Texas businesses returning during coronavirus are unlikely to spur fast economic recovery

Serving San Antonio for more than 60 years, The Barn Door Restaurant has long prioritized treating patrons with warmth and friendliness. Donna Heath has proudly upheld that standard as a manager, and she often greets guests by name and sometimes with a hug.

But when the restaurant reopened Tuesday night for the first time after closing its dining room during the coronavirus outbreak, it meant new responsibilities for Heath — ordered by Gov. Greg Abbott.

“It’s going to be really hard for managers,” Heath said in an interview, “because we have to make sure the new procedures are followed while also maintaining our warm relationship with our guests.”

As part of Abbott’s goal to energize the flailing Texas economy, restaurants have been given the all-clear to open dining rooms at half capacity beginning Friday, up from the 25% capacity cap he ordered when initially allowing restaurants to reopen with restrictions in early May. Child care facilities, bars and sports events will also now be able to return with restrictions in place, Abbott said.

But the workers and customers who are beginning to reemerge into a society still grappling with a spreading virus are navigating a vastly different world than the one they left behind weeks or months ago. During his announcement Monday, Abbott made clear he was trying to get the economy moving again while also limiting the spread of the virus. He repeatedly told Texans to keep their distance from each other and routinely wash their hands.

“The more we do that, the more we can safely open up,” he said. “The more safely we can open up, the more Texans can get back to work, pay their bills, get off the unemployment lines and get back into the workforce.”

But the power Abbott and officials across the globe used to close businesses and stop the spread of the virus does not extend to the economic revival, analysts said. As Abbott hands control of reopening back to business-owning Texans, not all restaurants, retailers, gyms and hair salons across the state will do so.

“It’s not that easy to reopen and everybody comes back and you just turn on the faucet,” Joyce Beebe, an economist at Rice University, said in an interview.

In allowing more businesses in Texas to open, Abbott has said he’s following data and experts to guide his decisions. However, reopening criteria issued by the White House suggest that states should have a “downward trajectory” either of documented coronavirus cases or of the percentage of positive tests. Abbott has said he’s been focused on slightly different numbers to help guide the reopening, including the rate of Texans hospitalized due to the coronavirus.

“Gov. Abbott’s focus is to keep Texans safe while also restoring their ability to get back to work, pay their bills and put food on their tables,” said John Wittman, a spokesman for the governor’s office. “That is why he is opening the Texas economy in a safe and strategic manner that relies on data and doctors and will protect lives while restoring livelihoods.“

The governor has faced criticism in recent months for being too slow to shut down the state — and then for taking too long to allow some businesses to return. This month, he moved to reopen certain businesses sooner than he initially indicated. Other businesses allowed to open with restrictions as part of Abbott’s recent announcement include gyms, zoos, tattoo parlors, bingo halls and bowling alleys. Hair salons were initially expected to be part of Abbott’s latest round of announcements, he said in April, but that changed after pressure from some fellow Republicans to open sooner.

Meanwhile, the state’s economic revitalization — and the country’s — may only go as far as oil and gas will allow, according to the Federal Reserve Bank of Dallas. Already during the pandemic, the price of oil briefly plunged negative, and many Texas oil producers have closed their wells and stopped production.

The energy sector is tightly tied to the state’s economy — and budget. On Wednesday, Abbott, Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen directed state agencies and colleges to reduce their budgets by 5%.

State oil regulators have said the industry, despite its suffering, is not going anywhere, and the Texas economy will rely on global oil demand increasing to send the state’s sprawling energy sector back to work.

While Abbott continues to seek economic solutions, the nation’s top two economic policy leaders, appearing this week before the U.S. Senate Banking Committee, offered contrasting views on how to solve the financial collapse. Federal Reserve Chairman Jerome Powell pushed for more federal aid.

“This is the biggest shock we’ve seen in living memory,” Powell said, “and the question looms in the air of, is it enough?”

Treasury Secretary Steven Mnuchin argued for a wait-and-see approach.

“There is risk of permanent damage” to keeping states closed, Mnuchin said, urging states to reopen business if they haven’t already.

Since Abbott and several local Texas officials first shuttered businesses to stop the virus’ spread, hundreds of thousands of people lost their jobs. The number of Texas families that applied for the Supplemental Nutrition Assistance Program doubled in March compared with the same period last year. Rent programs ran dry in various cities. And demand spiked at food banks across the state.

As officials attempt to revive the economy during the pandemic, outbreaks of COVID-19 have surged at meatpacking plants in the Panhandle, while prisons and nursing homes have become coronavirus hot spots. As Texans adapt to life in the third month of a statewide disaster declaration, cities are furloughing and laying off city employees, and officials have already ordered state agencies to begin making budget cuts.

The return of eviction proceedings has sent renters scrambling for housing, recent college graduates have had job offers revoked, and the state’s outdated and understaffed unemployment insurance office has left countless Texans confused and without unemployment benefits.

With so much economic devastation wrought by the virus, many Texans simply don’t have the money right now to support businesses. And the financial damage has not impacted all income brackets equally.

“One of the things that’s beginning to come into focus given the last jobs report — this shock is disproportionately hitting the lower end of the wage scale,” said Tim Fitzgerald, an economist at Texas Tech University.

As state health statistics show the coronavirus still spreading, Texans are now increasingly being given the choice of how comfortable they feel venturing out and spending money during a pandemic that has infected at least 51,000 Texans, killing at least 1,400 of them.

“I don’t think people are going to rush back. I really don’t,” Beebe said. “There’s a point where people will decide they’ve been staying at home for a long time and decide it’s time to leave. Maybe somewhere in their neighborhood, maybe slowly starting to go to the grocery store or other businesses nearby.”

Restaurant owners and managers said they’re concerned about some workers not returning to work upon reopening because a limited seating capacity would not allow servers who work for tips to net much money. More than 269,000 unemployment insurance claims have been filed related to the restaurant and food service industry in Texas over the past two months, totaling 19% of all unemployment claims filed during that time.

“We’ve cut lunch completely,” Heath said. “We’re only going to be open for dinner, and I do expect we’re going to have a great turnout. We have a hands-on relationship with our guests, we know them by first and last name. So we’ll have to figure out and see what that will look like.”

Disclosure: Rice University and Texas Tech University have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.