What’s the biggest thing businesses need right now to survive? Cash

UPDATED 4/23/20: 4.4 million new unemployment claims were filed in the last five weeks in the U.S.

No one is certain how long it will take for the regional and state economy to recover once the COVID-19 pandemic abates.

But experts said two things are clear. Businesses and residents need cash now to survive so they are prepared when people are unleashed from their homes and businesses can reopen. And, they say, protective measures must be in place to make people feel safe to resume daily life.

“This is not going to be like flipping on a light switch. This will be a gradual peeling back of restrictions that will be accompanied by smart health planning that will also build confidence,” said Ohio Lt. Gov. Jon Husted in an interview with the Dayton Daily News on Thursday. “As those (measures) come online fear will subside, confidence will resume and the economy will begin to head down the runway toward taking flight.”

A vast swath of the American economy has shut down since mid-March and nearly 26 million Americans filed for unemployment - including 964,566 Ohioans - in the five weeks ending on April 18.  Local business and political leaders said businesses and residents are not getting money fast enough now to pay bills after a rocky federal roll out of the $350 billion Small Business Loan Paycheck Protection Program, which is now drained, and continued delays in getting enhanced unemployment compensation.

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“Right now we’re trying to counsel our members,” said Phil Parker, president and chief executive of the Dayton Area Chamber of Commerce. “We’re telling them you need to talk to your banker, you need to talk to your attorney and you need to talk to your accountant for procedures to protect cash.”

The Dayton Daily News Path Forward initiative seeks solutions to the region’s most pressing problems. This story looks at what will help revitalize the Dayton region’s economy when the coronavirus crisis ends and the state’s stay-at-home order is lifted. We interviewed local and state political and business leaders, economists and other experts and analyzed state and national economic data.

The investigation found a mix of pessimism and optimism about the prospects of a quick recovery, all tempered by a deep uncertainty about how and when the deadly COVID-19 outbreak will be in check.

“I don’t see everybody all of a sudden just going back to work as normal,” said Jeff Hoagland, president and chief executive of the Dayton Development Coalition. “It’s going to take time to phase back in. Then that puts us in the fall. And does the coronavirus come back then?”

Parker and Hoagland said preserving cash flow is the biggest issue facing Dayton region businesses now, whether they are temporarily closed or operating at reduced capacity.

“Without cash the business will shut down and all those employees would be laid off,” Hoagland said. “By preserving cash, once we come out of this pandemic, it allows them to ramp up.”

Tight labor market replaced by flood of unemployed

Businesses that had struggled to fill jobs in a chronically tight labor market before the crisis do not want to lose good employees they will need when the economy heats up, said Joanie Krein, vice president-market managerat Manpower of Dayton Inc. She said Manpower is placing highly skilled laid off workers at companies that are hiring, including manufacturing, logistics and skilled clerical positions.

Her advice to companies: do things now to make sure they are an “employer of choice” when the things get back to normal.

RELATED: Coronavirus: 1 million Ohio jobs lost since restrictions began

“Employers need to maintain the relationships they have with their employees, their vendors, keep in good contact with people,” Krein said. “Make sure people feel cared for, feel safe and that they’ve been heard. That they understand their fears and concerns and that we will get through this together.”

Angelia Erbaugh, president of the Dayton Region Manufacturers Association, said many of the group’s member companies have tried to handle staff reductions through furloughs, rather than layoffs terminating employment.

“Everybody’s scrambling to take care of their employees, particularly so they’ll come back after this,” she said.

With consumer spending making up about 70 percent of U.S economic growth, economists also say the recovery will depend greatly on people having money to spend.

“The workers - that’s us - are the consumers,” said Julie Wolfe, state economic analyst for the Economic Policy Institute. “The best thing we can do to jump start the economy on the other side of this is to provide workers with income right now.”

Husted said the state’s overwhelmed unemployment compensation system is still awaiting guidance from the federal government and will likely not have the capacity to distribute enhanced federal unemployment benefits until early to mid-May.

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Ohio offers 26 weeks of unemployment compensation of about half the salary an employee earned while working. The state has paid $926 million to 376,000 of the state’s claimants in the last five weeks, according to the Ohio Department of Job and Family Services. Payments are retroactive to when people lost their jobs.

Bill LaFayette, owner of Regionomics LLC, a Columbus economic consulting firm, said households are piling up debt and people are seeking forbearance from landlords or creditors.

“There are some folks that are saying as soon as the stay-at-home orders are lifted things will just kind of spring back. I don’t think so, in part because obligations are being deferred. They are not being forgiven,” LaFayette said. “In any case that piper will have to be paid. Less spending.”

Nearly 44 percent of workers in the Dayton region, and 47 percent statewide, hold jobs that economists say are at a higher risk of layoffs due to the coronavirus crisis, according to an analysis released on April 3 by the Federal Reserve Bank of St. Louis.

RELATED: Massive coronavirus layoffs: 42% of Dayton area workers at risk

Government programs that quickly help businesses avoid layoffs and put money directly in the hands of those who have lost jobs are key to ensuring people are not “so far behind they’re wiped out,” said Hannah Halbert, executive director of Policy Matters Ohio.

“We may see demand roar back. But we’re not going to if these businesses are shuttered, if they don’t have enough support to make it through the stay-at-home orders,” Halbert said. “And if we don’t see people getting paid there is not going to be people with money to spend.”

Richard Stock, director of the University of Dayton Business Research Group, said the crisis could lead to a longer-term impact on the purchase of goods and services.

“The concern is that the degree to which you start to get a Great Depression mentality where people start to save substantially more,” Stock said.

Experts say this crisis, the result of a highly contagious novel coronavirus that causes COVID-19, may leave consumers afraid to go spend money where people congregate at stores, restaurants, movie theaters, sports stadiums, auto dealerships and tourism spots.

“This has traumatized us all and we really can’t underestimate the effect of just trauma and worry on consumer spending,” LaFayette said. He said the University of Michigan’s consumer sentiment index - which seeks to measure the confidence consumers have in the economy - sunk to 89.1 in March, a 64-month-low, and he expects April numbers are likely to be worse.

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Dayton Mayor Nan Whaley said it is hard to know what “normal” will mean when the pandemic ends.

“I think there will be things that are terribly disruptive,” Whaley said. “Retail was already on the ropes. I don’t think we will ever see retail like before the pandemic.”

Husted said Ohio officials are developing a plan for gradually resuming a normal life, but it will be one filled with protocols for widespread testing and personal protective equipment, hygiene, social distancing and determinations about who is safe to be in close contact with other people.

Husted said one idea being discussed is to possibly provide free testing to people who agree to report in and be tracked, assuming the shortage of tests ends and they become widely available. Those who have developed immunity to COVID-19 would be free to go out to work and travel in the community and those who are not immune would need to adhere to more restrictions and perhaps be able to get priority for an as-yet-undeveloped vaccine, Husted said. He emphasized that that idea is simply in the discussion stage and no decisions have been made.

UPDATE: Small businesses need grit, creativity and cash to survive coronavirus

“This is an unprecedented health and economic virus, the coronavirus,” Husted said. “And Ohioans are responding better than I could have ever possibly hoped for. This state is made up of good, tough people. We are a state which made early decisions and, thanks to Governor DeWine and what people in the state did, we are in a better position to come out of this stronger than a lot of other states. And I truly believe we will.”

Federal help approved

The federal government rushed to put money into the coffers of businesses and the pockets of residents through three stimulus bills, including the $2 trillion rescue package approved by Congress and signed by President Donald Trump in late March. Known as the Coronavirus Aid, Relief and Economic Security Act, or CARES, the bill bolsters unemployment compensation, provides tax relief and billions in low-interest or forgivable loans to businesses, incentives for businesses to keep employees on the payroll and other money to mitigate the impact of the pandemic.

RELATED: Fifth Third deluged with 33K paycheck protection loan applications

Ohio lenders are ramping up to provide businesses with Small Business Administration loans available through CARES. Lenders also welcomed a decision last week by the Federal Reserve to provide funding to assist the banks with liquidity as these large sums of money flow out to businesses, said J.T. Thurston, vice president of public relations for the Ohio Bankers League.

“Small businesses need this money now,” Thurston said “It’s not been as smooth and straightforward as we would have hoped from the bank’s perspective. There are glitches. And we are working through those.”

On Thursday U.S. Sen. Sherrod Brown, D-Ohio, called on the Trump Administration to speed up rollout of the enhanced unemployment compensation and to assist states in processing applications and getting the money to unemployed people.

RELATED: Honda lays off full-time Ohio workers for first time since ‘79

CARES also includes federal stimulus checks to U.S. residents meeting certain income requirements.

Emmalee Kalmbach, press secretary for U.S. Sen. Rob Portman, R-Ohio, said as early as this week “most Ohioans will start receiving $1,200 per individual and $500 per dependent in direct assistance from the IRS to help address their immediate financial needs.”

Local and state governments are moving on multiple fronts to help businesses and residents.

Among those efforts:

  • On Friday the Ohio Bureau of Workers' Compensation board agreed to give Ohio employers up to $1.6 billion in dividends this spring. Earlier the board allowed businesses to defer premium installment payments until June 1.
  • The state's private development arm, JobsOhio, made $50 million in loans available to eligible businesses for bridge funds, to retain employees and keep innovative companies in a growth position.
  • Staff at the local multi-jurisdiction BusinessFirst! program are contacting businesses across the region asking what they need and directing them to resources for help, said Erik Collins, director of community and economic development for Montgomery County.
  • The Dayton Convention and Visitors Bureau is working with the ravaged tourism sector to find future dates for canceled and postponed events, promoting delivery and carry-out for local restaurants and stores, connecting furloughed workers with help and linking hotels with organizations needing to house first responders, said Jacquie Powell, bureau president and chief executive.
  • Montgomery County is continuing with building inspections, while following social distancing protocols, to make sure that construction projects continue moving forward.
  • The city of Dayton created a COVID-19 crisis response team and is closely tracking data and organizing information to apply for funding to assist the community's recovery, said Dayton City Manager Shelley Dickstein.

“I really believe we are going to have to innovate our way out of this,” Dickstein said.

City and county officials both said they’ve learned lessons from how they responded to the 2019 tornadoes that devastated homes and businesses the region.

“I think the key will be to focus on what we can do for the businesses and really listen to what are the needs for the businesses. And just like the tornadoes, look at what can we do to adapt, to pivot and what we do to help,” Collins said. “That’s our biggest goal: how can we help as a community get our businesses back on their feet faster.”

RELATED: Coronavirus slowing Dayton region housing market

Many of those interviewed said the next federal stimulus package needs to send money directly to cities, counties and states at the frontline of the coronavirus battle. Many of them face massive reductions in income tax and sales tax revenue while being required to balance their budgets, officials said.

“It’s hard for the state to respond because we can’t deficit spend,” Husted said. “The state is in a much worse position to help because we are going to have lost revenue ourselves because of loss income tax and sales tax. We are going to be cutting our budget.”

UPDATE: How Dayton region small businesses adapted to survive

Montgomery County announced it anticipates a $20 million shortfall in sales tax revenues and canceled the spring round of ED/GE funding for development projects, Collins said. He said “everything is fluid” but at this point plans are in place for a fall round for the program, which distributes about $2.5 million through local jurisdictions annually.

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How the global economy fares will also impact how things go in the Dayton region and the state. The U.S. has become hugely dependent on supply chains and customers stretching across the world, much of which is also struggling with the coronavirus outbreak and its economic fallout.

“This is an international world that we live in now,” Hoagland said. “We are so interdependent on the supply chain in Ohio, nationally and internationally.”

At this point the global outlook is not good.

The World Trade Organization on Wednesday said world trade is expected to decline 13 to 32 percent in 2020 compared to 2019 due to the pandemic. Exports from North America and Asia will be hardest hit.

How bad it gets will depend on how long the outbreak lasts and what policy responses are. But WTO economists believe the downturn will likely exceed the trade declines that occurred during the 2008-2009 global financial crisis.

Stock said he’s encouraged by a couple of things. U.S. economic fundamentals were “fairly good” before the pandemic. And he said the Dayton region continues to have its perennial ace-in-the-hole - Wright-Patterson Air Force Base - and the huge array of defense contracting businesses that have grown up around it which have been deemed essential.

RELATED: ‘Magnet for high tech:’ How research drives Wright-Patt’s $15.5B impact

“The Dayton region was in pretty good shape. I think that’s what’s sad. There were lots of exciting things on the horizon and just around the corner,” Stock said. “The underlying economic framework in Dayton still should make it an attractive prospect for businesses as they think about expansion. So long term I think our prospects are great.”

He said economists predict two different type of recoveries: a V-shaped one that sees economic activity rocket up quickly or a U-shaped one where unemployment persists, businesses fail and those that survive see diminished sales.

“I am rooting for a V-style recovery,” said Stock. “Decisions the federal government makes over the next month will really impact whether we have a V-shaped recovery or a U-style recovery.”

Dayton builder Charles H. Simms counts himself among those optimistic about the future.

“I think there’s going to be pent up demand for everything: for people getting out, for people buying things,” said Simms, whose Charles Simms Development is continuing construction projects as a business deemed essential by the state.

“I think it’s great what the government’s doing trying to backstop the losses that people have,” Simms said. “Obviously its not going to solve everything but we are a resilient country, a resilient state, a resilient city.”


Ohio Department of Job & Family Services Unemployment Application - 1-877-644-6562 JFS.Ohio.gov

BusinessFirst - 937-225-4351 BusinessFirstDaytonRegion.com

Ohio Department of Development Services - BusinessHelp.Ohio.Gov

Ohio Means Jobs job search - OhioMeansJobs.com

Tips for businesses to survive the downturn

Review financials and cash flow.

Plan on a six to eight month drop in revenues and plan how to bridge gap.

Get credit line approved now.

Communicate with lenders.

Prepare for and consider applying for a Small Business Administration loan

Pursue accounts receivables.

Cut overhead, including all unnecessary costs.

Keep staff informed, safe and consider cross-training.

Communicate with customers using phone, email and social media.

Understand your insurance policy.

Expand supply chains.

Source Ohio Development Services Agency

About The Path Forward

Our team of investigative reporters digs into what you identified as pressing issues facing our community. That led us to form the Path Forward project in June 2018. Our team of investigative reporters seeks solutions to these problems by investigating how the region is preparing for the economy of the future. For more of our coverage, go to DaytonDailyNews.com/pathforward or join one of our groups on Facebook.

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