Expert: North-central Montana's small businesses in greatest danger during the COVID-19 crisis
Last updated 3/25/2020 at 3:43pm
Editor's note: Watch for more on local economic impacts of novel coronavirus 2019 in the Havre Daily News.
An expert said that, in north-central Montana, retail and the service industry are poised to be hit the hardest economically in the immediate aftermath of the global COVID-19 pandemic.
Bureau of Business and Economic Research Director Patrick Barkey said there haven't been any major surprises in the week since the Montana Economic Outlook Seminar, but that may not be much comfort.
"Most of the things that have been set into motion have progressed the way people have expected them to, and unfortunately that's very troubling, because they're not going in a good direction," Barkey said.
He said social distancing and general anxiety by consumers has caused spending in the region to drop, affecting local businesses that rely on that revenue to keep people employed.
"What's essentially going on is you are having a cratering of spending, and what's hardest hit of course are discretionary services and durable goods," he said.
Barkey said he expects retail sales to drop by 30 percent at least, and the service industry including restaurants and bars are right to be worried about their long-term financial sustainability. He said these businesses, even more than households, are the most vulnerable during the crisis.
Gov. Steve Bullock extended Tuesday his orders restricting businesses to April 10, including restricting bars, restaurants and casinos to providing food through delivery, drive-through and carry-out services and closing facilities including health clubs, movie theaters, bowling alleys and others.
Barkey said the average citizen can't do much about the hardships faced by many of Havre's small businesses.
"Individually, you can do almost nothing," Barkey said, "... I don't want to be pessimistic about it. I mean, every dollar you spend at a local establishment is going to help them, but with social distancing, I mean, what can you do when the elephant has already stepped on you."
He said the food and health care industries may see some short-term financial gains, but almost every other industry is going to be hit hard by the crisis. However, he also said not every industry will be hit the same way.
"In some ways, with your government base in Havre, you've got some stability there," he said.
Barkey said state revenues will certainly go down but are not in as much trouble as other segments of the economy. He also said impacts to the universities will not be seen in their entirety for some time yet.
Agriculture, on the other hand, is a bit more difficult to predict, he said.
"Agriculture, I'm not sure." Barkey said, "I think ag might be in better shape. As long as we stave off the financial panic, which we've more or less succeeded in doing, then I think ag might be less affected."
He said because the ag industry is so reliant on financing, avoiding panic is vital to its survival and, so far, the damage is not catastrophic.
He said the stock market, despite its losses, continues to trade and no major banking failures have happened, which is encouraging.
Barkey said that measures taken by governments, local and otherwise, to promote public health via social distancing are completely appropriate but will have unfortunate and somewhat inevitable consequences.
"When you shut down economic activity... you interrupt revenue for countless households and businesses, and many of their obligations continue to go on," he said.
"Of all the priorities we have, nationally speaking, for action I think the first 10 of those at least, maybe 20, should deal with public health," he said, "but the economic list, it's gonna rise up like a mushroom cloud."
Barkey said recourse is available for businesses that have been pushed to breaking point by the crisis, but it's something no one really wants to think about.
"We do have something in this country as bankruptcy law, and it does have quite a stigma to it," he said, "But you know we're talking about successful businesses, markets with potential, they have reputations etc. It's not unthinkable that they could emerge from a bankruptcy and resume something close to what they did before. Those are kind of frightening words, but it's kind of a frightening situation."
Barkey said the federal government has a big part to play in providing economic relief during the crisis, but he's not confident they will act in time.
"One possibility, which I don't think is going to happen, is the government helps enough people out in a timely enough way so that we can continue to make their payroll, avoid lots of layoffs and keep their enterprises going," he said, "That's gonna take an awful lot of money that's gonna have to happen very fast."
The U.S. Senate was expected to vote this morning on an aid package doing some of that.
The U.S. Small Business Administration also has made an economic injury disaster declaration, which makes disaster loans available to small businesses in all Montana counties.
More information about the Montana SBA disaster loans will be available on the coronavirus pages at https://www.sba.gov/offices/district/mt/helena .
Barkey said other countries are doing much better at quickly responding to the financial crisis than the U.S. is, particularly Denmark.
"I'm not saying this is right or wrong, but they pledged to make every citizen 75 percent whole on their paychecks," he said, "I'm not saying that's an easy thing to do, I'm not even saying that's the right thing to do, but they've already done it."
He said decisive actions like these boost the confidence of the citizenry and the country's economic institutions, and he thinks Congress is dragging its feet.
"It's just very unfortunate situation that we have these various people bickering over silly little details... it's disappointing bordering on appalling," Barkey said.
He said Congress should be less concerned with accidentally rewarding the "undeserving" and should move more quickly.
"We don't need to be ridged in our philosophy of what is and is not appropriate," he said.
While Barkey said he was frustrated with many aspects of the government's response there is some good news.
"There have been some good decisions made, particularly by the president and the Federal Reserve," he said.
Barkey said that some of the best economic minds in the country are working hard to find a way to help the country out of the economic bind it's in.
"There's a lot of really smart people thinking really hard about this," he said.