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Comment by jedberg | Hacker News Reader

I don’t think any of their models can accurately predict what will happen. We don't have any good prior examples to base the models on. I don't think the economy will recover, but I also don't think it is possible to guess how bad it will be.

I don’t think there is any model that can predict pent up demand.

I know a lot of my friends who still have jobs are talking about going out every night when the quarantine lifts so they don’t have to cook.

If a lot of people do that, we’ll suddenly need a lot of waiters back. And then they’ll have money.

Or maybe everyone will have learned that they love cooking at home and never go out again.

I don’t think there is any way to tell. We don’t have any good prior data.

All the previous models assumed unemployment claims and stock market drops when it was possible for everyone to work.

Right now there are a lot of jobs that are temporarily suspended skewing the numbers.

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But will your friends get haircuts, manicures, massages, etc every day when the quarantine lifts? Pent up demand only helps certain industries, unfortunately. Imagine being a hair dresser with a stack of bills from the shutdown and no big boost to income after the quarantine lifts to help pay things off.

Rough times ahead for many, sadly.

It'll be interesting to see if habits change. It takes 30 days to change a habit. Will people just get used to not eating out. Personally I am enjoying this lack of unnecessarily bullshit spending that is imposed by the quarantine.

I think the change in habit will have catastrophic impacts in the short term. Landlords seem totally willing to let prime restaurant real estate sit open. In my neighborhood several storefronts have sat vacant for years waiting for a tenant that can survive more than a few months. Rents continually increase. This drives up food prices and landlords have become accustomed to those rates. Post-virus the new demand will not support those prices.

I am enjoying spending less money to eat but restaurants will not be able to reduce price to meet the lesser demand because their rents will not go down any time soon. The current restaurants will have to fail and that property will have to sit for potentially years before rent is reduced.

We need a penalty (additional property tax?) on vacant real estate to drive prices back down with shifting demand.

Yes a vacancy tax would help in that scenario. But why would landlords leave the place empty rather than taking some rent. Are a lot of them without debt and own the buildings outright?

There is a coffee shop down the street that couldn’t pay their rent a couple years ago, way before coronavirus. They started a gofundme to bail themselves out and promoted it on the hyperlocal blog. The nouveau riche giddily bailed them out. Landlords here seem to know, consciously or not, someone with money to burn will pay the price.

I’m personally aware of several small businesses that are simply burning capital from family or friends to stay alive. Almost all of it goes to rent.

For us, this was the catalyst that really got us to stick to "no eating out, no takeout, and eat leftovers". We've been trying to do this for months with spotty success. But this has forced our hand.

I've really noticed it in our trash and recycling bins. They've been half full on garbage day since the quarantine. Usually we have more than we can put in them. I'm hoping this behavior sticks for us, but I kind of doubt it.

Also try composting if you can, it has reduced waste going into the bin by about 50%, and that compost can be used to grow more food in a few months time. Most of that compost is the parts of fruit/veg not eaten, such s carrot peel or broccoli stalks.

We have chickens. They eat everything we don’t. And they give us eggs in exchange.

> Imagine being a hair dresser with a stack of bills from the shutdown

Presumably all of those bill are owed to other businesses, who are run by people. People with empathy. People who realize that keep a good customer is better than losing them, even if it means cutting them a break.

I think people will surprise others with how this pain will spread through the entire supply chain so it does't kill any one business. I think all the businesses in the supply chain know that killing everyone at the end of the chain isn't a good idea.

This is a fundamental question we are being and will be forced to answer more directly:

Are we willing to trust our collective empathy or do we need the social contract to fill in the gaps for collective protection from this harm?

I believe many will benefit from empathy, but it will be disproportionate and many communities who will need it the most will not receive it.

Bills are owed to: employees, banks (loans), and landlords. Employees need to eat, banks have no empathy, and most landlords don't either.

The current business model in many companies is to run it with the money from the bank and minimal stocks ("just in time"), so there is no buffer and the impact is going through the entire chain until either kills everyone or hits someone with some buffers. If that's the banks and the government is trying to put some buffers there, it's a good enough plan, if not then it looks like doom for many companies.

But those people also have bills to pay and so on down the line. Without some kind of debt jubilee, we’re going to be paying the consequences of this one way or the other.

Yes. The moment this quarantine lifts, I'm going to go to a proper barber, get a great haircut, and likely pay for extra things like shampoo and shaves which I don't normally. I'm so sick of having to do everything at home, including my haircuts, that I really just want to spend my money.

Not everyone will afford to do that and you will definitely not make up for weeks of loss of business for that barber shop.

Are a lot of your friends the same people that think the shelter-in-place will end soon? Given the situation, even when the shelter-in-place ends (let's say May 1st). No way in hell am I going to go back eating in a crowded restaurant or going to crowded places. No, the recovery of this will take months and by that time, fall is ending and winter is here and the next round of flu/Coronavirus season is starting. I know this is a more pessimistic case but it just doesn't make sense to even think the economy will recover in a couple of months. There is going to be over 100,000+ deaths. You don't just recover within a quarter or two.

I don't think the economy will recover back to it's old levels.

I'm just saying we don't have any prior experience to guess as to how much it will or won't recover.

You're right, we don't but we should lean towards realistic-pessimistic. Anything otherwise we should consider ourselves lucky.

Once 30% of your population is completely broke, demand will be down, no matter how many yuppies want a night out.

What you’re saying makes sense only if these lockdowns are very short.

Of course demand will be down. But we really have no prior data to even guess how quickly it will pick up again.

the constant stream of articles on here about how folks can't pay for any emergency bills would have us believe they're all broke anyways. doesn't seem to have been a problem for the restaurants.

> I know a lot of my friends who still have jobs are talking about going out every night when the quarantine lifts so they don’t have to cook. If a lot of people do that, we’ll suddenly need a lot of waiters back.

What percentage of the U.S. population can actually afford to eat out every night?

Median U.S. household income is about $62K.[1] If you spend only $15 a night eating out, that amounts to $105/week or $5460/year, which is a good chunk of the median household's income, and an even bigger chunk of their income after paying for rent, utilities, taxes and other necessities.

[1] In 2018. Source: https://www.census.gov/library/stories/2019/09/us-median-hou...

It's hard to find data, but in mid 2018 a survey found that 33% of Americans dined out every day at least once. In 2019 a few surveys found that people who eat out at least once a week tend to do it at least 3 times a week, and 10% ate out 5-6 times a week.

So before all this, quite a lot of people dined out a lot.

> 33% of Americans dined out every day at least once

My guess is that most of those meals are people going out for lunch while they're working, and most of those people are grabbing a sandwich and bringing it back to their desks, which generates no income for waiters.

Agreed. But the studies in 2019 would indicate that 10% still go out almost every night to sit down restaurants.

After skipping a few paychecks they will eat at home almost every day until they recover; that may take many months.

My brother who does not make much (works at a gym) eats out each day. Many, many Americans do.

Fast food isn't that expensive. Especially not if you economize; McDonalds has a dollar menu for a reason.

>If a lot of people do that, we’ll suddenly need a lot of waiters back. And then they’ll have money.

By that time every restaurant will have had all its fresh food expire and will need to predict when the demand for it will return. If they do not do this accurately, they risk wasted capital that they'll need for when the demand does come back.

They'll have had to been paying rent or mortgage on the property they currently occupy, with only the revenue they're able to make on take outs.

Depending on the structure, I predict most restaurants won't survive this. Any restaurant with a dining room is toast. The world will look different after the crisis.

The world will look different after the first of the very next month.

> They'll have had to been paying rent or mortgage on the property they currently occupy, with only the revenue they're able to make on take outs.

Everyone keeps assuming landlords aren't people. If you own a commercial building with say six storefronts, once the SIP lifts, you have two choices:

Demand immediate back rent from all your tenants and then evict them all, leaving a completely empty building, or work with them so they can remain open and at least give you partial rent for a while until they can pay you back.

Yes, the government will need to step in and declare mortgages were on hold and no back payment is necessary, but that's already in the works.

I think landlords are smart enough not to just evict everyone as soon as they can. They know that no one will come and take that spot.

It's better to have partial rent than none at all.

>give you partial rent for a while until they can pay you back

And this is the happy choice! Existing businesses will be saddled with the debt of operating through the crisis. New businesses without that debt will have an advantage.

When bankruptcy is logistically more advantageous than debt service, bankruptcy naturally follows.

The world will look different after the crisis.

This is absolutely correct. If all we're going to do is defer expenses, then this will ruin small businesses. We might see a wave of entrepreneurs opening up restaurants at bargain rents, but I don't know that the demand will be able to support them. Existing restaurants are toast, unless they get assistance (not zero loans) to keep running. Zero interest loans still mean debt.

This is looking ahead to next quarter. Optimistic estimates of when things will open back up are looking like "May or June," so I don't think it's plausible to believe in a total recovery by the end of Q2.

Well, a totally naive model would be a uniform prior bounded between 0 and 1. The blog post says that they think it'll be between 0.1 and 0.4. That's more narrow than the naive model, but it's still pretty large error bars. I don't think they have spoken with much more certainty than is justified.

You can create models with various assumptions to arrive at worst and best case estimates.

They're also very much away of these various factors, but know better than to assume there will be major pent up demand with an economic shock of this nature.

These jobs are not temporarily suspended unless the government intervenes on the scale that European governments are. They will be lost, leaving scars on the economy. No one will be willing to endure this again, when needed again in the future, if they have to sacrifice everything all over again.

> I know a lot of my friends who still have jobs are talking about going out every night when the quarantine lifts so they don’t have to cook.

Most of the demand shortfall we're going to experience in the coming months will come from people being out of work, not from their being quarantined. That doesn't create pent up consumption that can unleashed at a later point in time.

Right by my point is that those jobs didn't go away, they're just temporarily suspended. We have no idea how many of those jobs will come right back when shelter-in-place is lifted. It's not a "normal" downturn.

Most businesses have said they will rehire the moment they are allowed to operate again. Why do you think people will be out of work?

A lot of small businesses will no longer exist after this is over. That is one reason. But it seems unlikely we'll be able to exit this without deep structural damage that takes a significant amount of time to repair; there are negative feedback mechanisms that are difficult to overcome even with well-targeted stimulus. The most basic is that unemployment reduces consumer demand which reduces employment demand. It doesn't just go away some sunny day in June either, the slack demand directly due to the virus is likely to be with us for many, many more months to come.

> who still have jobs

Nice caveat!

It will come down to the collective confidence.

Confidence to lend people money, to employ people, to spend money instead of overpaying on the mortgage to reduce the chance of default.

If there is a recession it will be a self-fulfilling prophecy.

It always is. Every recession is feedback loop.

Yes I am probably being tautological!

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