CME suggest the gaps are likely due to a number of factors including worker health concerns amid the pandemic, disinterest in the sector, childcare obligations, or government economic support for unemployed workers which could be discouraging them to find jobs in manufacturing. More support for women, immigrants, and temporary foreign workers could help close the labor and skills gap, according to the CME. A national childcare program and retraining for people who lost work in other industries could also help.

Apr 19, 2021 — Rising COVID-19 Cases Lead To Fresh Lockdowns

  • Amid rising infection rates and the emergence of more virulent coronavirus variants, several Canadian provinces reintroduced tighter restrictions in January. Ontario issued a stay-at-home order on January 14, 2021 for the entire province. For much of February, stay-at-home-orders in Ontario’s public health districts were gradually lifted. Toronto’s stay-at-home-order was among the last three to be lifted on February 22. New restrictions were also put in place in January in Alberta (eased February 8), British Columbia (extended indefinitely on February 5), Quebec (eased February 8), and Manitoba (eased February 12). Amid concerns about new, more transmissible coronavirus variants, Canada’s prime minister urged Canadians to avoid travel.
  • Since hitting its low point in April, Canada’s retail sector has added back more than 480,000 jobs. In January and February 2021, much of Canada was under stay-at-home orders and many non-essential retail businesses were closed. In January, the retail sector shed 210,000 jobs compared to December. However, 215,000 retail jobs were added in February and March and March employment was above levels seen the same month in 2020.
  • The automotive industry is one of Canada’s largest manufacturing subsectors. Canada’s auto sales rose 10% in February compared to January, but were down 9.9% year-over-year, according to Scotiabank analysis of Wards Automotive and DesRosiers Automotive Consultants data. US sales saw a month-over-month drop of 5.8% in February, and sales were down 12.6% on a year-over-year basis. While many of Canada’s lockdowns eased by late January, greater Toronto – which accounts for a fifth of the country’s market – remained under tight restrictions in February. The semiconductor shortage put a damper on sales on both sides of the border as inventory shrank. The shortage is estimated to have contributed to a 10% drop in North American automotive production in the first quarter of 2021, according to Wards Automotive. US sales were also hurt by February winter storms in many parts of the country. Improving economic conditions, vaccine rollouts, and stimulus programs are expected to prop up North American automotive demand unless supply chain shortages persist.
  • Canada’s retail sales decreased 1.1% in January 2021 compared to the prior month, and were up 1.3% compared to January 2019, according to Statistics Canada. Sales were down in six out of 11 retail subsectors as about 14% of retailers were closed in January due to COVID-19 restrictions. The average length of the retail shutdowns was three business days. Subsectors that saw large declines in January sales included clothing and clothing accessories stores (-17.8%); sporting goods, hobby, book and music stores (-16.8%); and furniture and home furnishings store (-15.1%). Subsectors that saw growth in January included general merchandise stores (+3.3%), building material and garden equipment and supplies stores (+2.9%), and gasoline stations (+0.9%). On an unadjusted basis, January’s online sales – which don’t include online-only US outlets like Amazon – were up 110.7% year-over-year, and reached $3.5 billion. Canada’s full-year retail sales were down 1.4% in 2020, marking the largest decline since 2009. Statistics Canada’s advance estimate for February retail sales is a rise of 4%.
  • Canada’s changing approach to pandemic relief may affect some consumers’ buying power. The Canada Emergency Response Benefit (CERB) expired in early October. In August, Canada’s federal government created a C$37 billion plan that increases accessibility to EI and provides three new relief benefits which aim to help workers who do not qualify for the EI expansion. The new benefits are the Canada Recovery Caregiving Benefit (for workers who need to stay at home to provide care to another person), the Canada Recovery Sickness Benefit (helps workers who are ill or must isolate due to COVID-19), and the Canada Recovery Benefit (for workers, including self-employed and gig workers, not covered under EI or the two other programs).
  • Retailers that have experienced decreases in year-over-year gross revenue may apply for assistance under the Canadian Emergency Wage Subsidy (CEWS). The funds are to be used for payroll and business expenses. Originally set to expire the first week of June, CEWS has been extended four times and is now set to run through June 2021. In early January, Canada’s government made changes to the CEWS program that set the maximum top-up subsidy rate at 75% for companies with a revenue drop of 70% or more. The CEWS program has lower-tiered top-up subsidy rates for companies’ whose revenue declines have been less severe. As of April 11, 2021, the CEWS program had paid more than C$74 billion to more than 440,000 employers.
  • Large retailers could benefit from the Large Employer Emergency Financing Facility (LEEFF) program. Announced on May 11 2020, LEEFF aims to keep companies that have been hit hard by the epidemic operating and enable them to retain their workers.
  • Amid rising infection rates and the emergence of more virulent coronavirus variants, several Canadian provinces reintroduced tighter restrictions in January. In most parts of Canada, restrictions were eased through February. However, on April 16, Ontario’s premier imposed a stay-at-home order that would remain in place for at least six weeks amid rising cases, the spread of new variants, and spikes in hospitalizations. Earlier in April, Ontario closed all in-store non-essential retail. COVID-19 cases were also on the rise in Alberta, British Columbia, Quebec, and Saskatchewan. Quebec imposed lockdown measures in hard-hit regions through April 25. British Columbia and Alberta also announced tighter restrictions.
  • Retail industry watchers in Canada worry the repeated closures in the sector will worsen its ability to attract and retain top customer-facing talent, an issue that pre-dates the pandemic. After repeated layoffs and furloughs, frustrated retail workers may not want to return after Canada’s economy finally and completely reopens. Workers may also avoid frontline retail work because they fear for their health and safety. Industry experts say the key to winning back top retail talent is through better wages, improved training, and a clear path to career advancement.

Apr 19, 2021 – Auto Sales Hurt By Semiconductor Shortage

  • Canada’s wholesale sales dropped 0.7% in February compared to the prior month to C$68.8 billion, marking the second monthly decline in three months, according to Statistics Canada. The February decline in wholesale sales was led by weaker results in the building material and supplies subsector which fell 6.1% amid higher prices for lumber and weak housing starts in the US and Canada. Wholesale sales for the motor vehicle and motor vehicle parts and accessories subsector were off 2.5% as a semiconductor shortage caused by COVID-19-related supply chain disruptions slowed vehicle and auto components production. Wholesale receipts were also down for food, beverage, and tobacco (-0.9%), and machinery, equipment and supplies (-0.4%).  While February’s wholesale sales were down month-over-month, they rose 6.5% compared to the same time a year earlier, and were the second-highest on record.
  • The wholesale sector’s recovery is not indicative of an economy-wide economic rebound from the impact of the COVID-19 pandemic, according to Statistics Canada. The wholesale sector has likely remained resilient as Canadian consumers made changes to their spending habits. For example, consumers spent more on food but went to restaurants less frequently. Similarly, as entertainment and travel spending dropped, spending on building materials for home renovations increased. However, some wholesalers still face challenges. A Canadian Survey on Business Conditions released in March 2021 tracked top concerns of major industrial sectors in the first quarter 2021. More than 45% of wholesalers reported they faced supply chain challenges. Nearly 40% said fluctuations in consumer demand was a major obstacle. About 35% said there was insufficient demand for goods or services, and 35% said costs of inputs were rising.
  • Wholesalers are expected to adjust their supply chain strategies after the  pandemic exposed weaknesses. Many industry experts say that the supply chain issues are occurring because product distribution systems in Canada and throughout the world are tuned to supply consumers with just enough of what they need on a given day. Canadian wholesalers experienced challenges in sourcing goods and materials from other nations as well as domestically as manufacturers temporarily stopped production or worker illness shut down suppliers. In a recent survey by HSBC, about 20% of Canadian companies said they planned to diversify their supply chains, both in terms of the number of suppliers and geographically.
  • Between April and December, the wholesale sector added back 62,500 jobs. The sector shed about 2,000 jobs in November, then lost another 7,300 in December. The wholesale sector lost more than 21,000 jobs in January 2021 as much of the country was under tight stay-at-home restrictions. Wholesales sector employment remained largely unchanged in February and March as the spread of new coronavirus variants led to spikes in new cases and lockdowns measures.
  • Amid rising infection rates and the emergence of more virulent coronavirus variants, several Canadian provinces reintroduced tighter restrictions in January. However, on April 16, Ontario’s premier imposed a stay-at-home order that would remain in place for at least six weeks amid rising cases, the spread of new variants, and spikes in hospitalizations. COVID-19 cases were also on the rise in Alberta, British Columbia, Quebec, and Saskatchewan. Quebec imposed lockdown measures in hard-hit regions through April 25. British Columbia and Alberta also announced tighter restrictions.
  • Large wholesalers could benefit from the Large Employer Emergency Financing Facility (LEEFF) program. Announced on May 11, 2020 LEEFF aims to keep companies that have been hit hard by the epidemic operating and enable them to retain their workers.
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