Wednesday, April 8, 2020

When Businesses Die, Bringing Back Their Services Won't Always Be Possible

By Brian Doherty - April 08, 2020 at 11:30AM

U.S. economic output is down around 29 percent over the past month, and as The Wall Street Journal anticipates, we likely haven't seen anything yet: so far that "doesn't consider how much output will be further lost due to additional demand-side drops from higher unemployment and the loss of household wealth on household and business spending."

The short-term loss in economic activity of the past month has been three times as large as after 9/11, with over 700,000 jobs (almost certainly undercounting what we'll find in another month) disappearing as the virus spread and businesses which depended on people being near each other were squashed.

Many American businesses, not to mention households, can't ride out months of enforced lack of income solvent and ready to roll back to action on the other side of the pandemic.

The number of moving parts in our economic engine is vast; one among many grinding to a complete halt is event production, in a world where people just aren't meeting anymore. You know, the people who make sure all the equipment and chairs and tables and poster boards and lights and sound equipment and displays all show up and work properly at the same time they are needed. It's the kind of unsung entrepreneurial effort that keeps our normal world quietly and unobtrusively humming.

Jobs in this space have disappeared in the past month. It's an industry, reports the Washington Business Journal, that overall "employs nearly 6 million people and generates $249 billion in labor income nationwide," according to a 2018 report from the Events Industry Council.

For now, none of those events are happening and none of that money is coming in. From roadies to production companies, the industry is on the ropes—an industry that claims to support "more jobs than oil and gas extraction, telecom, automobile, food, chemical and machinery manufacturing combined."

Denis Egan ran an event production company simply named "Event Productions" out of Alameda, California, across the bay from San Francisco since 1994. By the end of January, he was seeing signs that some events he was booked for around the University of California San Francisco were being axed. Then, he said in a phone interview, "everything started canceling and canceling. It got worse and by March—well, we didn't have a single event in March—and everything gets canceled as far as the eye can see."

His business was on the smaller end of his field, in better times doing 100 or so events a year, with eight regular employees, a union operation, setting up tables and their scrims, poster board displays, exhibit displays, chairs, and the other accoutrements for meetings of groups such as the American Society of Radiologic Technologists, Phillips Pet Food & Supplies, the New Living Expo, and confabs of colonoscopy professionals.

Setting up equipment for an event isn't just about what happens on the day of the event. The business needs to have all the things the event needs, and the dollies, forklifts, and trucks required to move them into place where and when needed, then get them out, with no room for tardiness. The events happen when they happen, and their facilitators must work flawlessly and be perfectly stocked.

Egan's operation thus needed a huge warehouse space, for which he can no longer afford the $20,000 monthly rent, with all his anticipated jobs canceled through September.

Egan isn't optimistic that trade shows, corporate events, concerts, or "any large groups of folks," will come back soon. "Things might be back to normal in a couple of months maybe for trucking or manufacturing where [workers] can stand 6 feet apart," he suspects, but "I don't see meetings, trade shows, concerts coming back until there's a vaccine."

The bigger companies in the space, Egan believes, will likely "still be around at the end of this. They have reserves, banks will back them." But smaller independents may well be gone. His business definitely will be.

His operation, he says, was among "the smallest level of independents who do this sort of work," typically grossing in normal years between $2 and 2.5 million, setting up at places like the smaller halls in Moscone Center in San Francisco or the San Jose Convention Center, packing the trucks the night before, showing up with the material and manpower before sunrise to get the event space ready for the attendees, then getting it all out and back to the warehouse by the end of the day. It's a lot of grueling physical labor and brain-bending logistics, and nearly all of us who enjoy it as attendees of conferences, conventions, or trade shows never have to think about it for a second.

Everything Egan had to keep for his clients' needs has to be liquidated now. These goods might end up taking in pennies on the dollar of his initial cost to obtain the items.

Those of us who want to be optimistic about the future of the economy can calm ourselves by remembering—rightly!—that all the stuff of our actual wealth will remain on the other end of this. Why get so disturbed by the economic disruptions of today when, long-term, all the knowledge, techniques, manpower, physical capital—the actual stuff by which we meet our needs and improve our lives—will still exist?

But Egan's story makes clear that while after he sells off his stock, dozens of people who just need some chairs, tables, carpets, dollies, trucks, forklifts, or pipes and drapes (to form temporary walls) will have them, but the usefulness of the collection in meeting the needs of event organizers will be gone. For this particular set of stuff, that concentrated ability to meet a specific set of human needs will never come back.

Egan will be OK—he's near retirement age and he owns a home free and clear. His workers are now out of a job, though, and with no industry in which to expend their particular skills and knowledge. And he worries some of his clients won't be able to use the remaining huge operations for whom, say, a mere $80,000 job isn't worth bothering with when they might have bigger conferences to put on that will earn them more money.

Tony Villarreal, who owns a Michigan stage audio and production company, was quoted in The Oakland Press, "holding on to our staff and equipment to weather the storm is a must" to have any hope of a functional business on the other end. Egan couldn't afford to do that, so he and other entrepreneurs who needed to be able to spring back into action with their specific objects and skilled workers will see the value their human and physical capital represented scattered to the winds.

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