Local businesses wrestle with record inflation
With inflation rates reaching a near 40-year high, businesses around NYU are suffering from supply chain issues and increased costs.
February 3, 2022
National inflation rates peaked at 7% in late 2021, a figure unparalleled since the early 1980s. Some local businesses around NYU’s Washington Square campus report making difficult financial decisions to keep their doors open due to increased costs of consumer products and supply chain backups.
“We’ve experienced inflationary pressures in the past but never to this extent, never across everything we buy,” Buzzy Geduld, the owner of The Donut Pub, said of his business, which opened its first location on Broadway in 1964. “We’ve never had a surge in virtually every product.”
The recent spike in COVID-19 cases, due to the omicron variant, has increased infection rates among warehouse employees, truck drivers and other workers who transport goods, placing additional pressure on already struggling supply chains. Business owners nationwide are struggling to navigate higher prices, coupled with reported labor shortages and competitive wages.
Lawrence White, a Stern professor who has worked at NYU since 1976, said that New York City residents and businesses have been hit hard by the rapid increase in inflation due to the nature of the city’s economy.
“The fact that New York City is a very service-oriented economy has meant that we’ve been much harder hit by this falloff of people that don’t want to go to gyms, don’t want to go to the movies, don’t want to go to the theater,” White said. “Our budgets are probably even more oriented toward goods as compared with what we would have seen two or three years ago, and our unemployment rate is higher. So people are not earning income, but seeing prices go up, and that’s a more worrisome phenomenon.”
White said that public reactions might not reflect the severity of the current inflation rate. Inflation has remained relatively constant since the early 1990s, staying at about 2% for more than 20 years. After a sharp increase in 2021 that continued into 2022, some are experiencing inflation’s impacts for the first time in their adult lives.
“That’s what’s making it appear severe even though by historical standards, or international standards, this is relatively mild,” White said.
Local businesses are still feeling the effects of rising inflation rates. Geduld said that the only way The Donut Pub has been able to offset the effects of inflation is to raise its prices — an approach that many businesses across the United States have taken. He hopes the increase in prices will cover the increased expenses without deterring customers.
Like many business owners nationwide, Geduld said he is unwilling to decrease or stagnate his employees’ wages to offset higher costs of goods. The U.S. workforce is about four million workers fewer than that of pre-pandemic times, with approximately 11 million open jobs currently. In November 2021, more than four million Americans voluntarily left their jobs.
Due to the decrease in workers and resulting competitive wages, businesses have had to find other ways to both offset inflation and retain employees. To thank his employees, who have helped The Donut Pub survive during the pandemic, Geduld is instead implementing new benefits this year.
“We intend to start for the first time, this year, in 2022, doing quarterly bonuses,” Geduld said. “We want to keep a smile on our employees’ faces so that when you come in, you’re going to see a smile, which makes you feel good about coming to our place.”
Michele Civelli, the co-founder of Madman Espresso, said her business has also struggled to compensate for rising inflation rates. Like The Donut Pub, Madman has never experienced as high of a rise in prices, Civelli said. She attributed the cafe’s survival to her customers, recounting the early days of the pandemic when customers would leave large tips on low-priced items.
“The last two years have been the most challenging time we have experienced as business owners,” Civelli wrote to WSN. “We were able to overcome the odds that brought down many less fortunate businesses only because of the incredible support that we had from our patrons showing relentless affection for our crew and our shop.”
Hotels and motels have also been hit hard by inflation, raising prices by 25%. Judy Paul, the owner and CEO of Washington Square Hotel and its adjoining North Square restaurant, said she is hoping for another round of federal stimulus checks or emergency restaurant funds to stay afloat.
“We’re definitely experiencing increases for our cost of goods for both businesses,” Paul said. “For the hotel, specifically, we’re even having problems getting certain items that are on backorder, like shower curtains and shams for the beds and bath mats. Some things we can’t even obtain at the moment.”
Paul noted that nearly all of the goods the hotel commonly purchases have increased in price by 5-10% — consistent with national inflation rates. Although she has tried to keep the prices of the Washington Square Hotel and North Square restaurant consistent, complimentary price increases during New York City’s omicron surge have made it difficult.
To remain in business, Paul said the hotel’s management has cut down its hours of operation, limited staff and, at times, shut down entire floors of the hotel.
“Small businesses are really under so much more pressure than any other business,” she said. “Without them, a neighborhood just loses so much of its character.”
Contact Abby Wilson at [email protected]