26 Million People Unemployed – April 2020

What will an Economic Recovery Look Like ?

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26 Million People Unemployed

This is a very big number; Coronavirus cases are finally declining but the number of unemployed will continue to rise.

As the number of unemployed increases , the time it will take to get people back to work increases as well.

Yes, we are in a recession [1]. We don’t need data to tell us what we are experiencing. 

No one was prepared for the type of unemployment we have today. Not local and state governments. Not the Federal government. Certainly not the people who became unemployed overnight.

Anecdotally I have heard that some people have started to receive checks from the stimulus package, but unemployment checks have yet to arrive.

One economic term that has sprung to life , to all our lives is “supply and demand”.
You don’t need to read about it in a textbook or look at a chart to see the impact unemployment has had on the supply and demand chain.
  
Think of all the services that you have stopped using or are not available.

I temporarily stopped my housecleaning service. I’m lousy at housekeeping. Today I have resolved to vacuum . I have said that every day for 2 weeks now.

I’m using one of my HEPA vacuum cleaner bags cut into pieces as my “mask” inside a bandana. I still have plenty of vacuum  bags so no excuse not to vacuum because I am wearing a mask.

But I don’t know what is happening to the women who come to clean as I use a service. Are they receiving benefits and unemployment? They should because the company I use claim they pay taxes and social security on their behalf.

I fired the gardening service after a long and contentious relationship . 

It was liberating.

Suddenly I didn’t care if my little lawn looked perfectly manicured every week. I don’t miss the mow and blow guys at all. Not using them is better for the environment .

I asked a potential new gardener if they could use rakes for the 20-30 leaves on the front lawn. No response.

Forget manicures and pedicures. Forget getting any part of your hair done professionally. Cover those roots? Do it yourself. Trim the ends a bit ? I did and said goodbye to 4 inches of my hair.

People who work in salons are temporarily unemployed. Not because they want to be unemployed. 
And not because there is no demand for their services.

The link between demand ( I need those services) and supply ( not allowed to provide services) is broken.

There is no “catch up” for the unemployed. There is no catch up for all the goods not sold.
Dairy farmers are dumping milk because schools are closed.

Suppliers (all the services we use) cannot increase prices to make up for months of lost work.

When my hair grows back and I need a trim, I’m not going to pay 4 times the normal price because the salon was closed for four months.

This is a situation where regardless of the demand , suppliers are not in a position to raise prices.

Prices go up when demand is higher than the supply. That is economic theory , not our real life today.

In the current environment “price gauging “ (raising prices) if you have a supply of paper towels , toilet paper or masks is close to treason . 

What is it going to take to bring the economy back to life?

Economic pundits are not very imaginative. They talk about a “V” shaped recovery or a “W” shape or an “S” shape. 

They are using letters to predict what a recovery looks like.

A “V” shape means the economy sinks like a stone but defying gravity snaps back just as quickly.

The “W” shape is the fake out recovery. 
Sink like a stone, start to resurface, go back underwater and then come up for air.

The “S” shape is more elongated . We’ve hit bottom, are slowly rounding the bend and after we hit the peak in the road start to head back down.

In plain language getting 26 million people back to work isn’t going to happen easily or anytime soon.

Some jobs and businesses won’t survive. 

Will people go back to spending the way they did before? Or will they be convinced that saving is a good strategy?

How will companies that have squished as many people as possible into the smallest space possible be able to create safe distances in the work environment. Open architecture in the workplace I hope is a thing of the past.

Granted the government is pushing money into the economy through loans and stimulus checks but it may not be enough.

Loans, stimulus checks and unemployment benefits can be used to pay off debt instead of increased spending. 

Stimulus means growth. The economy grows when people spend money. 

This sounds counterintuitive but saving money and keeping your savings in cash is a negative for growth. It’s money that isn’t doing anything.

Investing and earning money stimulates people to spend.


So, my 2020 Women where are you?

Have you opened an account? Bought a few shares? 

Investing is a long-term proposition. Economic recovery will take years.

Investing when stocks are near their low point is a good long-term plan.


[1] On April 29th , 2020 the Bureau of Labor Statistics reported preliminary 1st quarter GDP was negative 4.8% on an annualized basis. Technically an economy is in a recession when GDP is negative for 2 consecutive quarters.

The personal saving rate—personal saving as a percentage of disposable personal income—was 9.6 percent in the first quarter, compared with 7.6 percent in the fourth quarter.

https://www.bea.gov/news/2020/gross-domestic-product-1st-quarter-2020-advance-estimate