Economic Take

Unemployment rates in the upcoming May jobs report are expected to near 20 percent—the highest since the Great Depression. Before making any other dire comparisons to the US economy in the 1920s-30s, consider how unemployment numbers are calculated and how COVID-19 lockdowns have contributed to the current economic situation.      

Though industries, such as retail and healthcare, may experience lasting changes due to the COVID-19 pandemic, the decades-long trend of globalization will likely continue.      

Economists estimate that COVID-19 shutdowns have cost the U.S. economy billions of dollars per day. In response, the federal government has allocated trillions of dollars to protect jobs and businesses. Though there is little data on the effect of these efforts, an early sign of improvement may be that the number of people receiving unemployment benefits last week held steady.  

Consumer demand collapsed around the middle of March due to COVID-19 shutdowns. By late March, however, the savings rate jumped to 13.1 percent—nearly $1 trillion annualized. Will this build-up in savings unlock pent-up spending and help accelerate the economic recovery?  

The US Department of Labor is scheduled to release its highly anticipated April jobs report this Friday, but the results may not be all that surprising or helpful. We already know that 25 million people applied for unemployment benefits in the past month—the key to what lies ahead is the number of people who continue to receive unemployment insurance benefits versus how many return to their employers’ payroll.

The Small Business Administration received another $310 billion in funding last week for its Paycheck Protection Program. In order to have these loans forgiven, businesses must use the funds on payroll, so we should see employees returning to their jobs in the coming weeks.  

The impact of the Small Business Administration’s Paycheck Protection Program should soon be visible in the number of people leaving unemployment insurance (UI) to go back on the books of their employers. Also this week: What the new normal may look like as parts of the economy begin to reopen.    

Many people are wondering what the US economy will look like after the COVID-19 pandemic is contained. The answer to this question depends largely on how long businesses remain shuttered and how many people retain their jobs or seek unemployment benefits through the CARES Act.  

Many of the 10 million Americans who applied for unemployment benefits in March worked for businesses that will soon receive assistance from the Small Business Administration’s (SBA) Paycheck Protection Program. Whether more people now stay employed thanks to SBA loans or end up claiming unemployment insurance benefits may affect how quickly the US economy recovers after the pandemic.

With its passage of the CARES Act, Congress has thrown a lifeline to businesses and individuals who were disrupted and displaced by the COVID-19 pandemic. Still, some worry about the economic impacts of this historic stimulus package—how much should we be concerned by debt, inflation and other possible repercussions?    

The Senate’s historic $2 trillion stimulus package includes key provisions aimed at keeping small businesses and individuals afloat. These measures, including an expanded unemployment insurance system, can offer considerable help at a time when business disruptions don’t appear to be slowing down.      

The economic landscape is changing rapidly as more businesses and public spaces are locked-down to combat the spread of COVID-19. As governments and central banks step in to help provide relief, individuals are also getting creative with how they deal with disruption.      

The federal government and the Federal Reserve are now working on multiple fronts to contain the spread of COVID-19 and soften its impact on the economy. The shock to US domestic demand from closures, cancellations and other preventative actions will likely be one of the main economic challenges. That said, there are three undercurrents helping to cushion the economy from this blow. Also this week: How the OPEC price war may provide a much-needed source of economic stimulus.

  While it’s hard to look beyond the public health and economic impacts of COVID-19, it’s important to remember that the economy is more resilient than some may think. Consumers will probably benefit from falling oil prices and interest rates, and businesses are better prepared than ever to mitigate supply and demand disruptions.  

While it’s too early to make predictions about the lasting economic effects of the coronavirus, it’s not surprising that it has impacted our interconnected global system. We’ll have to wait and see if this downswing in economic activity will be followed by an expected rebound.