COVID-19 Infects the Labor Market – Tip of the Iceberg – April 6, 2020
The U.S. BLS reported that nonfarm payrolls fell a much-greater-than expected 701,000 in March. Because the survey is taken during the week that includes the 12th day of the month, a more modest 150,000 drop was anticipated. Given that first-time jobless claims over the last 2 weeks have totaled nearly 10 million (Dept of Labor), April’s number will be ugly.
Of the 701,000, just 18,000 jobs were lost in manufacturing. Leisure and hospitality, which has borne the brunt of social distancing policies, fell by 459,000.
Meanwhile, the unemployment rate rose to 4.4% in March vs the 50-year low of 3.5% in February. A separate survey, which gives us the unemployment rate, recorded nearly 3 million job losses. However, 1.6 million people who lost jobs simply left the labor force. They aren’t looking for work, and therefore, are not counted in the official unemployment rate.
To be counted as officially unemployed, one must be out of work AND looking for work.
What’s likely happening: these workers were furloughed, will collect generous jobless benefits, and won’t look for employment right away. Many may be “attached” to their former employer. That means they will be required to go back to work when recalled or lose benefits.
There are two major government programs that have been crafted to keep money flowing to employers so firms have cash to pay employees, keep the lights on, and remain afloat.
One began Friday through the Small Business Administration (SBA). The other is the Fed’s Main Street Business Lending Program (MSBLP). Details are still being ironed out.
With over $400 billion seeded by the Treasury Dept., the MSBLP can be leveraged into $4 trillion in firepower. It’s an enormous amount of cash aimed at smaller- and medium-sized businesses. The MSBLP complements the SBA’s $349 billion Paycheck Protection Program.
At this stage, both have failed to stem a massive number of jobs. The magnitude of these programs is enormous. But the execution must be flawless since hours not months matter.
Possible hiccups:
- Will small business owners access these lifelines?
- How many bureaucratic hoops will they need to jump through to obtain needed cash?
- How can the large number of applications be quickly processed?
- How fast can cash be infused into companies that can’t meet payroll?
- What about controls that ensure loans are used as intended?
Large portions of the economy are being put into a coma. When safety concerns dictate, the “patient” can be brought out of the coma. Life-support measures being enacted include stimulus checks, generous jobless benefits, and support to larger and smaller companies. Another stimulus bill is also being discussed.
What will help turn the tide will be signs that daily new cases in the U.S. are slowing, a vaccine and effective treatment are developed, and confidence to go back in public rises. Even signs new cases in New York have peaked might be viewed favorably.
Final thoughts
We are living in a world that nobody could have possibly envisioned a few months ago. The impact caused by COVID-19 has disrupted most countries.
People are reaching out to loved ones and friends via texting and emails. Some are even connecting the old-fashioned way – by phone.
Families are closer than they have ever been before. Activities and jobs around the country have been suspended but not ended.
Created 2020-04-06 16:46:56
