The Week in Review: April 6, 2020
COVID-19 Infects the Labor Market—Tip of the Iceberg
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 two 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 the 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 a 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 of new cases in New York have peaked might be viewed favorably.
If you have any questions or concerns, feel free to reach out to me, Will, or Tyler.
Two for the Road
Investors bold enough to invest in stocks during the dark days of the Great Depression would have seen their stakes grow tenfold by 1957. —Marketplace, January 5, 2009
Since residents were ordered to shelter in place, demand for electricity in New York and San Francisco has been down between 300 to 600 megawatts—the equivalent of a midsize gas power plant. On a separate note, marijuana sales are up 159% in California, up 100% in Washington state and up 46% in Colorado. —E&E News, March 23, 2020
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