Covid Economy: It Could Get Worse for Many Americans

This column is about the current Covid Economy (CE) that resulted from the coronavirus pandemic. My opinion is that the current economic situation continues to be distressing and it may get worse for millions of Americans.

Unemployment. The CE has experienced a dramatic loss of employment.According to the Pew Research Center,

“Unemployment rose higher in three months of COVID-19 than it did in two years of the Great Recession (2007 -2010)…the COVID-19 recession is comparable more to the Great Depression of the 1930s,

The employment situation is still dire. According to Department of Labor Statistics, “there were a total 28,059,349 people claiming benefits in all unemployment programs for the week ending August 1”.

The statistic cited above includes new unemployment benefits programs( e.g. Pandemic Unemployment Assistance,) that were created due to the current crisis for gig workers, freelancers , the self employed and owners of closed business.

From Aug. 8 to Aug. 22, the total of those collecting benefits under the PUA program, rose to 14.6 million.

It is important to note that news media reports about new filings for unemployment need to be read carefully. For example, on September 10, the Washington Post headline reported that: “ 884,000 people filed for jobless benefits last week, the second week in a row of fewer than a million claims”. However, the article contained additional information that could change the inference a reader might draw from the headline:

“Another 839,000 had claims processed for Pandemic Unemployment Assistance (PUA),… which have been rising for weeks. When added together, the numbers of new unemployment claims and PUA claims have risen for four weeks straight.”

Labor Force: According to the September Bureau of Labor Statitics report: The number of people working or seeking work (called the labor force participation ), “are historically low” One reason for the lower particpation rate , acording to theThe Washington Post, is that “closed child-care facilities and in-person schooling represent a persistent impediment to returning to work…” especially for women .

Gross Domestic Product ( the value of the goods and services produced in a country ) The GDP contraction (the amount the GDP shrinks) , was 33% as measured on July 30.

Wall Street/Main Street. In the CE the financial markets are prospering . However, Wall Street is not Main Street. In general, the financial markets are forward looking, anticipating what a company’s profitability will be several years hence.

However, Main Street is more near term. A struggling business or unemployed person finds no comfort anticipating that things may be looking up a few years down the road.

Just as important, an increase in revenue or even profit does not necessarily result in a comparable increase in employment. For example, Target revenue for the twelve months ending July 31, 2020 increased by  10.16% .However , Target’s total number of employees in 2020  (368,000),was only a 2.22% increase from 2019.

For Netflix revenue for the twelve months ending June 30, 2020 increased by 28.35% . However, Netflix‘s count of 7,800 full-time employees is about the same as last year.

This column disagrees with the Federal Reserve, which has forecast that “ unemployment will fall to 7.6 percent by the end of this year, and to 5.5 percent by the end of 2021…” However, in my opinion the Federal Reserve has frequently been wrong and is overly optimistic in its forecast. The weakened economy and the impact on people that follows from it may outlast the federal government’s ability to mitigate pain and sustain a recovery. The federal government cannot go on borrowing trillions of dollars indefinitely. Here are some of my reasons:

1. We do not know when, if ever, a safe, effective vaccine will be approved and provide immunity from the coronavirus for a large portion of our country’s 33o million people . We do not know if herd immunity is even possible with this novel virus. The longer the pandemic lasts the longer the CE will be with us. Employers, large and small, private and public , that have been able to operate at some level so far may not be able to hang on indefinitely. According to Fortune magazine, “Since March, 21% of all U.S. businesses—most of them small or midsize—have closed for good… Small and midsize businesses make up the backbone of our economy. They employ roughly half the workforce and generate about half of our GDP. For every dollar spent at a local independent business, 58 cents stays in the community.”  2.People who regained their jobs in the hospitality and retail industries when their states re-opened them could lose those jobs again if there is another virus-caused shut down.

3. The clock is running out on industry specific bailouts. For example, the airline industry has notified 75,000 employers that they may be laid off unless the $25 billion federal rescue package, (scheduled to expire on October 1) is renewed .

4. According to the New York Times, “Job growth slowed further last month {August}, the latest sign that the economy’s spring momentum has faded — and a warning that the recovery could go into reverse this fall without further government support. “

According to Axios: “Businesses are positioning themselves for an increasingly competitive landscape by doing everything they can to ramp up productivity and cast off excess costs.

Much of that cost savings will likely come from cutting jobs and adding new ones more slowly…”

5. According to the Bureau of Labor Statistics , “The longer a person is out of work the less likely they are to be hired in the future.” The number of Americans unemployed for 26 weeks or more is increasing.

6.The solution to some problems can result in other problems. For example, there are millions of people who may become homeless when rent and mortgage deferral programs are ended. But if the deferrals continue, landlords (including small ones) and mortgage lenders may suffer significantly, and even collapse, from lack of income.

7.A political factor is this: In this time of pandemic and CE, we have a president who actively discourages simple ways to limit the pandemic such as mask wearing, social distancing and not holding super-spreader events. Our current president denies science, and ignores reality . It is still possible the president we have now could be re-elected. That would prolong or worsen the health crisis and thereby worsen the CE.

To end on a positive note: American citizens can determine through their votes if a better person than the current president (namely his main opponent) will be elected.