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About one year after the first case of COVID-19 was detected in North Carolina and the state’s initial stay-at-home order, the state is moving toward greater reopening.
With declining cases and increasing vaccinations, Gov. Roy Cooper issued an executive order in late February that eased restrictions on a number of indoor venues, allowing for more businesses to reopen and for customers to return to more indoor dining and entertainment.
But despite a shift in a favorable direction for businesses, the economic effects of the pandemic are still severe for many North Carolina entrepreneurs who continue to wrestle with decisions balancing safety, risk, profit, and in some cases, survival.
Current data from the U.S. Bureau of Labor Statistics shows leisure and hospitality jobs decreased by nearly 21% over the previous 12 months, resulting in an estimated loss of one-fifth of the jobs in hospitality and leisure in the state as of December.
Although the order moved the allowance for nightclubs, movie theaters, conference spaces and other indoor meeting venues to 30% capacity, with a limit of up to 250 people total, some business owners say the economic benefits at such a low capacity do not outweigh the liabilities of reopening.
“Our industry relies on high turnover and quick service throughout the night to make a profit,” said Charles Smith, who manages Ibiza Nightclub in Wilmington.
“Opening to 30% capacity would look like something close to a busy Wednesday karaoke night in normal times. … Economically, it doesn’t make much sense.” The club will not yet reopen, he said.
Grady Green, who manages Limelight Dance and Night Club in Greensboro, said that the 30% capacity limit allows him to open his venue for reservations and special events, but Limelight also cannot make a profit operating as a club at that capacity.
“If someone calls and wants to do a wedding reception, we are now able to do that better, and I’m thankful for any little bit, but it would not be beneficial to operate as a nightclub at this moment,” Green said.
“Right now, we’re just keeping our heads down … and hoping we still have a head when this is all over.”
The latest order also allowed restaurants and bars to expand to 50% indoor capacity, though venues have previously said their floor plans and social distancing measures determined more of their maximum capacities than capacity restrictions did in many circumstances.
Hope in spring
As the weather warms once again, a return to outdoor dining may be a saving grace until social distancing measures begin to relax, allowing patrons to ease into restaurant dining.
Even as restrictions continue to ease, the concern persists that customers may not necessarily follow the rules.
“People have varying tolerances for risk, especially after an entire year of learned behaviors,” UNC Charlotte economist John Connaughton said.
“In a restaurant with 50 different people in it, you don’t know who has been vaccinated and who hasn’t. So, we don’t know how quickly people are going to be willing to get back to the way things were.”
Smith said he also feared the public health message that opening too early would send.
“We are monitoring the trends closely and we are looking forward to when we feel safe to open,” Smith said.
“But for now, we worry that opening sends the wrong signal. The last thing we want is for someone to come to our venue and get sick.”
Large public entertainment enterprises, like the Carolina Hurricanes and Charlotte Hornets, are permitted to open their arenas at 15% capacity, which is roughly 3,000 fans for each stadium.
The change also allows college sports to begin hosting some fans, such as those who were able to attend the Atlantic Coast Conference tournament last week, and North Carolina’s 10 minor league baseball teams are currently expected to allow fans when the season starts in April and May.
“My guess is, at current levels, they can’t even break even for the cost of hiring security, ticket takers and the rest of the costs that come with hosting fans again,” Connaughton said.
“It’s a way to try to start getting back to normal and have some fans in the facility, but right now it’s not making money for them.”
Economic data also appears to signal hope for a strong economic rebound in 2021, though projections rely on the presumption that vaccinations will continue at their current pace and that the COVID-19 variants will not hinder progress toward population immunity.
According to projections by both Connaughton and N.C. State University professor of economics Mike Walden, North Carolina’s economic output is expected to return to near pre-pandemic levels by the fourth quarter of this year.
Though overall spending is expected to rebound quickly, the recovery will not be uniform. Different economic sectors, especially leisure and hospitality, are expected to lag and the locations that rely on them will not recover as quickly as others.
According to Walden, locations like Winston-Salem, Charlotte and the Triangle had already recovered to above 93% of their pre-pandemic economies by November, but areas more reliant on tourism, like Asheville and Wilmington, were still below 92% recovery at the same time.
Even where spending is expected to return quickly, economists project that unemployment, which was around 4% in North Carolina before the pandemic, will remain at least 5% or higher throughout 2021 and into 2022 — even though economists expect the state to gain back nearly 10,000 more jobs in 2021 than were lost in 2020.
The answer to this seeming paradox, Connaughton said, is that the losses and gains will not apply equally to all industries.
“Hospitality and leisure only account for about 3% of GDP … but it accounts for around 10% of total employment,” Connaughton said.
“That makes it easy for growth in other sectors to offset losses in that industry, but a large number of restaurants have closed permanently. So even when restrictions are lifted, those jobs aren’t even going to be there for workers to reclaim.”
As a result, areas that have a diversified economy will likely see fewer long-lasting impacts of the pandemic recession in terms of overall economic metrics, but wherever restaurants and bars have closed, a significant proportion of people there will have trouble finding new work in the coming months and years.
A changing economy in NC?
Walden said he sees massive changes to the economy coming in the next few years.
“Economies will always change, pandemic or not,” Walden said.
“But I believe that the pandemic is compressing the future in terms of the economy … changes that would have taken 10 years, I think they could happen in two or three years now.”
Of those changes, North Carolina will see an influx of people moving from more metropolitan states and even North Carolinians moving from cities into more rural areas, Walden said.
Cities like Asheville and Wilmington might recognize that an overreliance on tourism makes them susceptible, and they may look to diversify their economies, he said.
Asheville and its suburbs are already attracting major new investments from other industries, such as Connecticut-based aircraft engine manufacturer Pratt & Whitney and, more recently, Thermo Fisher Scientific.
“This is a moment where these places might reassess their situations,” Walden said. “This might be when they look at their history, at what they’ve built their economies upon. And looking to the future, they might decide they want to go in a new direction. It’s always good for a local economy to diversify, no matter what.”
Connaughton is less convinced. He doesn’t discourage economic diversification, but tourism will continue to remain the major economic driver in these locations, he said.
“We’ve had ebbs and flows in the tourism business over the years, whether due to a recession like 2007 or due to spikes in gas prices,” he said.
“But tourism is always quick to recover because there’s no lingering effects. As soon as people have money back in their pocketbook or gas prices fall, we’re back on it.”
Whether due to lost jobs in the hospitality sector, changing economies, or automation, economists agree that employment will not recover as quickly as the rest of North Carolina’s economy, meaning that the pandemic will have a lingering effect on the thousands who find themselves with no job to return to for months or even years to come.
“The biggest problem here is transitioning those people who are 40 and 50 years old and whose jobs have just disappeared permanently,” Connaughton said.
“Companies don’t hire people like that, who have 20 years of experience in a different sector. I don’t argue against retraining people, but the truth is that the data doesn’t support it as any great success.”
For now, business owners like Smith of Ibiza Wilmington, remain hopeful.
“I’m constantly fielding phone calls from people wanting to know our hours and availability,” he said.
“As vaccines continue to be distributed, I’m hoping I’ll have good news for them by Memorial Day.”