Historic jobs report signals fragile recovery. ‘I didn’t hire a single person back,’ says NYC restaurant owner
The U.S. labor market added 2.5 million jobs in May, the Bureau of Labor Statistics announced, surprising many who forecast another terrible month as the economy – broadly shut down in an effort to contain the coronavirus pandemic – limps back to life.
The unemployment rate dropped to 13.3% from 14.7% in April.
“These outcomes are huge surprises relative to expectations for several million more jobs lost and another large increase in the unemployment rate,” wrote JP Morgan analyst Michael Feroli.
While the slow reopening of the U.S. economy gets credit for the historic job gains, the Independent Restaurant Coalition warns that the employment gains are fragile.
Food services and drinking places accounted for half of the job gains in May, but employment only rose by 1.4 million. Restaurants and bars, among the businesses hit hardest by the coronavirus shutdown, lost 6.1 million jobs in March and April.
“I have not hired a single person back,” Amanda Cohen, chef and owner of Dirt Candy, a restaurant in New York City, told Yahoo Finance. Cohen is on the advisory board of the IRC, and is trying to help Dirt Candy and other restaurants survive the economic downturn.
The IRC has called for the implementation of a $120 billion restaurant stabilization fund to ensure that the path to recovery is sustainable and restaurants have the funds they need to operate at reduced capacity as a social distancing measure.
“Restaurant workers continue to make up the largest share of America’s jobless,” the IRC said in a statement. “Congress needs to pass a relief package specifically designed to protect our industry. Some independent restaurants are able to reopen, but the odds of staying open have grown nearly insurmountable. Restaurant owners face massive losses in revenue due to social distancing guidelines and increasing costs of supplies, and risk being forced to close again at any time.”
‘PPP was totally unhelpful up until this moment’
Cohen laid off her entire staff of 33 when New York Gov. Andrew Cuomo told restaurants to shut down in New York City in March as coronavirus cases surged.
“It was nerve wracking. I definitely missed out on the first round [of loans from the Paycheck Protection Program] and I was not convinced I would get it on the second round,” she said. “There was so much information going around it was hard to know what to listen to and what to filter out.”
Cohen secured a $275,000 loan in the second round of PPP funding, but her struggles were far from over. It took a strong lobbying push by the IRC for restaurant owners like Cohen to gain clarity on how they could spend PPP funds without hurting their business.
IRC members addressed President Trump directly in May and reached out to Senate Majority Leader Mitch McConnell, Minority Leader Chuck Schumer and other lawmakers.
Trump signed off on fixes to PPP on Friday. Previously, the program required that business owners spend their loans within 8 weeks in order to get it forgiven. The new legislation extends that time frame from 8 weeks to 6 months or the end of the year, whichever comes first.
Business owners who would rather repay the loan have now been given 5 years, instead of 2. The amount of the loan that has to be spent on payroll expenses to ensure forgiveness has also been reduced.
“We have so much more time to use the money, which was the best thing that could have happened to us,” said Cohen. “So instead of it being 75% for payroll and 25% for rent and everything else, the split makes more sense, where I can make 60% on payroll and 40% on utilities and rent and everything else.”
New York City Mayor Bill De Blasio has indicated that restaurants might be able to reopen next month for outdoor dining.
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