Arizona’s failed response to the coronavirus pandemic is the focus of the Washington Post today. Arizona reopened early to revive its economy. Now, its workers and businesses face even greater devastation.
Arizona had been one of the last states to close, and first to reopen, when the coronavirus started to sweep the nation this spring. But a brazen gamble to restart its struggling economy has backfired months later, threatening to plunge workers and businesses into a deeper financial hole.
Hundreds of thousands of people are still out of a job, some for the second time this year. Restaurants, gyms and other companies are closing up shop once again — perhaps for good. Even government officials say they are bracing for a crippling blow, with the latest shutdown expected to cleave further into their still-souring finances.
The economic devastation comes as Congress prepares to return Monday and begin debating how to structure another round of federal stimulus. The $2 trillion Cares Act, which lawmakers adopted in March, helped buttress the country during the early days of the pandemic. But many of those benefits are on the verge of expiring, imperiling states that are in worse shape than they were nearly four months ago.
Like Florida, Texas and others that opened early, Arizona now ranks as one of the country’s worst coronavirus hot spots, with more than 143,000 cases and more than 2,700 deaths as of this weekend. Some residents in cities such as Phoenix and Scottsdale say the surge is the result of the state’s return to old routines, after Republican Gov. Doug Ducey lifted his stay-at-home order in May in part to give the local economy a boost — leading people to flock, often without masks, to cramped public places.
This time, however, families and businesses that fall into dire straits are at risk of even greater financial trauma: Nearly 1 million Arizonans, for example, are set to lose extra money in unemployment assistance after this week, leaving them with unemployment benefits that are much lower than most other states.
“If that happens, it will spell financial disaster for us,” said Erlynne Campbell, a 47-year-old resident of Phoenix who lost her bookkeeping job in March and then struggled for months just to cash her first unemployment check.
“I obediently stayed home and filed for unemployment,” she said, “and trusted I would be provided for in the time frame we needed to stay home to stay safe.”
In Arizona’s turmoil, local leaders and economic experts said they see a cautionary tale with national import: Those that try to prioritize their economic recovery over public health in the middle of the pandemic are at risk of undermining both.
“Our economy in Arizona, like other states, was tanking,” said James Hodge, the director of the Center for Public Health Law and Policy at Arizona State University. “There was unquestioned political apathy or political backlash toward what was considered heavy-handed government interventions.”
“Many people point to that as the catalyst,” Hodge continued, “a very significant early demand to reopen the economy that was too soon.”
The decision to reopen Arizona arrived amid a wave economic carnage that has spared no part of the country. In one sign of the shutdown’s financial sting, retail, restaurant and gasoline sales dropped dramatically in the metropolitan area covering Phoenix, Mesa and Scottsdale, essentially tracing the borders of Maricopa County, the state’s most populous expanse. Total taxable sales fell by about 6 percent in March and more than 16 percent in April, compared with the same periods a year earlier, according to data compiled by the University of Arizona, depriving businesses of much-needed income.
Some hotels stayed open during the shutdown, but occupancy fell precipitously, troubling a region that relies heavily on tourism and the so-called snowbirds who flock annually to Arizona’s warmer climate. The loss of spring training baseball — which generates foot traffic through Phoenix’s airport, stays at lodgings, dollars for its restaurants, and tax revenue for cities and states — further compounded the headaches during what is typically Maricopa County’s most lucrative period.
“We saw a pretty significant drop in economic activity as we shut down the state,” said Todd Sanders, president of the Greater Phoenix Chamber. “When we started to reopen in May, we started to see it come back again.”
But the economic jolt that soon followed came at a steep price for some Arizona workers and businesses.
“The bars, the clubs, the pools — everything was open. All the nightclubs were open with no social distancing,” recalled Alexis Duron, a 24-year old from Scottsdale. “People were coming from everywhere to travel here, to party here, because yeah, Arizona doesn’t care,” she said. “It was zero-to-100 really quick.”
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Public-health experts, state leaders and residents feared such an outbreak as soon as Arizona reopened for business. Ducey issued a series of orders culminating in a stay-at-home directive at the end of March, only to begin to unwind them throughout May in time for a visit from President Trump.
At no point during the initial reopening did Ducey require people in the state to wear masks. Instead, the GOP governor permitted cities and counties to impose their own mandates in June, well after infections started to spike and some local government leaders openly threatened to defy him.
“I am confident that we have made the best and most responsible decisions possible,” Ducey said at a news conference in early June. The governor declined to be interviewed for this story, but Patrick Ptak, his spokesman, said Ducey has made his decisions “in the best interest of public health.”
“We know people need to be safe and healthy in order to fully participate in the economy,” Ptak said in a statement. “That’s why our decisions have been guided first and foremost by the recommendations of public health and the data.”
In Phoenix, Luz Balanzar came to feel the consequences of a swift reopening firsthand. For months, she had been out of work from her housekeeping job at the Pointe Hilton Squaw Peak, not far from the foot of the Phoenix mountain preserve. When the hotel called her back in May, Balanzar, 53, returned to a job she described as unsafe at the time — with public spaces she felt were not properly maintained and scores of patrons wandering the hallways without masks.
One day in mid-June, Balanzar said she started to feel sore, and soon, she lost her sense of smell, she said with the aid of an interpreter and representative from her union, Unite Here. Five days later, she confirmed her worst suspicions: She had the coronavirus.
Balanzar has been home for weeks without pay, after she said the hotel forced her to tap her paid-time during her furlough in March and April. She said she has since spread the coronavirus to her husband and daughter, and she believes she caught it at the hotel, stressing safety protections “weren’t in place when they opened up.”
In a statement, Rudy Sharp, the general manager of the resort, said it had followed state and local health guidelines but could not discuss Balanzar’s case. “We take the health and safety of our staff and guests very seriously,” he said.
With infections spiking, some workers fear the latest surge in Arizona could prove even more debilitating than the first. Beginning in March, unemployed state residents benefited from an extra $600 in federal jobless aid, offering them a major boost toward paying their rents and mortgages and covering other costs of living. The financial support, authorized as part of the Cares Act, was particularly welcome in Arizona, which only pays out a maximum of $240 each week in unemployment benefits, one of the lowest rates in the United States.
But the extra federal assistance is set to expire on July 25 despite the sustained coronavirus outbreak in Arizona. In Washington, Democrats have advocated for reauthorizing the aid, but Republicans have sought to rework it, contributing to a months-long partisan stalemate over a fourth coronavirus relief package that still persists weeks before an August recess.
“If we were to lose [the benefits], it would be very difficult for residents in so many industries, like tourism, that haven’t returned,” said Phoenix Mayor Kate Gallego (D).
A backlog in unemployment applications still hasn’t been fixed in Arizona, meaning numerous residents newly seeking aid — and many who never received checks in the first place — say they are still battling crippling delays. Thousands of residents have joined multiple Facebook groups devoted to Arizona’s missteps, where many complained last weekend the state wrongly closed their accounts without warning as part of a fraud investigation.
Krista VanAuken, a 29-year old from Phoenix, said the fast-dissipating safety net has left workers like her with little choice: There aren’t many safe jobs available, but Arizona’s paltry unemployment payments may not be enough to cover her monthly bills, either.
“Those are paid for right now,” she said, “but the money is going to run out next month when it’s time to pay rent.”
Businesses leaders similarly are bracing for another round of financial hardship.
Ray Herndon wasn’t happy when he initially had to close the doors to his restaurant, the 45-year-old Handlebar J in Scottsdale, this spring. He estimates the rib joint lost about $100,000 in sales during the busy spring season, even though they switched, like many establishments, to takeout dining.
Herndon said the restaurant tapped federal dollars from the Paycheck Protection Program to help stay afloat until June, when it reopened at reduced capacity. But he isn’t sure how long that might last — and what it might mean if the business has to sustain another round of sizable losses as a result.
“I have a nest egg, but [if] I have to start pulling out of my IRA and everything else to make the restaurant survive, at that point I’d have to have a sit-down with my accountant,” he said.
The Flo Yoga & Cycle studio in Chandler, southeast of Phoenix, had only welcomed back fitness buffs for about seven weeks before it had to close a second time. Ducey’s second round of closures, issued in June, infuriated Debbie Davis and her husband, Eddie, who said they missed out months of revenue at their fitness boutique because of Arizona’s initial stay-at-home directive.
“We just don’t see that happening around us,” Debbie said in July, even as the outbreak reached its apparent zenith. The shutdown, she said, displayed “a disregard of what it takes to operate a business at any size, and a real disconnect to what was actually happening in at least our circle of influence.”
Eddie, her spouse and co-owner, instead faulted the government for conflicting, confusing statements about the coronavirus and the threat it posed. “We still have bills we have to pay,” he added. “All these bills are still coming, and we cannot pull in any revenue right now.”
Some business leaders acknowledge Arizona might have been too quick to try to restart its economy, even in the face of once-unfathomable financial trauma. “I’ll plead guilty to this: We hoped for the best,” said Glenn Hamer, the president of the Arizona Chamber of Commerce. “Arizona’s numbers declined to a point where it seemed we had very good control. . . . We’ve learned a lot of lessons.”
The rate of new, positive coronavirus cases has slightly declined in Arizona in recent days, according to a Washington Post analysis, but it still ranks as the second-worst hot spot in the country. But Hamer, like many of his peers, cringed at the prospect of another directive that might return Arizonans to their homes much as they had been this spring.
“I don’t believe we need to take those steps,” Hamer said.
This is why Governor Ducey won’t issue a stay-at-home order and mandate mask wearing in public to get control of the current coronavirus surge: because our shadow government, the Arizona Chamber of Commerce and Industry opposes it. Its shortsightedness is doomed to failure, and will only make the economic consequences worse in the long run.
The Wall Street Journal (paywall) reports: “Big U.S. companies are deciding March and April moves won’t cut it. The fierce resurgence of Covid-19 cases and related business shutdowns are dashing hopes of a quick recovery, prompting businesses from airlines to restaurant chains to again shift their strategies and staffing or ramp up previous plans to do so. They are turning furloughs into permanent layoffs, de-emphasizing their core businesses and downsizing production indefinitely.”
Politico reports that even those who kept their jobs saw their hours and earnings cut, and now may become permanent. America’s hidden economic crisis: Widespread wage cuts:
Millions of Americans who managed to hold onto their jobs amid the coronavirus pandemic have seen their incomes drop as employers slashed wages and hours to weather what they expected to be a short-term shutdown.
Now, with the virus raging and the recession deepening, those cuts that were meant to be temporary could turn permanent — or even pave the way for further layoffs. That could portend deep damage to the labor market and the economy because so many workers who have kept their jobs have less money to spend than a few months ago.
The numbers haven’t received the same attention as job losses, which are highlighted every week in government data. But at least 4 million U.S. workers have received pay cuts since February even as they continued working the same job, and millions more have seen pay freezes, according to economists from the Federal Reserve and University of Chicago who put out a study analyzing data from the payroll processing company ADP.
Other estimates put it higher: Roughly 7 million workers have likely received a dock in pay, according to Mark Zandi, the chief economist at Moody’s Analytics. Combined with those who have been forced to log fewer hours, the number climbs to 20 million people — or 1 in 8 workers — who have seen their paychecks shrink over the past few months even as they continued to work, underscoring how much harm shutdowns have caused beyond layoffs alone.
“We have an income crisis that is even larger than a jobless crisis,” Claudia Sahm, director of macroeconomic policy at the Washington Center for Equitable Growth, wrote on Twitter recently.
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Notably, the cuts are mostly hitting higher-wage workers, who tend to be more shielded from the effects of a downturn. And smaller paychecks, even in the short-term, lead to less spending, extending any recession.
“The speed of a recovery is really directly aligned to how consumers are behaving,” said Jane Oates, a former Labor Department official who is now president of the nonprofit WorkingNation. “And if people don’t have money, they’re not spending it.”
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The longer the shutdowns continue and the economy lags, the more likely temporary cuts are to turn permanent, or to result in further layoffs, economists warn. If companies resorted to reducing pay as a matter of survival, “then the next thing is, I just gotta cut [jobs] — I have no choice,” Zandi said.
Unlike job losses, which have disproportionately affected low-income workers, the pay cuts are mostly hitting workers in white-collar industries, according to the study of ADP data. Three-fourths of the cuts in pay fall within the top 40 percent of wage earners, researchers said.
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[T]he latest data now suggests the recession is likely to deepen and last far longer than initially anticipated as coronavirus cases reach record highs and a majority of the country has either paused or reversed reopening plans.
New unemployment claims have remained above 1 million, a previously unprecedented level, for 17 straight weeks. And the number of American households expecting to lose income over the next month has begun to rise in recent surveys after six straight weeks of declines, according to Census data.
“Now what we’re concerned about is that some of those temporary wage cuts could become permanent or turn into larger layoffs down the road,” Swonk said.
The current unemployment and underemployment numbers nationally are at depression levels. Arizona can’t reopen its economy because of the widespread unchecked social spread of the coronavirus. Republicans in Congress are opposed to providing more financial assistance to Americans. Governor Ducey responds with half measures designed to do as little as possible with his executive orders. He won’t call a special session of the legislature to increase Arizona’s measly unemployment benefits and to fix the earnings deduction provision. And his eviction moratorium now expires on Halloween, just days before election day, after most Arizonans have already cast their vote early by mail ballot.
Remember in October and November.