The U.S economy that seemed to be roaring back to life over the summer now faces a dark winter. The recovery, just like the recession, has been unequal and, in many areas, hangs in limbo. To see this so-called “zombie recovery” in action, look no further than Evans City, Pennsylvania. It’s the same place that the 1968 zombie classic “Night of the Living Dead” was filmed.
We all know from looking around us that we are not living the economic lives that we used to. There is the aggregate data that shows that the U.S economy has been recovering, but you scratch the surface, and you find all of these bits of the economy that are really operating at a reduced capacity or that are in a kind of suspended animation.
Part of the reason we choose Evans City is that Butler County, which is a suburban county of Pittsburgh, is a place that, on the surface, looks like doing better than other places – it had an unemployment rate of 5.9 in October. But when you scratch the surface, you’ll discover that there are all of these businesses that have reduced capacity and are struggling to stay alive. They’re not calling it quits, but they’re curtailing their ambitions.
We spoke to a lot of people on the ground here, and one of those was Kevin Foley at Fibercon International Inc. Fibercon is a small manufacturing company, it’s actually a former unit of U.S. Steel that was bought by an employee and has been run by his family for a few decades now.
They make these tiny little bits of steel that make reinforced concrete and are used in factory and warehouse floors. So their order book is a bit of a bellwether. Kevin Foley, who runs the sales and marketing unit there, told us that sales this year are down by a third. They’re seeing customers who are parking projects.
They’ve got a big retail customer who has just put a project on indefinite hold and another customer who builds industrial parks – they’re not building industrial parks right now because they’re worried about the economy going forward. So they’re in this kind of state where they’re doing a third less business than they used to.
They’re staying alive, but it’s not that kind of thriving recovery that they need to get back to where they were.
Then there’s the story of Ed’s Beans Incorporated. This is a coffee roaster in Cranberry Township, and they own a chain called the Crazy Mocha chain. That story has been a little worse.
Ed’s Beans got a Paycheck Paycheck Protection program loan in the spring for roughly five hundred thousand dollars. That was to keep them afloat, but right now, they only have seven of their Crazy Mocha stores open in the Pittsburgh area. This is kind of a regional Starbucks, if you will, in Pittsburgh, and they’ve just finally had to file bankruptcy in October.
So, if you talk to economists, that’s something that they are worried about. This year we have seen fewer bankruptcies than we would in a normal year. However, many economists expect in the months ahead in 2021 to see a rise in insolvencies and bankruptcies.
That’s where Ed’s Beans, which really suffered from all of us staying home and not going to the office and buying a coffee on the way. In the meantime, the stores that are still trading are kind of in this zombie state.
What the rest of the country can learn from this area of Pennsylvania just outside of Pittsburgh? It’s a simple lesson that we really need to recognize – there’s a lot of help still needed for small businesses, in particular, a lot of whom don’t have access to capital markets or credit in the same way larger companies do.
This is one reason why a lot of economists think the government needs to step in with some more help, particularly for small businesses. We think the small business owners and a lot of Americans certainly agree with those economists.