Protests Hammer U.S. Cities Struggling to Recover After Lockdown

The reopening of America was always going to be fraught, with competing fears of new virus outbreaks and economic meltdown. Now cities across the nation, from New York to Chicago and Los Angeles, are reeling from unrest that could worsen both.

Violence erupted in dozens of cities following the death of George Floyd, a black Minneapolis man who died after a white police officer pressed a knee into his neck for more than eight minutes. Some demonstrators broke off to rampage through shopping districts, including Rodeo Drive in Beverly Hills and State Street in Chicago, and set fire to police cars and municipal buildings.

The chaos, amid otherwise peaceful protests, struck as the economy struggles to emerge from its coronavirus-enforced hibernation. After the Covid-19 deaths of more than 104,000 Americans, unprecedented government intervention and massive disruptions to business and everyday life, the scenes of unrest across the country were a bleak contrast to the recent optimism of the markets. The S&P 500 registered its second straight monthly advance on Friday.

“I think people are coming to the realization that their jobs may not be coming back or coming back quickly. This is all conflating with the racial tensions and completely boiling over,” said Mark Zandi, chief economist at Moody’s Analytics. “This highlights the depth of despair in America,” he said, citing 20% unemployment and 50 million workers who’ve lost their jobs, had pay cuts or lost hours.

The violence prompted Inc. to scale back deliveries and shut down delivery stations in a handful of cities including Chicago, Los Angeles and Portland. Target Corp., which had already shuttered 32 stores around its Minneapolis headquarters, said it was closing dozens more around the nation, at least temporarily. Apple Inc. issued a statement saying, “with the health and safety of our teams in mind, we’ve made the decision to keep a number of our stores in the U.S. closed on Sunday.”

The scenes of burning cars, looting, and violent arrests by baton-wielding police unfolded as business owners try to lure back customers who were already concerned about going out in public.

After spiking in mid-March, the Federal Reserve Bank of Dallas’ new Social Distancing Index, which measures the extent of physical distancing and its relationship to economic activity, had started to decline once U.S. states began lifting restrictions on business and consumer interactions.

“The impact of the riots may be greater on the daily and weekly measures of consumer confidence, which were trending slightly upward since mid-April, but which may now post a pull-back into early June,” said Mike Englund, chief economist at Action Economics, which provides financial-market commentary.

Cities hammered by major budget hits from the pandemic can hardly afford the extra costs of policing overtime, security measures and damages from the protests. Progressive activists have questioned municipalities’ financial support for police departments as other services are cut.

Even before the protests, the Fed and Trump administration have been under mounting pressure to do more for states and municipalities.

Chicago Doubts

In fact, the unrest cast doubt on reopenings planned in Chicago on Wednesday and New York City on June 8. Chicago Mayor Lori Lightfoot, who imposed a 9 p.m. to 6 a.m. curfew on the city, restricted access to the downtown area to those who work or live there, and essential workers. At Lightfoot’s request, Illinois Governor J.B. Pritzker is sending 375 National Guard soldiers to the city.

Lightfoot said the violence had forced the city to consider postponing its planned partial reopening set for June 3. “Instead of a moment of celebration, what they’re doing is experiencing a moment of despair,” she said.

Like other public officials, Washington D.C. Mayor Muriel Bowser said Sunday she was concerned the protests could spark another increase in coronavirus cases in a city that started the first phase of its reopening on May 29.

“We saw a mass gathering, basically — we’ve been working hard for the last eight, 10 weeks on not having any mass gatherings,” Bowser said.

New York City Mayor Bill de Blasio said Sunday that the violence wouldn’t delay the city’s plan to restart its construction, manufacturing, wholesale and curbside retail businesses. But the costs of policing the city during days of protests must be added to a budget already under stress from the lockdown’s economic costs.

“We certainly have had to employ a lot of resources for a few days and I think it could potentially go on a few more days. But I don’t think it will go on forever,” he said during a news briefing. “In terms of impact on our restart, I don’t see one. In terms of impact on our budget – something but nothing profound.”

Amazon Deliveries

For now, the unrest has put an undeniable dent in the supply lines feeding the U.S. economy. Amazon delivery drivers in Chicago and Los Angeles received messages Saturday night that said: “If you are currently out delivering packages, stop immediately and return home. If you have not completed your route, please return undelivered packages to the pick-up location whenever you’re able to do so.”

Some of CVS Health Corp.’s stores were damaged in the protests but no employees were hurt, spokesman Mike DeAngelis said in an email. A number of the stores were closed as a result and some others were temporarily closed as a precaution.

The fury over Floyd’s death comes as black Americans are dealing with a disproportionate impact from the coronavirus from a health and economic perspective. In New York City, African-Americans have a higher rate of infection than other races, according to city data. A McKinsey & Co. report found that 39% of jobs held by black Americans are at risk from furloughs or layoffs due to the shutdowns meant to curb the spread of the pandemic.

People have stepped in to aid businesses affected by the protests in Minneapolis, with hundreds of residents joining the cleanup effort. More than $800,000 was raised on GoFundMe to help rebuild Scores Sports Bar, which delayed its opening during the pandemic only to be destroyed in the protests.

Other business owners in the Minnesota city say they support the demonstrations. Minneapolis’ Moon Palace Books, a bookstore that closed its doors but is accepting online orders, included a petition on its website asking for the city council to defund the police department.

Chicago’s South Loop neighborhood was one of the hardest hit areas of the city. Many residents on Sunday morning took to the streets to help sweep sidewalks of broken glass from looted businesses.

“So many people have stopped by to buy brooms,” Mike Wiese, manager at Gordon’s Ace Hardware, said. The store’s cash registers were too damaged overnight to do any transactions today, so he’s been giving the brooms away and asking people to come back later to pay.

The long list of businesses hit by looting and/or vandalism included Trader Joe’s, Kasey’s Tavern, which holds the city’s second oldest liquor license, pet store Kriser’s Natural Pet, Bulldog Ale House and a knitting shop.

Los Angeles hotel owners Peter and Ellen Picataggio boarded up the windows of their Farmer’s Daughter hotel in the city’s Fairfax district before the neighborhood erupted in violence Saturday night with stores looted nearby. Fortunately for the Picataggios, their damage was limited to a stolen fire extinguisher and graffiti tagged on the plywood.

Reservations had just begun to pick up after a lockdown had limited hotel bookings to as few as one or two a night. He thinks the recovery will still come.

“Do I think this will impact it?,” Peter Picataggio said. “No, I think it will be a blip. If it ends here, I don’t think there will be a long term impact.”

Heather Johnson, a buyer for a shoe shop, works with the owner of Shiekh Shoes, a family-owned store that started in the Bay Area. On Saturday thieves stole all of the merchandise and damaged the fittings on the walls.

“I don’t know how we’re going to bring the store back to life,” she said. “It’s going to be really, really hard.”

— With assistance by Alexandre Tanzi, Spencer Soper, Yueqi Yang, Kim Chipman, Henry Goldman, Angelica LaVito, and Kelly Gilblom

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