The impact of the Covid-19 pandemic on employment has been utterly astonishing. In February 2020, the jobless touched a 50 year low of 3.5% as the US economy added 173,000 jobs. Last week, the U.S. Bureau of Labor Statistics reported that the February Job Openings showed the number of job openings in February to be 6.9 million. At that time, there were more job openings than there were people looking for jobs. Additionally, wage growth at 3.7% was outstripping inflation at 2.3%, partly due to the tough competition in attracting and retaining qualified workers. As a result, Consumer Spending was increasing since Consumer Spending accounts for roughly two thirds of GDP, this rise was strongly supportive for the US macro-economy
The pandemic ended this trend. Over the course of just two months, the US economy has shed over 30 million jobs and the unemployment rate stands at 14.7%, the highest on record. Businesses are closed and consumer spending has decreased considerably. In just eight weeks, the brutal economic conditions have wiped out nearly all the nation’s job and wage gains since the great recession of 2007-2009.
Entering May, the US is poised to open back up for business. The total number of deaths from the pandemic is generally declining and the cumulative total is unlikely to come close to what some segments of the medical community were projecting. It appears there will be a tiered approach to reopening the economy which, while sensible given the potential for a second wave of the virus, will prolong the eventual recovery. However, once the economy reopens, a recovery will happen, and it will occur more quickly than most people realize. Given the daily bombardment of bad news and the horrific pandemic health statistics, it is understandable some feel this is too optimistic.
Consider the following: Just two months ago, the US economy was strong and growing by historical measures. Since that time, the US government has pumped trillions of dollars into it. The scope of which is well over twice the size of the 2009 fiscal stimulus package. Small businesses can apply for financial assistance thru the CARES Act, which contains $376 billion in relief dedicated to preventing layoffs. Americans who filed their taxes in 2019 or 2020 received a one-time direct deposit of up to $1,200 ($2,400 for married couples) plus an additional $500 for each child. $250 billion for an extended unemployment insurance program (plus expanded eligibility).
And new stimulus packages are coming. For example, legislation is being drafted that could provide up to $13 an hour for those workers who are in jobs considered essential to keep the economy up and running for everyone else. Those occupations include warehouse workers (avg wage of $13/hr), grocery store employees (avg wage of $7 to $10/hr) and factory workers (avg wage $15/hr). Many of these employees are currently being paid at the Federal minimum wage of $7.25/hr). Adding an additional $13/hr is almost doubling/tripling the salary of those workers at the bottom of the earnings spectrum. This is a significant, life changing event for them. The Department of Homeland Security estimates there are between 49 and 62 million workers in essential industries.
All of this will result in significantly increased Consumer Spending and, since the consumer is the backbone of the US Economy, our economy will return to the path it was on early in the year. A recovery is coming … and it WILL happen sooner then many people think it will.