If we really want to know when the economy will begin breathing somewhat normally again, we better follow the money and check what’s happening at our favorite restaurants. At this point, many people, both personally and through their corporate interests, hold huge amounts of cash. Even with many people losing their jobs, others have continued earning during a time when it’s not as easy to spend.
As seen in the chart showing year-over-year growth in demand deposits, the money began to stack higher back in March when states and cities shut down retailing and other crowd-generating activities. With fewer places to spend and with some people already hoarding toilet paper, canned goods, and bleach, consumers spent less overall. Checking account balances followed a bumpy path upward.
Then, very quickly after President Trump signed the CARES Act on March 27, money in the bank skyrocketed. A few trillion dollars flowed partly into checking accounts, with a large surge arriving on about April 13. As the chart indicates, deposit balances headed north, and sharply. Later, with some states opening their economies on about May 4, some money headed out the door.
Even now, though, the latest Fed data show that there’s still a lot of money sitting in checking accounts with nowhere to go. When and the extent to which it moves will determine when the economy begins to look normal again.
Data on 60,000 restaurants’ daily bookings maintained by OpenTable tell us that a recovery will not happen overnight. The organization offers some additional clues about where the economy may be opening most significantly. Until about May 14, in-house service for practically all restaurants was closed. OpenTable’s May 29 data indicate restaurants overall are about 20% recovered, which is another way of saying that about 80% are still looking for more diners.
The degree of restaurant recovery varies markedly across the country. Arizona and Kansas are better than 50% recovered, with Alabama, Florida, South Carolina, and Texas following close behind. At the other end of the spectrum, restaurants in D.C., Illinois, Maryland, Massachusetts, Michigan, and New York are still practically completely closed.
Data for cities tell us that Scottsdale, Arizona, is almost 70% normal and that Fort Lauderdale, Florida, is hitting close to 50% recovered, but that almost all of the remaining cities in OpenTable’s data set have little to show in terms of in-house restaurant service.
Of course, we should be patient. After all, it has been just 20 weeks since mid-January when the coronavirus arrived meaningfully in our midst. Since then, we have lost more than 100,000 people, each one precious in his or her own way, we have witnessed what it is like to see a massive economy mostly shuttered, and now, we are observing how hard it is to restart the economic engine.
One thing is certain in the midst of all the uncertainty. The engine will not begin to roar until the accumulated cash flows out of the banks. Restaurant bookings suggest it will be a while.
Bruce Yandle is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of the Clemson University College of Business and Behavioral Science. He developed the “Bootleggers and Baptists” political model.
