In just six weeks, the U.S. labor market has metastasized into a wasteland with tens of millions of Americans out of work, waiting to hit the asphalt jungle and be productive members of society again. The good news is that the tide appears to be turning. The bad news is that the economic pain could be worse than what forecasts tell us. While the job-loss trend appears to have peaked, it could take a long time to be fully awakened from this Coronavirus-induced comatose state.
Initial Jobless Claims
According to the Department of Labor, initial jobless claims came in at 3.839 million for the week ending April 25. This is higher than analysts’ expectations of 3.5 million, but it is down from a week ago. Continuing jobless claims clocked in just short of 18 million. The four-week moving average, which removes the week-to-week volatility, dipped to 5.033 million.
Last week, the number of Americans applying for unemployment benefits clocked in at 4.427 million, worse than the median estimate of 4.2 million. Continuing jobless claims came in at 16 million, and the four-week average surged to 5.786 million.
In total, 30 million Americans have lost their jobs in only six weeks. It recently became official that all the jobs created since the end of the Great Recession were erased due to the COVID-19 pandemic. Now that the U.S. economy needs to start from scratch, can America trigger a monumental recovery?
While it is believed that the U.S. has reached the apex on the jobs front, a lot of labor data from March and April are coming out and showing incredible insight into how devastating the situation quickly became. The year started with 225,000 new jobs. A few months later, millions of workers have lost their positions. It is estimated that one-third of Americans live in states that are reopening or are in the beginning stages of hitting the reboot button, which could lessen the blow in the next few months. Until then, there are plenty of employment numbers, projections, and analyses to sift through.
Unemployment Under the Microscope
Are the government’s jobless claims an accurate representation of today’s labor market? Not quite. The Coronavirus shutdown could hurt as many as 57 million U.S. employees, says the Mckinsey Global Institute in a new report. Once you factor in furloughs, reduced hours, and a decline in pay, the number of workers affected by the Coronacrisis doubles the number of jobless claims. Economists at the think tank arm of the consultancy group aver that it paints only a partial picture of workforce disruptions.
WalletHub, a personal finance website, examined cities that have been most affected by the pandemiconomy and compared unemployment figures in March 2020 (most recent) to March 2019 and January 2020. According to its findings, the top five municipalities severely impacted by COVID-19 were:
- Seattle, WA
- Hialeah, FL
- North Las Vegas, NV
- Miami, FL
- Henderson, NV
On the flip side, the lowest growth in joblessness was in:
- Fayetteville, NC
- Springfield, MO
- Knoxville, TN
- Salem, OR
- Durham, NC
Despite the many jurisdictions in the early stages of reopening, there is a concern that consumers and employees may be too apprehensive about returning to business as usual due to second wave worries. A recent University of Washington research study found that more than 14 million workers face exposure to infections at least once a week and 26 million at least once a month. It is this possibility that could prompt shoppers to limit their consumption, and a slide in demand is terrible news for the economic recovery, explains marketing expert Todd Gareiss.
He told Fox News:
“As companies begin to reopen, they will be in survival mode. That means multiple layers of expense reduction initiatives, which will of course include cutting FT headcount. When the incentives and stimulus programs dry up, what will the demand side look like?
Job openings will be determined by the demand for goods and services provided by each industry and company. With the expected glut of applications, it will be a true ‘buyers market’ for those companies that are hiring.”
Will America hope for the best and prepare for the worst moving forward?
It’s Always Raining at the Fed
If there were one institution that appears to be raining on everybody’s parade, it is the Federal Reserve. After finishing its two-day Federal Open Market Committee (FOMC) meeting in April, Fed Chair Jerome Powell warned that more economic pain is coming and that all the bearish data we have witnessed has yet to catch up to the Coronapocalypse. Powell went as far as saying that 0% interest rates would not do much if consumers and companies are not spending, suggesting that its unprecedented monetary actions may not even result in success. He did make the case that this will be a collective effort, noting that “it may well be the case that the economy needs more support from all of us.”
The federal government is throwing trillions of dollars into just surviving until tomorrow. The central bank is adding trillions to its balance sheet. Most of the country has been placed under house arrest. In the end, it might all be for naught as the economic fallout from the Coronavirus could linger for years to come.
If this is the case, perhaps it is better never to leave the house and just wait until it is morning in America again. Who is up for another game of gin rummy and a six-hour Richard Wagner opera?
Read more from Andrew Moran.
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