The jobless trend has peaked. As a growing number of states reopen, the post-Coronavirus cleanup begins. Unfortunately for the world’s largest economy, the cleanup will take about as long as clearing up the attic from your grandfather’s decades-old newspapers and your spouse’s gym equipment that will never be used. With one out of five Americans unemployed, households’ finances have taken a serious hit, and it could take years for their bank accounts to recuperate. Can it be done with COVID-19 inflation on the way?
Initial Jobless Claims
According to the Department of Labor, initial jobless claims came in at 2.438 million for the week ending May 16. This is slightly higher than the median estimate of 2.4 million. Continuing jobless claims topped 25 million. The four-week average, which eliminates week-to-week volatility, clocked in at 3.042 million.
Last week, 2.981 million Americans filed for unemployment benefits. The continuing jobless claims clocked in at 22.833 million, while the four-week moving average topped 3.616 million.
In total, just short of 40 million Americans have lost in about two months. Despite fiscal and monetary stimulus and relief, the trend of millions losing their livelihood has produced substantial financial costs for households and businesses across the nation that will make it hard for people to keep their heads above water.
Dollars, Debt, Devastation
Even if you have been fortunate enough to remain employed during the pandemiconomy, you still have likely been impacted in some way. According to one study, you have probably lost income.
New research by the Society for Human Resource Management and Oxford Economics found that U.S. workers have lost approximately $1.3 trillion in income or about $8,900 per employee. But the COVID-19 Business Index report notes that about $260 billion of these losses, or 20%, were from workers who accepted reduced hours or lower compensation.
A separate report authored by the Urban Institute, a progressive think-tank, anticipates that about half of the tens of millions who have lost their jobs will potentially face lower pay once they regain employment. The drop in income is projected to affect older workers as those between 50 and 61 are expected to accept a 23% pay cut.
Before the public health crisis, Americans were already tapping credit markets at record levels. In the first quarter of 2020, household debt surged to a record high of $14.3 trillion, which is $1.6 trillion higher than the previous all-time high during the Great Recession. Now that Americans will inevitably need to make up for their monthly shortfall, you can expect consumer debt levels to spike in the April-June period.
But once the lockdown is lifted and the people go back to work, will consumers return to their old ways? A LendEDU study learned that 26% of consumers say it would take them between one and three months to start going out and spending again, while 18% think it could take as long as six months.
The Future of Work
The future of work will inevitably change in a post-Coronavirus economy. The most apparent alteration will be the concept of working from home, which is something that seems to be pleasing workers.
A study found that a lot of folks who are still working seem to be happier. A Q2 CNBC/SurveyMonkey Workplace Happiness Survey discovered that 38% of Americans report to being more satisfied with their job now than before the pandemic. Researchers found a direct correlation between higher employee sentiment and working remotely, which explains why one-fifth would prefer to work from home forever.
Whether you like to perform your duties within the confines of your home or you prefer to complete your tasks in an office environment, big companies are highlighting the perpetual shift to telecommuting. Barclays CEO Jes Staley went as far as prognosticating that corporate offices with thousands of employees “may be a thing of the past,” and Nationwide CEO Kirt Walker confirmed a “98% work-from-home model.”
Not only are these businesses adapting to the evolving landscape, but they also appear to be listening to the workers. A recent poll noted that 25% of tech workers prefer permanent work from home policies.
This could spell doom for the already struggling commercial real estate industry. Investors are expecting this sector of the economy will continue to be under pressure for the foreseeable future. If companies choose to ditch the office, commercial property owners could face a day of reckoning.
A Tough Situation
It is going to take a long time for consumers to catch up and restock their cupboards. But what will exacerbate a dire situation is the prospect of higher price inflation on the other side of the lockdown. Shoppers already saw food prices skyrocket in April. With more companies shifting operations away from China and its cheap imports, Americans’ purchasing power will take a breather in the coming years. In the COVID-19 recovery, wage growth might not be as intense as it has been for the last several years, forcing millions of Americans to fall behind the rising cost of living. It is going to be rough out there.
Read more from Andrew Moran.