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Two months after reopen, Georgia economy rests on still-shaky consumer

Blo Blow Dry Bar district manager Maria Dowling works on Sara Askari’s hair at the Buckhead location Thursday, July 2, 2020. STEVE SCHAEFER FOR THE ATLANTA JOURNAL-CONSTITUTION
Blo Blow Dry Bar district manager Maria Dowling works on Sara Askari’s hair at the Buckhead location Thursday, July 2, 2020. STEVE SCHAEFER FOR THE ATLANTA JOURNAL-CONSTITUTION

For more than a month, Erin Freer, like the owners of many small businesses, idled her staff and shut down her two hair and beauty shops for women, part of Georgia’s effort to slow the spread of the coronavirus.

Then May came, many restrictions were lifted and the Blo Blow Dry Bar went from zero employees back to nearly full staffing with more than 20. But then, with just a trickle of customers, she had to furlough all but a dozen.

The flow has increased, so she might add a couple more, but business is nowhere near pre-pandemic normal when so many women were looking to buff up hair, nails or make-up.

"It snowballs," Freer said. "If you don't have dates, don't go to bars, don't have events like weddings and proms, don't go to work – you don't need your hair done."

It is, in many ways, the story of the Georgia economy. Two months after the state's shelter-in-place ended, the damage remains and worry about the virus keeps many people from living the way they did. And that only makes it harder for many businesses to recover.

While business data showed the state's economy rebounding steadily in May and early June, progress seems to have slowed. Coronavirus cases have surged again in recent weeks across much of the U.S., including Georgia, threatening to further stall the economic recovery or push it into reverse.

Blo Blow Dry Bar district manager Maria Dowling wears a face shield and a mask while working on Sara Askari’s hair at the Buckhead location Thursday, July 2, 2020. STEVE SCHAEFER FOR THE ATLANTA JOURNAL-CONSTITUTION
Blo Blow Dry Bar district manager Maria Dowling wears a face shield and a mask while working on Sara Askari’s hair at the Buckhead location Thursday, July 2, 2020. STEVE SCHAEFER FOR THE ATLANTA JOURNAL-CONSTITUTION

At the height of the shutdown, 89% of metro Atlanta's health and beauty businesses were closed, according to Womply, a business software platform that tracks spending. As of late June only 17% were closed, but the improvement has leveled off in the past several weeks.

Consumer spending in Georgia had been rising steadily between mid-April and June, only to plateau, still 8.2% below its January level, according to the Opportunity Tracker compiled by Harvard University researchers.

Spending by Georgia businesses edged up just 1.5% in June, according to Cortera, which collects data on company expenditures. Another sign of distress: companies were paying 38% of their bills late.

Many companies are suffering whiplash after entering the crisis with historic momentum. The U.S. economy was in the midst of a decade-long expansion and Georgia's unemployment rate was at a record low.

Burn Boot Camp was hitting its stride as the pandemic hit, said McKenna Meyers, co-owner with her husband of the clubs in Alpharetta and Cumming. "We had just had three of our highest earnings months."

They tried to compensate by offering virtual classes and livestreamed classes, and reopened with careful protocols for spacing and equipment use, and still lost 20% of their members.

They have since added new customers, but their recruits have mostly come from fitness clubs that did not reopen after the shutdowns. So while Burn may be recovering, the overall sector is a lot smaller than it was.

According to Harvard's Opportunity Tracker, spending in Georgia on entertainment and recreation in June was half of what it was in January.

The shutdowns triggered hundreds of thousands of layoffs, but even with the lifting of most restrictions in May, the state has continued to see unprecedented job cuts. Georgia's Department of Labor processed 117,885 new jobless claims in the week ending June 27. About 655,000 Georgians, more than one in eight workers, are receiving unemployment benefits.

Blo Blow Dry Bar district manager Maria Dowling sanitizes the chair after washing a client’s hair at the Buckhead location Thursday, July 2, 2020. STEVE SCHAEFER FOR THE ATLANTA JOURNAL-CONSTITUTION
Blo Blow Dry Bar district manager Maria Dowling sanitizes the chair after washing a client’s hair at the Buckhead location Thursday, July 2, 2020. STEVE SCHAEFER FOR THE ATLANTA JOURNAL-CONSTITUTION

Some big companies have prospered, including grocery chains, big box retailers and Amazon.

Atlanta-based Home Depot is trying to fill 580 open positions in Georgia, mostly in stores or in distribution and warehouse centers, said spokeswoman Margaret Smith. “That’s slightly higher than normal for us this time of year.”

But other large firms have been hurt badly by the pandemic.

With air travel down about 80%, Atlanta-based Delta Air Lines recently warned more than 500 pilots of possible furloughs and early retirements. Mariott has laid off hundreds of employees in metro Atlanta. The closings of area schools triggered layoffs at Aramark, which provided them with food.

The sectors hit hardest by the shutdowns were hospitality and health care – together accounting for more than 1 million jobless claims in Georgia since mid-March.

Any recovery depends on the attitude of consumers. Consumer spending makes up more than two-thirds of the U.S. economy.

When Gov. Brian Kemp ended the shelter-in-place order and lifted most restrictions on businesses, there was at least hope that the coronavirus had peaked. But Georgia's reported cases have risen in six of the past seven weeks, reaching record highs in recent days.

Many consumers are still reluctant to enter crowds – which means less revenue for restaurants, stores and salons. Many businesses do not hold large events – which hurts hotels and conference centers. Many employees work from home — which means they do not go out for lunch or shop on breaks.

When the shutdowns hit, Slater Hospitality furloughed 150 hourly employees as it closed its restaurant, game zone, miniature golf, bar and event space on the roof of Ponce City Market. All the workers were brought back in early May as they reopened, said co-owner Mandy Slater.

But there isn’t as much work as before. Virtually no big events are being done, while the rest of the operations are running at a little better than half normal revenue, Slater said. “You break even for a while. Or try to.”

In health care, many workers were furloughed as non-virus activities – check-ups, dental cleanings, elective surgeries – were suspended. Now, many have been called back to their offices, where they find extra procedures and fewer patients than before.

"Shutting down this business for two months was like telling me I couldn't see my extended family," said Hugh Flax, who has had a dental practice in Sandy Springs since 1996. His six-person staff is now all working, albeit with protocols that include masks, gowns and machines to clean the air.

He is not as busy as he used to be. “We are not quite there yet. I think people are still trying to sort out the issues for themselves.”

Spending on health in Georgia is still down 12% compared with January, according to Harvard's Opportunity Tracker.

Blo Blow Dry Bar district manager Maria Dowling works on Sara Askari’s hair at the Buckhead location Thursday, July 2, 2020. STEVE SCHAEFER FOR THE ATLANTA JOURNAL-CONSTITUTION
Blo Blow Dry Bar district manager Maria Dowling works on Sara Askari’s hair at the Buckhead location Thursday, July 2, 2020. STEVE SCHAEFER FOR THE ATLANTA JOURNAL-CONSTITUTION

In manufacturing, lack of parts and anti-virus measures forced many closures. Since mid-March, more than 210,000 manufacturing workers have filed for unemployment in Georgia. Spending by makers of chemicals, machinery and metal products is running 20% or more below a year ago, according to Cortera.

Yet factories making in-demand goods — like Georgia-Pacific's paper products and many food makers – ran at full tilt. And now production in others has increased, said Sheryl LaPlace, Atlanta-based senior human resources specialist for Insperity, which helps companies with their HR.

Uncertainty about the course of the virus means uncertainty about business, which puts a premium on flexibility, and it also likely means the recovery will not be even and steady, she said. “This is tough terrain, uncharted terrain. And we are kind of going in a jagged line.”

For some companies, the pandemic meant neither closures nor changes in plans.

Alpharetta-based Milletech writes software for connecting and managing company business through the internet. The company has 22 workers here and 140 in India, but for some time has been planning to centralize its staff, said Nasir Mujawar, chief executive.

Milletech plans to partner with the Georgia university system and Historically Black Colleges and Universities to train engineers, he said. That means bringing many of those jobs back here this year —and "all of them, eventually."

The natural churn in the economy continues – people going in and out of jobs – albeit at far great intensity.

New businesses are still being created. Among them, two Atlanta-based entrepreneurs plunked down roughly $150,000 each in recent weeks to start companies: one, a high-end, neighborhood-targeted advertising company, another an environmentally focused cleaning service.

"I have been very busy," said Leslie Kuban, an Atlanta-based franchise consultant who engineered those deals.

Small business accounts for nearly half the jobs in Georgia.

Still, the consumer has final say.

The wave of layoffs has shaken the ability of many low-wage and gig workers to spend, said Adam Roseman, chief executive of Atlanta-based Steady, which provides software to help manage finances.

Many of Steady's roughly 150,000 users in Georgia receive federal pandemic assistance, including a $600 weekly stipend for unemployed workers. "Roughly a quarter are now wholly reliant on (that)," Roseman said. "Roughly another quarter have seen their incomes go to zero."

Whether as ride-hailing drivers, waiters or hair stylists, service workers make up most of Georgia’s work force. But the $600 boost to jobless benefits is set to expire at the end of July. If more aid isn’t on the way, that could send the finances of hundreds of thousands of Georgians — and consumer spending — into a renewed tailspin.

Many companies are already forced to restrict their own business with social distancing and barriers. Yet even worse is the fear that there won't be enough customers even if those limits are lifted, said Erin Freer, the hair and beauty entrepreneur.

“It’s going to be difficult if there’s not a vaccine, with the need to rebuild the trust of customers,” she said. “It is not sustainable. Not currently.”

Blo Blow Dry Bar district manager Maria Dowling wears a face shield and a mask while working on Sara Askari’s hair at the Buckhead location Thursday, July 2, 2020 STEVE SCHAEFER FOR THE ATLANTA JOURNAL-CONSTITUTION
Blo Blow Dry Bar district manager Maria Dowling wears a face shield and a mask while working on Sara Askari’s hair at the Buckhead location Thursday, July 2, 2020 STEVE SCHAEFER FOR THE ATLANTA JOURNAL-CONSTITUTION

Business spending in Georgia compared with a year ago

Building materials and garden supplies: +49.4%

Food manufacturing: +0.9%

Food services and drinking places: +0.2%

Textile mills: -0.6%

Administrative services: -1.9%

Construction of buildings: -8.2%

Food and beverage stores: -21.2%

Clothing stores: -25.2%

Machinery manufacturing: -33.2%

Source: Cortera

Business spending in Georgia, change from May

Food services and drinking: +28.4%

Textile mills: +23.4%

Administrative services: +23.1%

Food manufacturing: +8.2%

Clothing stores: -2.5%

Machinery manufacturing: -14.2%

Food and beverage stores: -15.2%

Source: Cortera

Number of customer visits in Georgia compared with a year ago

Clothing stores: -18.9%

Beauty and spa shops: -60.1%

Food establishments: -53.2%

Retail: -2.0%

Source: Fivestars

Number of customer visits in Georgia compared with week before

Clothing stores: +3.5%

Beauty and spa shops: +18.3%

Food establishments: -4.8%

Retail: -11.6%

Source: Fivestars

Share of Atlanta businesses closed, late June

Arts and entertainment: 20%

Bars: 31%

Health and beauty: 17%

Lodging: 14%

Sports and recreation: 23%

Restaurants: 23%

Retail: 9%

Source: Womply