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A pandemic year, two cafes and an abundance of doubt about the other side

[March 24, 2021] By Ann Saphir and Nathan Frandino

(Reuters) - A year after the pandemic forced Chris and Amy Hillyard to temporarily close their two San Francisco Bay Area cafes, the news is suddenly good.

Covid-19 infections have dropped sharply. The Hillyards and most of the staff at Farley's East and Farley's SF have been vaccinated. The business got a second round of federal government aid, bigger than the first.

But for all that, the long-term outlook still isn't clear, and that's particularly so for the flagship location, tucked among tall and still-empty office buildings in downtown Oakland.

Reuters has been following the Hillyards and Farley's since March 2020, when they laid off their entire staff, chronicling their reopening six weeks later with a $225,000 paycheck protection program loan, their summer with help from donors like Golden State Warrior point guard Steph Curry, and hardship during the winter viral surge.

But last month, as coronavirus cases fell and California loosened more restrictions, Farley's got a second $300,000 federal grant. That's enough to cover payroll and help fund other parts of the operation for six months, Chris Hillyard says.

But "it doesn't provide long-term resolution into the problem of not having enough business," he said. "Is this just drawing it out? Or is it getting us through?"

Those are questions that policymakers had hoped not to be hearing a year into the pandemic. The earliest rounds of aid last spring were premised on the idea that Americans would be able to return to pre-pandemic activities in a few months, without permanent changes to commerce and consumer behavior.

A year later, it's clear that has not been the case, even though a growing body of indicators points to an economy that is starting to emerge from the crisis.

Employment rose by the most in four months in February, and consumers appear to be gearing up for a spending spree, with Federal Reserve data showing credit card balances at U.S. banks rising in each of the last five weeks, a first since the pandemic struck.

People are resuming activities largely shunned for the last year. More than 1.5 million travelers passed through airport security checks on Sunday, the most since the national state of emergency declaration last March, government data showed.

In-person dining has been clawing its way back, with the number of diners at restaurants open for business at 90% versus 2019, according to national data form OpenTable. While many places remain shuttered or under capacity constraints, states like Florida and Texas that have more liberal policies are seeing numbers swell to 100%.

Still, the question is will that rising tide lift all boats? The pandemic has affected the American economy in an extraordinarily uneven way, with employment in leisure and hospitality down 20% from before the pandemic, compared with a 6% drop overall.

It's also remade the economy's physical landscape, creating what Stanford University economics professor Nicholas Bloom calls a "donut" effect: Once-vibrant city centers hollowed out as commuters switched to working from home.

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Guests enjoy live music and coffee outside as Farley's Cafe marks its 32nd anniversary with bagpipes, Irish stew, and live music on St. Patrick's Day in San Francisco, California, U.S. March 17, 2021. REUTERS/Brittany Hosea-Small/

Bloom and his co-authors in a recent paper estimate that even after the pandemic recedes, about one in five workdays overall will be supplied from home, compared with one in 20 before the pandemic.

That shift, they wrote, will reduce worker spending on meals, entertainment and shopping in central business districts by 5% to 10%.

People "spend more near their residences and less near their workplaces," says University of Chicago Booth School's Steven Davis, a co-author on the paper.

BALLOONS AND MASKS

That trend has been a lifeline for Farley's smaller cafe, in San Francisco's Potrero Hill neighborhood.

Last week, as bagpipes blared for a celebration of the cafe's 32nd anniversary, a steady stream of masked residents flowed in and out of the cafe. It was the first time the cafe had allowed customers indoors in a year.

Outside, people ate Irish soda bread and sipped coffee under orange, green and white balloons at an outside seating area.

Sales at the neighborhood cafe are running around 60% of pre-pandemic levels, and ticking up. Last month the Hillyards hired two new employees there, the first additions to payroll since April, when Farley's reopened after a six-week shutdown at the start of the pandemic.

They are expanding elsewhere as well, opening a Farley's branded location at the San Francisco International Airport next month.

In Oakland, as in San Francisco, spring weather is bringing out more pedestrians. But with few commuters back in their offices, Farley's East sales are still running about 30% of pre-pandemic levels.

That lag may have made it a bit less painful when they had to close for a couple of days earlier this month after many of the staff fell under the weather after getting their second dose of the vaccine.

But now everyone at the Oakland cafe is fully inoculated, and the Hillyards plan to reopen to indoor eating in late April, once local restrictions on restaurant occupancy are expected to ease. They expect to supplement income with an in-cafe retail shop featuring denim napkins and coffee paraphernalia.

"It's still a big unknown what sort occupancy we'll get in office buildings after everyone is vaccinated," Chris Hillyard said. "We don't know when they are coming back, or if."

(Additional reporting by Howard Schneider; Editing by Dan Burns and Steve Orlofsky)

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