One of my readers emailed a sad but eloquently-written note from a business owner forced to throw in the towel.
Expect millions more similar stories.
It’s with a very sad heart that we are announcing the permanent closure of our hair studio.
This decision did not come easily, and was unanimously agreed up by Amy, Annie and myself. We simply can’t continue to acquire more debt without income.
With Governor Wolf’s latest extension of the stay at home mandate, and with no end in site for the salon industry, we have no choice. We are saddened, overwhelmed, and also outraged.
We are distraught over the loss that our team will experience. We are so sorry for them and for all of us.
We are forever grateful to this community for welcoming us with open arms and allowing us to succeed. For 16 years, we ran a thriving and happy business, gone in a matter of weeks based on the decisions of one man with too much power.
To all of you who have supported us over the years, we thank you from the bottom of our hearts. We will miss you tremendously. You are our friends, our confidants, our people.
For anyone who purchased a Gift Card after March 17, 2020, over the next 7-10 days you will see a full refund. Thank you so very much for believing in us!
With Love,
Amy, Annie, and Rachael
Anywhere, USA
I removed the name of the studio but left the rest intact. The integrity of the owner is commendable, refunding gift cards.
This very sad story will be repeated countless times in the next few months.
Disastrous Small Business Losses
Small businesses have been hit extremely hard. I covered that aspect in Job Losses by Size of Company: Who Lost the Jobs?
The 1-19 employee category is not through the roof because of single-person firms with no overhead, like myself.
I wanted to weed out one-person firms but that data is not available.
I suspect but cannot prove that 3-19 person businesses were the hardest hit by Covid-19.
If you have a store or an office overhead, and income dries up, you are in serious trouble.
When a third employee is added, the likelihood of an office or lease soars.
Number of Small Businesses
In 2018 the SBA reports there were 30.2 million small businesses with 58.9 million employees.
The above stat shows the average small business in 2018 had 1.95 employees. It’s safe to presume small businesses are dominated by those with precisely 1 employee.
Once a storefront or a lease is involved, business risk skyrockets.
A 6.4 Million Discrepancy Between Employment and Unemployment
The BLS reported a loss of 20.5 million jobs.
Unfortunately, that number is on the low side by over 6 million, and the BLS admits it.
For details, please see A 6.4 Million Discrepancy Between Employment and Unemployment.
Inflation or Deflation?
If you believe the Fed’s printing press will soon result in inflation, you are mistaken.
For discussion, please see Inflation or Deflation? Collapse in Demand Trumps Supply Shocks
Yet, Hyperinflationists Come Out of the Woodwork Again.
Expect Millions of Bankruptcies
Unfortunately, millions of small businesses will go bankrupt over this. And bankruptcies are inherently deflationary.
Best Wishes
Best wishes to Amy, Annie, and Rachael … and Joe, Fil, and Roberto … and Sue, Mark, and Katy … and everyone else in similar shoes, Anywhere, USA.
Mish
Are individuals the only entities in this economy who are continually urged (urging usually ignored of course) to have 3-6 months of emergency funds available “just in case”?
What kind of business owners / CEOs / CFOs out there don’t adhere to similar advice?
Oh … that’s right … nearly every entity in the economy follows the lead of all levels of government and the Fed and lives “over the edge” totally financed by debt.
OOOPs … sounds like utter financial incompetence to me …
Two things about this story don’t make any sense. First, of all businesses, hair salons will recover faster than most. Now, say this was a boutique selling purses or ready-to-wear, it might take quite awhile to recover, but hair salons have historically been one of the strongest businesses around during recessions and depressions. My father always told me that hair salons and bars were booming in the 30’s, but no one else did well. Covid changes that for bars, but clearly hair salons are going to pick back up sooner than most. They are open now in my state, so long as the customer and hair cutter both wear masks.
Second, there is absolutely no reason they should be out of money at this time. If they did a PPP loan, it would pay the wages, rent, and utilities. For a hair salon, that should be almost everything. That should get them through May and June, and by the time those 8 weeks are over, they should be running at full capacity.
Thank God I’m essential personnel that easily work from home.
We need to open the economy back up. the vast majority of us will be exposed to this virus eventually. In a couple of years, you’ll either be immune or dead. The only thing the lockdown does is spread out the initial infections so our medical systems are not overwhelmed. I would guess we’re past that threat. If opening up causes problems, we can reverse the decision. We need to use common sense.
The vast majority who die are people who are sick to begin with. Opening up may speed up their death if they get infected, but, not opening will cause extreme hardship on many and may cause deaths in of itself due to despair.
I don’t get why we have to protect the sick and elderly at all costs, but are OK with sending 22 year old peak health men into battle.
We had a similar outbreak in 1957. We didn’t lock down. We asked people to be careful and wash their hands. 116k us citizens died and our population was half what it is now.
Debt Slaves filling for Bankrupcy
Borrow to buy Gold and Silver and join the Bankrupcy mob.
Old Solution for Slavery (Debt)
Before the Hebrews exited Egypt they borrowed from thier neighbors (credit cards)
and left the plagues of Egypt. (and defaulted on their slave master creditor)
Exodus 3:22
But every woman shall aborrow of her neighbour, and of her that sojourneth in her house, jewels of silver, and jewels of gold, and raiment: and ye shall put them upon your sons, and upon your daughters; and ye shall bspoil the Egyptians.
Exodus 11:2
Speak now in the ears of the people, and let every man aborrow of his neighbour, and every woman of her neighbour, bjewels of silver, and jewels of gold.
Better get more monkeys on the printing machines!
April tax collections plummet 55 percent
A sharp decline in economic activity as well as tax cuts approved by lawmakers added to the decline.
05/08/2020
Delaying the filing deadline no doubt played a big part, too.
Rather than closing the economy, why can’t we all just wear masks? That’s all it takes. If every sick person has a mask, there is no one left to spread it.
“Stay Home Stay Safe” is a good slogan but it will land the world in an economic ditch. It is not sustainable. But then the world will accept this only after receiving countless such cards. These losses are being ignored while computing the lives saved due to lockdown.
“Go out, but wear a mask” would be just as effective, but without the collateral damage.
The large corporations are shifting from furlough to early retirement buyouts, to layoffs. There are still a LOT more unemployment claims to be made, but spread out over the next 4 months. An economic depression is unavoidable at this point.
I’m sorry for their loss and it is profoundly sad that our federal government’s non-response has caused this and so many other businesses to fail.
The hard part about this story that people just do not understand is that most businesses are small businesses, and they operate on slender margins. If you are in business and 95% of your receipts are paying for all overhead with five percent or less paying providing your income there simply is no math that allows you to survive any real downturn in the economy, no less months of being closed, and then half a year at functioning at 25% capacity. Corporations can, they will have to ruin their balance sheet to do it but they can borrow.
I have tried to get four seats reupholstered on a table and chair set for my lanai. All closed. No reopen date. Looks like I will be watching a lot of vid’s about reupholstering chair seats. I am not waiting for a vaccine to finish what I started.
And look at this fact, grocery stores operate in an average of less than 1.5% margin on sales. That means they make all their profit after overehead on just a sliver of all sales. If they lose 1.5% of sales to competition they do not go out of business, but they are at break-even. They can pay the wages and bills but there is no profit. Then have something like Covid hit where sales are down more than 20% and the higher margin items just sit there while the bulk lost leaders comprise most sales and you are instantly screwed. Groceries are going to go up fast and not because of supply and demand. They will inflate fast because the stores that sell them to you will have to charge 20 and more percent just to keep their doors open.
If you think we are headed for deflation you are not considering everything in economics. You say nobody wants debt at any rate so the price will have to fall and that is DEFLATION. But remember that rates are inverse to price in the bond markets. If the Fed comes along and says wew will buy any and all debt they are putting a floor under the assets used for collateral that the debt was issued with.
Where is your argument (Mish) that we will have deflation. As far as I can tell your whole deflation argument lay with debt default, debtors can’t pay so they default. That spikes the return owners of the debt must recieve/lowers the price of the debt. Um yeah that is Argentina. Have they had this deflation you are so sure of? No, they have averaged 55% inflation for years now.
The IMF will float them an even bigger and cheaper loan. At lower interest since the last time they defaulted.
There is a true collapse coming but it will not be in the US. Ironically because all other currencies are priced in the US dollar we have trillions and trillions in wiggle room. And if things looked bleak a few months ago with oil prices and such look at what a difference a few strands of RNA make. One little virus and we are suddenly far more powerful than ever.
We are in big trouble. 50% of nation is willing to see a significant chunk of 70 yr old lives lost in order to save economy and current way of life. Other 50% is willing to take a depression and massive change to society… which is noble although i dont think they under stand big picture implications.
The hatred i see coming will split country further and october will be craziness before election.
Whoa…
Side note… my 2 office managers wont come back to work until july. The feds pay more than i do.
Something had to give anyway. We can’t keep going like we have been for the past 30 years. Covid may have been our saving grace, lancing the boil before it got even bigger.
This whole thing is an opportunity to improve how our civilization works. Yes, heads will be busted over it, but I think it’s worth the cost in the long run.
“Terrorism is the best political weapon for nothing drives people harder than a fear of sudden death”. Maybe we can have the guy who said that improve civilization for us. Civilization is a collection of self centered people, cant improve that.
Younger people don’t like the boomers, hence the “OK Boomer” expression. They also want to do the socialism thingy.
The only people wanting to risk people’s lives are rich people and desperate business owners. I sympathize with the later.
And we don’t like the younger Millennial generation, hence the “Okay Debt Slave Dumb Ass” phrase.
Maybe an open business could adopt a dead person (or permanently injured person) or two as a mascot. Hang their picture on the wall so customers will feel privileged that some person gave their life for their business.
A sacrifice on the altar of capitalism–like so many before
You know, life comes with no guarantees.
That goes for business or health or life. Yours, your family, friends, strangers.
There are no easy decisions in this, but there are many people who have experienced losses that cannot be restarted or built again. And many more that are to lose those that they love.
The bizarre thing about this story is thta
9
Fell asleep on the keyboard again there I think…
ROFL: https://www.theguardian.com/world/2020/may/11/mexico-us-sanitizing-tunnels-coronavirus-covid19
The ORANGE MAN will go nuts.
He build Mexico a wall, for free. What a nice orange man.
Maybe Mexico will pay for a wall?
This is being driven by the drug cartels. It gives them a reason to dig drug tunnels!
Talking about businesses reopening: https://www.usatoday.com/story/news/nation/2020/05/11/massachusetts-ice-cream-shop-cape-cod-closed-amid-harassment/3107162001/
With all the achievements of modern technology and medicine where is the irony in a 32kb strand of RNA crashing the whole thing?
When a half bit asteroid lands on it ?
Machine Learning, Artificial Intelligence, etc, etc, all useless.
As I said, the tech companies we have specialize in one thing and one thing only i.e. they all aspire to be the best peeping Tom in the world.
“With all the achievements of modern technology and medicine….”
Ergo: Those “achievements” aren’t all that….
It may make some feel better to prance around pretending “we” are somehow “better” now. But we aren’t. Afghan cavemen still buttkick any self proclaimed “superpower” at will. Viruses still beat us 100-1 at the game of life. And besides, no society with the capacity to “achieve” anything even remotely impressive, would ever fall for something as universally, and obviously, idiotic as a money printing central bank. That and brains are simply mutually exclusive.
American Travelers Are About to Be Pariahs in This New World https://www.thedailybeast.com/with-coronavirus-american-travelers-are-about-to-find-out-what-its-like-to-be-the-pariah
I am not too worried. This is where the Orange Man excels, He will post a diatribe every second melting down the Twitter servers in the process, and by the end, our right to visit Europe whenever we darn well please will be restored.
We have a president that creates 100 tweets a day. Does he ever come out of the bathroom anymore?
Maybe that all means that anyone from europe visiting the US for holiday will face a two week quarantine when they return. Therefore tourism from europe to US will be on hold also. I’m not sure EU would care, if their attitude is to want to close out US and justify their own measures. Already I have seen it presented like this by authorities, that it is not fair on locals to have people entering and travelling when they themselves have had to endure, or still endure, restrictions.
So sometimes it doesn’t look so much science based as in that article, but more like political positioning – I mean what does any politician know on who is carrying the virus given it is basically endemic now ? It is like they are misusing the travel bans they should have put in place when the virus first appeared in Wuhan, and applying them now to suit their own ends…or maybe just disguising the fact that they have messed up their own reaction, pot calling kettle style…or even just trying to make out the lack of travel is because they restricted it, not because people are reticent to.
Ultimately it might be part of installing an individual travel exemption system worldwide, a top down approach on monitoring because locals will see foreigners enjoying privileges in their country that they don’t have. That all adds up to increasing globalist control, and new methods at tracking and surveillance being sold as a way out (to allow travel) , or as a means to bring economic benefits.
If they actually get to the point of low virus and low domestic restrictions, then restricting incoming possible carriers will make sense though (beyond known hot spots) , but basically tourism is messed up either way – if a country has much outbreak people won’t travel there, if the country is low virus then restrictions will be wanted on people from anywhere else. Even virus passpapers won’t guarantee that anyone is virus free, even testing doesn’t. Only quarantine combined with testing (not antibody) is closer to being sure. The rest is just politics.
Most Europeans come here for business and family. For holidays they tend to vacation in nearby countries.
I couldn’t find data which differentiated reason for travel, but ultimately visits equals spending I guess.
Outbound to Europe from US is
And vice versa but only for western Europe
Eastern europe has more US visitors than the reverse, and US to southern europe isn’t mentioned. So very roughly I would call it equal probably.
This problem is made worse by the economy being 70% service based. We would be in better shape if we had not off-shored the massive amount of manufacturing jobs that we did. Especially essential durable goods.
People can get along just fine without going out to dinner, but when their refrigerator craps out, they have to replace it…
70% service based, and probably 50% unnecessary. People are fed. The lights are on. The toilet flushes. The rest of it was essentially entertainment.
Rand Paul commonly has a reasonable and independent opinion.
Yes … right before he flips to the unreasonable and partisan opinion.
Its Definitely sad to hear bankruptcy news. I know it is going to explode in the coming months and these stories will be everywhere in mainstream media. I feel there is something wrong with way the entire small business are operated and managed. Just two month of shut down shouldn’t take out a business which ran for 16 Years.
We need to teach our new generation on debt and concept of saving. It is good to have debt build a business but not to burry it in the long run.
“I’m in debt. I am a true American.” -Balki Bartokomous
mentality should go and one should adopt
“It is the debtor that is ruined by hard times.”-Rutherford B. Hayes
I like your quote from Hayes. Note that the traditional business cycle involves periodic downturns, in which people learn the value of thrift and the dangers of debt. When the weak businesses fail, the stronger ones survive, setting the stage for a strong, long lasting recovery.
That said, however, I expect a long, slower recovery this time precisely because many will be learning the dangers of debt, and will be reluctant to spend, yet, in the long run, it will be for the better.
The Nanny State lockdown is almost completely to blame here, as well as those who supported it. A targeted lockdown of vulnerable people would have been sufficient, and would have balanced the cost-benefit equation in a more reasonable, intelligent way. The people who will really suffer here are mostly working class, not your Bubble-Wrapped upper-middle class, the very people making most of these idiotic decisions.
It’s not just small businesses at risk. Here is a story from my local small county newspaper where many of the front page stories these days are touting how bad things are going to become.
Because of the Feds backstopping, too many were relaxed, taking this as some kind of parlor game where everyone wears masks, stands in nice store lines and avoids each other on the sidewalks.
So this story below is about education, which is a solid Dem constituency in CA, and how serious the cuts are going to be. The virtual tears and hand-wringing is palatable. Actions DO have consequences!
Education is facing deficit of $18 billion
K-12 as well as community colleges staring down shortfall for two years
By John Fensterwald
Instead of $3 billion more in funding next year, officials from Gov. Gavin Newsom’s administration are now projecting possibly $18 billion less over two years for K-12 and community colleges. That amount — a historic decline of more than 20 percent in the constitutionally guaranteed minimum level of funding — would have a devastating impact on education, unless Newsom and the Legislature take other actions to reduce the cut or lessen the impact.
The California Department of Finance released its revenue and funding forecast on Thursday, a week before Newsom is expected to release his revised state budget. Financial data reveal the shattering and immediate impact of the coronavirus on the state’s economy. With more than 4 million Californians out of work and applying for unemployment insurance, forecasts project a drop in sales and income tax receipts by more than 25 percent next year.
…..
Thanks Jojo. I live in Orange.
BTW I hope you meant “palpable” and not “palatable.”
This is every State. Not just CA. What State isn’t financially decimated right now?
Some aren’t as bad. CA is a big state with a lot of people dependent on the government handing out money, which is going to disappear. In another story today, I saw that the plan is to finagle the budget, moving things around AND they are counting on the Feds giving them many billions to backstop their problems. I doubt this is going to play out like they are hoping.
It’s so sad, and so unnecessary. Rand Paul, during his reaming of that imbecile Fauci, described something you’d have to have read in the comments sections here, but wouldn’t hear it from Fauci, and that is, the very low fatality rate amongst younger healthy people. “Paul, a medical doctor, noted during the Senate hearing before the Senate Health, Education, Labor and Pension Committee, that the mortality rate among children ‘approaches zero’, and that for those aged 18-45 “the mortality in New York was 10 out of 100,000.”” Fauci is 79 years old and a prima donna. He should have retired long ago. You can’t have such people deciding economic policy. Why hasn’t Fauci been more forthcoming about the fatality related age and comorbidity demographics?
Did it ever occur to you or Paul that the lower mortality rate is due to the social isolation measures that you are trying to eliminate? How stupid is it to say something is not needed because it is working? Had these measures not been put into place, we would be looking at situations like we saw on cruise ships and military ships in particular, where lack of social distancing caused extensive sickness and death of younger people. Also please do some research on the permanent organ and lung damage done to many of the people who survive. Just because this thing does not kill you does not mean you will ever be the same after exposure to it….
You seem to be an expert on stupid. The closest we have to a no lockdown control is Sweden, and the age and comorbidity fatality risk data is pretty similar to the USA, and so no, I don’t think the lockdown matters. Did you know that the flu raises the risk of stroke? OMG, let’s lock down the economy! Did you know that H1N1 can cause severe kidney damage? OMG, let’s lock down the economy. Did you know that EBV can cause a really nasty nasopharyngeal carcinoma? OMG, let’s lock down the economy! The internet greatly exaggerates the significance of things, and the MSM purposely terrorizes and exaggerates as well. Viruses cause all sorts of things, including cancer, but not in significantly great numbers of people.
There’s no way of knowing to what degree, if any, social distancing is effecting the spread. You can’t compare people shopping for an hour or so wearing masks to people constantly confined together on a boat wearing nothing.
Social distancing makes little to no difference to death rates among younger healthy people. Even the data from the cruise ships confirms this. On the military ships on which we have data, the death rate of healthy young people is about 1 in 15,000 or below 0.01%.
If one is concerned about permanent organ damage (yet to be conclusively proved in the case of Covid-19), then one should also consider the permanent organ damage caused by sugar, alcohol, grains, all kinds of unhealthy stuff that people ingest these days. Where do you draw the line?
Of course no children die of Covid. When they do, the death is attributed to “pediatric multisymptom inflammatory syndrome”, or to “Kawasaki Disease”.
You seems so sure his wasn’t the right route to go. The problem with that’s is your mind is already made up. Regardless of the outcome you will never reverse course.
We are 2 months into something that will most likely last years. The long term health effects are completely unknown. I don’t really thing the shutdown mattered personally. It was going to happen either way.
It will happen again either way. Next time most people will not disagree.
I look at the growing body of data which instructs my opinion, and don’t rely on the MSM which profits by pushing buttons and terrorizing and which is populated by liberal arts majors who read teleprompters and have no clue about the stories they report.
So show the data instead of your hysterical insults. They aren’t compelling.
Here it is. Out of 44,016 deaths reported on the CDC site through May 6th, this is what one will find:
of COVID-19 deaths under the age of 25: 58, or approximately 0.1% of deaths
of COVID-19 deaths under the age of 55: 3,433, or approximately 7.8% of deaths
of COVID-19 deaths 55 and over: 40,583, or approximately 92.2% of deaths
I have shown the NYC data here.
I don’t listen or pay attention to MSM. It’s garbage.
What I do understand is what this thing is. It’s a new virus with almost zero immunity in the general population. It spreads like wildfire. It’s going to resurge and hurt many many people.
The debate seems to now be how many will die Vs the economic impacts. It’s a pointless debate. People are not going to spend money in mass with such instability in the system. That’s all that really matters.
Humans face new viruses on a regular basis. Each flu season brings forth new flu viruses. Many others that we don’t even notice as our immune system takes care of them. You say ‘It spreads like wildfire’. This is true. But I notice you didn’t mention how many it kills. It’s the fatality rate, and more specifically the age-demographic of the fatality rate that is important.
We get mutated versions of the flu virus very year. Our bodies have seen and build antibodies for all flu viruses out there. They are not new just mutated.
Covid is new. Novel. We have zero immunity to it. The reason it’s so deadly is the body has to figure out a strategy to fight it. The body doesn’t have to software to fight the virus so it has to write its own. So peoples bodies are terrible at writing software.
The long term problems this virus could pose to the body is the scary part. Death is terrible but if this thing has a high complication rate long term in survivors, that may be worse. Death is not the worse outcome.
You are talking from fear, not rational analysis.
You compared the flu novelty to an actual novel virus and changed course. We have zero antibodies to covid.
Yes for 10,000 people around the world sars and Mers were semi not novel. For the rest of the human population it was.
As for 60-80 asymptomatic? Pre-symptomatic And asymptomatic are easily confused when not followed up. Originally they didn’t know, best estimates at this point are 6-10%.
The long effects of this virus are complete unknown. If you want to enlighten your self read this article.
With the amount of misinformation I understand the rapidly evolving situation. The fact is we are a few months into something that will be with us indefinitely. Information and science are ever changing and never settled.
“If you believe the Fed’s printing press will soon result in inflation, you are mistaken.”
…
I’ve lost track of the number of stories of CEOs (and staff) / medical workers / sports leagues / school employees taking proactive salary cuts (temporary). There will be more. Things will get worse before better.
A program of automatic credit would have prevented this tragedy…..
I can’t speak for others, but I personally would have no interest at all in loan guarantees. If I wanted to borrow money, I could borrow without a guarantee. If a business takes out a loan, and the business does not come back to where it was, how will the business pay it back? That could just make the situation worse for many businesses.
As for the PPP, it’s true that the PPP doesn’t help me much – 80% of the money will flow through to the employees. For the other 20%, 3% of it I will use to pay utilities, and will the remainder I will pay back to the government. The reason I took it out was primarily to help my employees, but it will have no impact on whether I decide to stay open or not.
Nope. More credit will not help businesses with no customers. This is different from throwing good money after bad money since a lot of these small businesses were viable in normal times. What’s required here is some sort of clause in their rent contracts, etc that would allow them to skip rent, etc when something like this happens.
Paid for by revenue collected from all those who suddenly saw huge income increases as a result of covid, no doubt…..
The solution to this, if free markets are left alone, is 1) huge, massive, reductions in rents (Both commercial and residential, as the latter allows workers to work for less). Leading to similarly huge reductions in valuations of covered space. Leading to massive debt writedowns.
And 2)The huge, massive reduction in cost of doing business resulting from the above, making less contagion exposed lines of business more viable than they are today. Such that employment is shifted to those, instead of just vanishing into the air without replacement. (1000 sq/ft on Manhattan for a buck a month, makes a lot of business models viable which aren’t today. Ditto $1/acre for prime Aspen, Colorado farm land.)
What is specifically NOT a solution, is to bend over backwards to prevent property valuations (which are way beyond destructively pumped up hence too high already) from bearing the brunt f the cost of the required adjustment. Although, this being America in the Fed Age and all, that is exactly the idiot policy being pursued. Go figure….
“What is specifically NOT a solution, is to bend over backwards to prevent property valuations (which are way beyond destructively pumped up hence too high already) from bearing the brunt f the cost of the required adjustment.”
The destruction of property values would bankrupt many municipal and county governments, with the attending destruction of both valuable and marginally valuable services, school funding and the wholesale gutting of pensions.
Drive carefully. Traffic citations may soon be the most secure revenue generator for your city!
Unless you live in a place where “municipal and county governments” own all property, or property taxes are in the 100% range; funding government by way of going into paralyzing debt in order to artificially pump of property “values” of arbitrary non-government entities, has got to be somewhere pretty close to a new world record in inefficient revenue generation.
Loans don’t matter when the revenue stream is permanently gone.