Cover Photo: Public Domain
Two and Ten: The number of Americans filing for unemployment insurance spiked on Thursday. According to the Labor Department, more than 6.6 million new claims rolled in over the past week. Looking at the big picture, total job losses over the past two weeks have now reached nearly ten million. How quickly will America and the world be able to bounce back from this devastating blow? That’s what’s up for debate:
On one hand, “we knew this was coming,” Michael Farren writes for the Hill. “Second, the recent bills passed by Congress, for all their flaws, should help most unemployed workers and the broader economy to survive the crisis. Since this slowdown is largely self-imposed, rather than the result of deep structural problems in the economy, the eventual recovery should be swift. On CNBC last week former Federal Reserve Chairman Ben Bernanke also expressed optimism about the longer-term picture for the US economy. While the country is in for a “sharp, short” recession,” he sees a “fairly quick rebound” ahead.
On the other hand, Peter Goodman of the New York Times observes that “fears are growing that the downturn could be far more punishing and long-lasting than initially feared — potentially enduring into next year, and even beyond. Mass joblessness exacts societal costs. Widespread bankruptcy could leave industry in a weakened state, depleted of investment and innovation. Households may remain agitated and risk-averse, making them prone to thrift. Some social distancing measures could remain indefinitely. Consumer spending amounts to roughly two-thirds of economic activity worldwide. If anxiety endures and people are reluctant to spend, the expansion will be limited — especially as continued vigilance against the coronavirus may be required for years.”
Flag This: The question then becomes whether the global recovery takes the shape of a “V”, an “L”, a “W” or even a “Nike Swoosh”. A “V-shaped” recovery implies there will be a quick bounceback. An ‘L-Shaped” recovery is one where the virus runs into the second half of 2020, forcing social distancing to remain into the fall. A “W-shaped” recovery is one in which the virus returns and there is a second wave, which is likely. Lastly, a “Nike Swoosh” recovery is one that allows businesses to slowly resume, ultimately picking up speed into the end of the year. Right now, “official” statistics out of China suggest the country is entering into a “V-Shaped” recovery. The catch is, the data is simply unreliable. If you watch one thing from China, watch service sector data. These numbers shed light on jobs like housekeeping, travel, nursing, and teaching. If these come back online in China that will be a good first step. Otherwise, the alphabet-soup debate about global recovery will rage on.