The Lehigh Valley’s business sentiment index the BSI made a small recovery in July, rising by 5.7% after its historical 31.6% fall in April. The index is still below its average level during the Great Recession. The small July recovery could be either the start of a directional change or just a bounce.

The July survey revealed some interesting decision-making dilemmas facing businesses; for example, the largest losses and gains in July were among the purchasing indices; the index of plans for future purchases rose sharply, however, since it was from an all-time low, it is still 19% below its January level. On the other hand, the index of actual purchases over the last 6 months, continued to drop, falling to half of its January 2020 level.

Businesses, clearly are not buying, nor planning to raise their purchases close to where it was before Corona.

The percent of local companies which reported net layoffs, was 5% during 2018 & 19, while the percentage of those with net hiring hovered close to 30%. In January 2020, before the impact of COVID, we observed a significant change; percent of businesses with net layoffs almost doubled, while the percentage of those with net hiring dropped. By April, the percent of companies with net layoffs had tripled, while the percent of those with net hiring was almost halved. This negative trend became even worse in July. 

Our employment indices also moved in opposite directions, the index of actual hiring over the last 6 months, continue to fall through July to all-time low. On the other hand, the index of plans for future hiring recorded a small increase indicating that businesses have started to plan for future hiring.

The index of actual revenues over the last 6 months fell to less than half of where it was in January, while expected future revenues, rose sharply in July, it is still well below its January level. Some business optimism is coming back, but in trickles.

All of the indices in our model are still well below where they were in January.

Most economists still believe that the 3rd quarter would witness the start of the recovery. How fast or slow that recovery will be, has very little to do with how fast or slow states open businesses or if children attend school in person. All of it, however, depends on how safe people feel in going out of their homes, going shopping, or even thinking of maybe visiting a restaurant! That kind of feeling does not come from wishful thinking and cannot be manufactured; for it to sustain, it has to be real. Our economic recovery is directly related to the rate at which we can bring this pandemic under control.