With Delta Surge, US Travel and Dining Decline Again

[Asia Economy Reporter Yujin Cho] As the COVID-19 Delta variant rages in the United States, signs of economic slowdown are becoming more pronounced. The decline in consumption in traditional service sectors such as travel, hotels, and dining is spreading to employment reductions, raising concerns that the economy may enter a peak-out phase where it begins to decline after reaching a high point. Institutions are steadily lowering their economic growth forecasts for the U.S. third quarter.

On the 29th (local time), Bloomberg reported that consumer sentiment is shrinking due to the spread of the Delta variant, causing travel and dining expenditures to decline again. The weakening demand for face-to-face services and delays in companies' return to normal operations are expected to lead to sluggishness in related industries and reduced tax revenues, thereby weakening the momentum of the U.S. economic recovery.

According to the U.S. Transportation Security Administration (TSA), the number of airport passengers in the U.S. on the 24th dropped to 1.47 million, the lowest in three months. The average number of airport passengers in the last week of August was 1.76 million, a 14% decrease from 2.05 million a month earlier. There are concerns that the airline industry, which was hit hard by the COVID-19 pandemic but showed a clear recovery in the first half of this year due to vaccine distribution, may be falling back into a slump. U.S. airlines reported an increase in cancellations of peak season travel reservations and said that delays in office returns and other factors are slowing companies' return to normal operations, making the resumption of business passenger demand unlikely.

Delays in returning to offices are also affecting traditional service industries such as laundries and restaurants. According to OpenTable, an online restaurant reservation site, the number of restaurant reservation seats in the U.S. has returned to a level 10-11% lower than in 2019, the year before COVID-19. OpenTable CEO Debi Soo said, "With the spread of the Delta variant, daily life has come to a halt again, and restaurant reservation rates have sharply declined in July and August."

According to STR, a U.S. hotel data specialist, hotel room occupancy rates in the U.S. have declined over the past four weeks, and average room rates have fallen for three consecutive weeks. Bill Crow, an analyst at Raymond James Financial, said, "Even considering seasonal declines, the drop in demand is noticeable. With the business travel market sluggish and the spread of Delta added, the travel industry will face another cold spell."

Reduced consumer spending is also impacting the employment market. Bloomberg pointed out that hiring declines are prominent in sectors severely affected by COVID-19, such as dental care and childcare, as signs of economic slowdown. Job postings for dental and childcare services have decreased by an average of 7% over several weeks. Jed Kolko, chief economist at the U.S. job site Indeed, noted, "With the spread of the Delta variant, fewer companies are posting job openings, and as spending on travel, dining, and other services decreases, labor demand is expected to decline again."

With consumption contraction and employment reduction deepening signs of economic slowdown, the U.S. economy, which had recovered to pre-COVID-19 conditions, can no longer be optimistic about the second half of the year. Bank of America Securities lowered its third-quarter growth forecast from 7.0% to 4.5%, and Goldman Sachs revised it down from 9.0% to 5.5%. Bloomberg economist Eliza Winger pointed out, "The larger-than-expected decline in July retail sales, reduced demand for dining and air travel, and delays in office returns are increasing downside risks to economic momentum in the second half."

This content was produced with the assistance of AI translation services.