V-Shape in services spending is vital to main street
|A Safe Re-opening is Vital for Service Businesses
It is generally well understood that the COVID-19 crisis and the efforts to contain it present a major threat to retailers, leisure & hospitality and the parts of the healthcare system not involved with the important work of fighting the virus. A factor that is slightly less widely followed is the forced change in the composition of consumer spending is a threat to Main Street.
In this report, we examine how the cratering in consumer spending on services is nothing short of an existential threat to Main Street. The Commerce Department recently polled small businesses about the impact of the pandemic.1 The largest share of businesses reporting a large negative effect were in sectors that have come to be synonymous with the challenges of this crisis like accommodations, entertainment and education (Figure 1). Some highly impacted business categories were less intuitive like healthcare (due to postponed non-life-threatening services) and mining (due to unprecedented low oil demand), but also “NAICS 81—other services.” When you look into the subcomponents that comprise that “other” category, you see the same services and businesses you would see on a walk down Main Street in any town in America: churches & civic organizations, barber shops & beauty parlors, auto repair places & car washes, and laundromats & dry cleaners (Figure 2). In fact, the healthcare component also includes another familiar spot on Main Street: the dentist office.
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