‘Twas the night before the April jobs report, when all through the economy, not a non-essential worker was working, not even a server. The jobless benefits were deposited into bank accounts with care, in hopes that the Coronavirus soon would be elsewhere. The unemployed were nestled all snug in their beds under quarantine, while visions of returning to work danced in their heads to improve their mental hygiene. COVID-19 exclaimed as it drove out of sight: “Happy recession to all, and to all a good night!”
Initial Jobless Claims
According to the Department of Labor, initial jobless claims came in at 3.169 million for the week ending May 2, worse than the median estimate of 3.05 million. Continuing jobless claims topped 22.6 million. The four-week moving average, which eliminates the week-to-week volatility, hit 4.173 million.
Last week, the number of Americans filing for unemployment benefits clocked in at 3.839 million, worse than the median estimate of 3.5 million. Continuing jobless claims was about 18 million, and the four-week moving average was more than five million.
Financial markets and politicians will now look to the April labor report, and everyone is anticipating devastation. Analysts are penciling an unemployment rate of 16%, and about 21.5 million lost jobs. If you are looking at the situation from a glass-half-full perspective, you can take comfort in the fact that the job-loss trend has most likely peaked. From a glass-half-empty vantage point, it is going to take a while before the nation returns to near full employment as it was in the good old days of January 2020.
Coast vs. Rural
Small businesses are hurting the most in this lockdown. Many different studies have found that a large percentage of these smaller and independent companies are on the cusp of closing their doors. The federal government has attempted to mitigate the crisis by extending them loans, otherwise known as the Paycheck Protection Program. This initiative is meant to incentivize employers to keep their employees on payroll, and the funds are forgivable if all workers are on staff for eight weeks and the money is used to pay rent, mortgage interest, utilities, or payroll.
The PPP has been controversial since it was first launched, from the publicly traded companies accessing the program to the funds running dry in just days. Now, a new study has revealed that these small business loans are not being allocated proportionately to the hardest-hit areas of the country.
The Federal Reserve Bank of New York (FRBNY) discovered that states facing the biggest health and economic burden of the Coronavirus pandemic are receiving a small proportion of PPP lifelines. For example, in New York, fewer than 20% of small businesses have been approved, but more than half of them in Nebraska are expecting PPP funding.
Opponents charge that the first-come, first-serve function has allowed rural states to be approved for too many PPP loans, while coastal states have received too few. They say this is unfair since the coastal regions are the ones paralyzed the most by COVID-19. But Haoyang Liu and Desi Volker, two economists at the FRBNY, suggest the gap may be due to community banks:
“Community banks have been reported to view PPP as a chance to expand their customer base. The four largest banks in the United States represent a significant share of the depository base but have (at most) a combined 12 percent share of the total amount lent through the PPP.
Moreover, the fifteen largest banks originating PPP loans have just a combined 26 percent market share of the total dollar amount lent. It seems therefore that medium-sized and small banks, including community banks, are important in channeling PPP funding.”
Now that many states are reopening their economies, who will be the winners and losers?
A Post-Coronavirus Economy
Once the restrictions are lifted in your town, where will be the first place you will be headed? The local pub for a shot of whiskey or the neighborhood barber to shave your quarantine style? In the immediate aftermath of the Coronacrisis, specific industries will receive an injection from the so-called pent-up demand.
Starbucks announced that it plans to open 85% of its locations in the coming days. If the coffee giant can do it, then plenty of other restaurants, bars, and coffee shops will follow suit. Of course, the experience will not be the same as owners will institute state-mandated guidelines, from social distancing to sanitation protocols.
At this point, it seems like a coin-toss if hair salons and barbershops will open their doors. Shelley Luther, the owner of Salon A La Mode in Dallas, TX, was sentenced to a week in prison and a $7,000 fine because she defied state orders and reopened her shop. Many officials, including Governor Greg Abbott (R) and Rep. Dan Crenshaw (R-TX), are outraged by the court’s ruling. CNN also excoriated a California business owner for restarting multiple barbershops, despite the state mandating businesses to keep closed amid the pandemic. Perhaps it is a case by case basis as to when you can get a haircut.
Looking ahead three years, what companies will be market leaders? It is likely more than ever that Corporate America will transition to a work-from-home model after years of being apprehensive. This means that software companies making remote work easier will become titans of industry. The medical care sector – pharmaceuticals, personal protective equipment, and health care technology – will also be huge contributors to economic growth.
In between the short- and long-term, who will survive and thrive is anybody’s guess at this point. A growing number of concerts, sporting events, festivals, and anything else requiring large crowds are getting canceled for the rest of 2020. Movie theaters and theme parks will likely install capacity restrictions. It is unclear what else would hit the reset button in the next several months.
The Forgotten Man
Now that 34 million Americans have lost their jobs, where will they find employment next? Where does the working man go? A recent Washington Post/Ipsos poll found that 77% of workers think they will return to their old positions. Whether this is a realistic view or hopeless optimism remains to be seen. Many will get their jobs back, but a lot of them will not – and this is the new challenge the U.S. economy will face over the next several years. While the data appears to suggest the nation overreacted to the Coronavirus, it is unlikely things will revert to the status quo anytime soon. Be it a massive public-works project comparable to the Great Depression or a state-led initiative to abandon China and rejuvenate a domestic manufacturing base, the nation’s dynamic economy will examine different avenues.
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Read more from Andrew Moran.
The Cost of Coronavirus
High School: How COVID-19 Has Impacted the US Economy
Middle School: The Economic Cost of COVID-19
The Government Response to Coronavirus
High School: White House Acts on Coronavirus
Middle School: Trump Takes Action on Coronavirus
Elementary School: Trump Versus Coronavirus
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