Service Economy Rebound Post Covid Crash : The Indicator from Planet Money We join Stacey for her first haircut of the year, and discuss the future of the service economy as the end of the Covid-19 pandemic (hopefully!) nears.
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Back to Business?

Back to Business?

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SYLVIE DOUGLIS, BYLINE: NPR.

(SOUNDBITE OF DROP ELECTRIC'S "WAKING UP TO THE FIRE")

STACEY VANEK SMITH, HOST:

A couple of weeks ago, I got my vaccine.

UNIDENTIFIED NURSE: OK. Go ahead. Yeah. All right. Count of three. One, two, three. OK.

VANEK SMITH: Ouch.

UNIDENTIFIED NURSE: Sorry.

VANEK SMITH: That's OK.

UNIDENTIFIED NURSE: All right. You are done.

VANEK SMITH: So that is it, huh?

UNIDENTIFIED NURSE: That's it.

VANEK SMITH: Wow. That's amazing.

UNIDENTIFIED NURSE: Isn't it?

VANEK SMITH: The whole thing took less than 10 seconds. And it was surreal. Like, just like that, the whole economy, the whole world, really, seems to kind of open back up to me. And all of these things started to seem possible all of a sudden that had not seemed possible just 10 seconds before. Like, maybe I could stop obsessively Purelling (ph) everything. Or maybe I could shake somebody's hand or hug one of my friends or get on an airplane and go see my family or maybe even go abroad.

Oh, my gosh, it's my hair salon. I haven't been here for a very long time.

Or, you know, get my haircut. So during the whole pandemic, I did not get a haircut. Hair grows pretty fast, and it just got longer and longer and longer, got very tangled and unruly. It sort of started to take on this life of its own. I felt like it had its own moods, mostly bad moods. It was not a good situation.

Hi, Lisa.

LISA EVANS: Hi, Stacey.

(SOUNDBITE OF DOGS BARKING)

VANEK SMITH: Lisa Evans has been cutting my hair for 10 years at this little salon in Brooklyn called Boy Luv Girl. I usually come see Lisa every two or three months or so. And when I checked in, she looked up when my last appointment had been.

EVANS: November 17, 2019.

VANEK SMITH: That's the last time I was in here?

EVANS: Yeah.

VANEK SMITH: Wow. That's a...

EVANS: That's a long time. That's - so like it's 17 months.

(LAUGHTER)

VANEK SMITH: For the last, oh, roughly 17 months, actually, much of the service economy has been in this kind of suspended animation - restaurants, nail salons, movie theaters, concerts, bars, gyms. Now that people are getting vaccinated on a large scale and things are opening back up, there is this question hanging over the economy. Will the service economy bounce back to where it was before COVID? This is THE INDICATOR FROM PLANET MONEY. I am a fully vaccinated Stacey Vanek Smith. Today on the show, the service sector. Will all of those businesses, all of those millions of jobs come back? Or will the recovery be slow and painful like it's been in some past recessions? And I get my haircut.

EVANS: So what are we doing today?

VANEK SMITH: Well, you can - I don't know - release the Kraken. It's...

EVANS: Yeah, it's pretty long.

(SOUNDBITE OF MUSIC)

VANEK SMITH: Back in March, when New York went into lockdown, Boy Luv Girl salon closed along with businesses across New York and across the country. And basically overnight, millions of professionals like Lisa Evans and all of her colleagues were unemployed. Boy Luv Girl opened back up at the very end of June. And Lisa says, when it opened, she was just booked solid, at least at first.

EVANS: It was super, super busy for a month. Like, so many people were coming in. And then it just really just dropped off. So, like, there'd be some days where I'd have, like, one person. And then I would just kind of go home.

VANEK SMITH: Lisa says this drought lasted through the summer and the fall. And she says it was rough. I mean, she was technically back at work, but almost no one was coming in. She says a lot of her clients had left New York City. And a lot of the clients who stayed just did not feel comfortable coming to get an in-person haircut, even despite the COVID procedures that the salon had put in place.

Then you're not on unemployment. You're like counting on your income. And then you have one client a day. Like, that feels like it might be hard.

EVANS: Yeah, it was definitely stressful.

EVANS: Right now there is a backlog of demand. And some businesses are reporting that they are flooded with customers, more than they can accommodate. After all, there are millions of overdue teeth cleanings and eye exams and pedicures and haircuts. But once that pent-up demand is finished, there is this question hanging over the economy. Will we spend as much money on services as we used to? Will businesses like Boy Luv Girl get the same number of customers they did before? Julia Pollak is a labor economist at ZipRecruiter. She says there is a lot of optimism in the economy right now as more and more people get vaccines and offices and school reopened and people get back to their routines,

JULIA POLLAK: There is huge excitement among employers who are finally able to reopen. They are lifting hiring freezes. They are taking these sort of permanent steps now to reopen and to create jobs.

VANEK SMITH: Still, says Julia, there are some potential roadblocks - for one thing, older consumers. A survey from the Federal Reserve Bank of Cleveland found that many older people say they plan to spend less on services than they did before COVID.

POLLAK: They experienced the worst health effects, and so many now associate being in crowded places or consuming face-to-face services with an intolerable health risk. There's been some sort of emotional scarring in that population that will make people think twice before getting a service.

VANEK SMITH: Another potential issue - substitutions. Julia says a lot of people made really big purchases to make up for the services they were missing. And now, they might just keep on using those.

POLLAK: Those people who invested in Peloton bikes...

VANEK SMITH: Oh, yes.

POLLAK: ...May now cancel their $200 a month boutique gym subscription. People who bought beard trimmers and taught their partners how to cut their hair may continue to do that. Many people invested in home entertainment systems and streaming services. They got these big, flashy flat-screen TVs. And in the future, it may just be more convenient to sit on the couch and watch a movie from home rather than going out to the movie theater.

VANEK SMITH: And, Julia says, even if we do go back to gyms and hair salons and restaurants like we used to, those jobs could still take a while to come back. After all, hundreds of thousands of businesses just didn't make it. They closed their doors. Others cut back locations or services and let some of their workers go. That will slow down growth for a lot of businesses and make expanding and adding jobs slower and harder. Still, Julia says, there are reasons for optimism. For one thing, behavioral economics. In this case, she says, the very well recorded human trait of you don't know what you got till it's gone.

POLLAK: I know that I personally will buy season tickets to the Los Angeles Philharmonic Orchestra for every season for the rest of my life. In the past, I often would think about the decision back-and-forth, you know, can this really fit in my budget? But now I've experienced a world without live music and art, and it's just too ghastly to contemplate.

VANEK SMITH: Aw. Is there a musician or a piece or anything that you are - like particularly would love to hear live right now or that you're looking forward to?

POLLAK: I want to sit back and hear Beethoven's ninth.

VANEK SMITH: Is the ninth - is that "Ode To Joy"?

POLLAK: Yes, exactly.

VANEK SMITH: Oh, that's like dun-dun-dun-dun-dun (ph).

(LAUGHTER)

POLLAK: Exactly, where you saw the orchestra standing up and the whole hall just raining (ph).

(SOUNDBITE OF MUSIC)

POLLAK: So that's the experience I'm now craving.

(SOUNDBITE OF MUSIC)

VANEK SMITH: Julia says there's data showing that many Americans are actually planning to spend more on services and experiences this year than they did before COVID. OpenTable, the restaurant reservation service, reports that the number of restaurant reservations is actually above where it was before the pandemic in states like Florida and Texas. And it's climbing steadily almost everywhere. Hotel occupancy rates are up to 60%, which is not far off from normal levels. Julia says people have realized how much they value things like going out to eat, traveling, going to the theater or being able to get a comb through their hair.

EVANS: All right. How's that feel?

VANEK SMITH: Oh, my gosh, really good. That's - yeah. I was like so long overdue.

EVANS: Yeah.

VANEK SMITH: Lisa Evans, my stylist, says she is also feeling hopeful. In the last few weeks, a lot of newly vaccinated regulars have made long-overdue visits. And business, maybe much like my hair, is starting to seem like it is getting back to normal again.

Thanks, Lisa. I'll see you really soon. Yeah, much sooner this time.

This episode of THE INDICATOR was produced by Britney Cronin and fact-checked by Sam Cai. THE INDICATOR is edited by Kate Concannon and is a production of NPR.

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