More Than 5.2M More U.S. Workers Filed for Unemployment

To be fair that is the case pre-vivid, so there shouldn’t be much of a difference for pure number crunchers.

The hypothetical V shape recovery that everyone was touting back in March was baseless- it was under the way out of touch assumption that lock downs would last only a month and business would be allowed to open as if it were an on/off switch. Basically, it assumed 0 secondary effects to recovery.

IMHO, that's not how it works. For better or worse companies are reluctant to fire in good times. There's a lot of people employed at jobs that aren't really needed. Things like the project they got hired for was canceled and they were just stuck somewhere. Projects that accomplish their goal still tend to drag on adding inconsequential features. And, of course, there's just the slackers skating by.

When an economic crisis comes along they get canned and the business realizes that they weren't actually needed. When the good times come back they don't hire those employees back. They continue operating with a smaller staff and pocket the extra profit.

Zero. No way such massive companies can swing all of a sudden.

- There's not enough tests still - People are scared of doing anything even if stores open up - Most importantly, sales just don't magically appear with the snap of your fingers, takes time to ramp up again - Companies are still heavily on only essential spending, that doesn't change overnight

They're talking no public events til 2021 now. I think the realization is that this isn't just a 1-2mo ordeal. It's going to be a 1-2yr shift.

V-recovery reporting is fully explained by politicians saying what people want to hear

So there are a few things to think about with respect to the recovery. Disclaimer: I am not an economist.

One thing is that to a certain extent an economy is psychological. Yes, certain things are physical realities (such as crop yields) or political realities (e.g. states of war) or legal realities (like regulations against selling homemade beer), but a lot else is purely based on sentiment. And it doesn’t matter how good reality is if people think it’s bad: they won’t act in the market more than they must to survive, and it will actually be a bad market, even if the fundamentals justify a good one — at least for awhile, until enough contrarians seek to take advantage of good prices (a kind of sentiment arbitrage, I suppose).

But something I worry about even more is well-intended interventions which make things worse and prolong the poor economy. There’s precedent for this in history: the Smoot-Hawley Tariff Act was intended to alleviate the Great Depression but instead exacerbated it. Specifically, I can think of laws against so-called ‘price-gouging’ (which is a myth: no-one in all of human history has ever paid more for something than he felt it was worth to him at the time he bought it, because whenever anyone feels the all-in price for something is more than the all-in value … he doesn’t buy it): by interfering with the price mechanism which is the fundamental method for economic actors to bid for their needs and desires to be met, it will result in less-efficient allocation of resources (capital and labour) across the entire market. This misinvestment will by definition lead to a poorer economy than would otherwise be the case.

More like an extended W...???

I think the major miscalculation you’re making here is that business will magically return to these places as soon as things open back up.

People are not going to patronize restaurants and bars as long as the risk of infection remains high. If half of people stay home due to Covid and the other half don’t care, most businesses won’t be able to sustain. A quick recovery is completely dependent on full economic participation, particularly by those lucky enough to still have jobs.

The US still has no scalable testing system, despite being promised one over a month ago, and we still don’t yet know if Covid can reinfect people. Opening back up without testing puts small businesses at risk by asking them to start spending money to open back up with no guarantee business will come back. If that happens, the government will have more people to bail out.

I'm genuinely confused how anyone in tech can honestly believe that this is only effecting hourly workers. That was certainly true for the first week but if my linkedin is any indicator last week was a blood bath for many startups. I can easily name 5 companies in my area that had greater than 20% layoffs just last week.

Google is already making the call to slow down hiring. Each week from here on out we are going to continue to see this impact more and more people in more secure jobs become effected. This will remain true even as the pandemic eases up.

Short term, that is mostly the theory. However, there are businesses that will have closed permanently, and the number of them grows day by day. Many restaurants survive on razor thin margins, and a few weeks without revenue can shut them down for good. Additionally, people are getting less money right now and so when things reopen you have a bit of a chicken-and-egg problem where restaurants don't get that many people because people need jobs to go there.

However, the stock market largely shares your optimism at this point.

> The businesses themselves (restaurants, retail, etc) haven't gone anywhere, they're just not operating. Yes there will be some bankruptcies, but those companies will restructure, assets will be sold, and something else will pop up in place.

I personally know of dozens of small businesses that have closed for good. You can also go on Reddit and check the small businesses subs for a reality check. Small business owners and employees are hurting really bad and government aid has pretty much failed them.

It also seems you are thinking of small businesses as if they were large corporations that can file for chapter 11 and simply restructure. Small businesses and their owners cannot afford that, they usually close down out of court or file for chapter 7, which implies a total shut down and liquidation of their business at a loss. The business owners will be ruined and most likely won't be able to start a new business for years, if ever. And in these uncertain times, it's very doubtful anyone will want to take their place for a while.

Honestly it seems to me you are so far removed from these people, businesses and their actual lives, that you are out of touch with reality. I find your lack of empathy appalling.

A lot of small businesses have a much harder time "just not operating"; it will probably be a long time until local small businesses can come back. It's also unlikely that people will immediately go out as soon as it is deemed safe to do so. Our habits will have changed by then and we already know not to trust the (US) government's ability to accurately tell us when it's safe.

> The people aren't going anywhere, and they haven't been deleted from society.

Uh, not to get too dark here, but that's definetly happening to some people.

I don't see all of the retail jobs coming back. Small stores will go under, maybe even some big chains, and there will be a further shift to online shopping as millions more Americans become accustomed to it.

We will see a sharp uptick in new business failures - all those that opened into this climate with empty showrooms and blank customer lists. They won't be hiring.

Even some big companies will retool around automation I imagine - to survive. Those jobs will never come back.

Anyone looking for a job after this is 'over' will be shoulder to shoulder with 20M other people doing the same thing. Its going to be rough.

Yeah I think this is a bit of an artificial recession in that demand hasn't declined for any of the normal reasons, but because people are being forced not to consume.

My guess is that means recovery will be quicker because all of the pent up demand will explode once the restrictions are lifted.

I could be wrong though. I could see a situation where people are skittish and decide to increase their savings long term--less travel, less eating out etc...

I'd like to be optimistic about the recovery but for those locations that do go under (retail, restaurants, etc) there will be replacements but I have a feeling new tenants will take a long time to fill those empty locations. I think people will be wary to put their money into a new business not knowing what the next year will look like.

edit: spelling

Instead of a V recovery, think of it as a flipped check mark. Once lockdown ends there will be quick partial recovery (we've already seen some of that in the stock market), and then we'll find out fully which industries are not coming back for awhile if ever (brick and mortar, commercial RE, etc...)

A lot of this is timing on reopening and how consumers are doing. If you just naively assumed a 1:1 fire to rehire ratio on some time window, there's still an extreme amount of friction involved in rebalancing that to previous levels. Spending is not going to magically bounce back to normal as anyone who had their mortgage or rent frozen is going to have to pay that back in a few months. Or just pay down credit card debt that they racked up. There's a lot of good data out there showing that savings rates (that has a massive effect on consumer spending) go way up during recessions/depressions and I wouldn't expect that to be any different.

I also wouldn't assume that there won't be further layoffs later in the year that hit salaried workers. Airlines are almost certainly going to do massive layoffs as soon as their federal programs expire in October and a huge portion of those people are going to be competing for hourly jobs.

Then think about how many people are going to get laid off after their employer starts monitoring VPN traffic and fully realizes that a good 20-30% of their workforce does nothing all day.

This supply side argument could also be made for the great recession and great depression. But obviously those still happened.

Historically when lots of companies file for bankruptcy and large swathes of the work force are laid off we enter a recession/depression. And they've all been stickier than your comment suggests.

The problem is this assumes that the businesses that employ these hourly workers can snap their fingers one day and Tada, be open.

The problem is that businesses can only be operating if the businesses they depend on upstream and downstream are open. Restaurants can't open until they get their food restocked, but restaurant suppliers haven't been stocking at their previous levels because they haven't had customers. Restaurants also may not be able to go back to 100% capacity in order to spread people out, which means the restaurants won't make enough money to warrant the number of servers and cooks they had previously. Restaurants may not even be able to afford to re-open or pay the same number of staff even if business warrants it because of built up backpayments on rent and accounts payables.

This isn't just a food service industry problem. What about movie theaters? Theaters attendance had heavily declined before shelter in place directives caused them to close. They aren't going to open to full capacity and need the whole staff they originally had.

Have an IT consulting shop? I know several who had their services (both commercial and residential) dry up because companies didn't want to incur extra expenditures and house holds were scared because of unemployment and getting less PC problems diagnosed or buying less hardware. The IT shop can't staff back up until their customers starts coming back.

Hotels won't need to rehire a lot of their cleaning crews until their occupancy rates go back up. Same with airline and airport staff, and indications do not show that people will be willing to travel immediately once lock downs are gone.

etc...

Every part of our economy is dependent on each other, and even if we had everyone vaccinated today there would still be significant spin-up time until we even halve the unemployment rate.

When your employees file for unemployment, if you didn’t fire them for cause, you can be liable for their unemployment benefit payments.

"it's worth considering that most of these people are probably hourly wage earners"

I'll consider your unpopular opinion because it's healthy to think about a range of scenarios...though curious to know why your optimism operates on this premise?

I like your idealism and hope you're right but have a feeling we've quarantined ourselves AND our economy. When things open back up again it's going to be brutal.

Children begging in the streets brutal.

I unfortunately disagree with this. Restaurants operate on thin margins. They are currently closed so all of the food, etc is likely waste. On top of that they are going to be months in arrears on rent and fees to their vendors. Many of those vendors are going to be months in arrears to their own employees, vendors etc. In order to open back up, pay rent / vendors and employees they are going to each need a large cash infusion. They cant just open, and hope that customers come back, if they do that they wont be able to pay the employees on payday. Many of them are likely done for good. Not to say other things wont replace them.

Regarding most of these people being hourly, I think that is not correct. Lots are but there are tons of startups, unicorns and publicly traded companies laying off 20+ % of their employees. Travel companies are slashing their backend salaried work force. Many of these companies are going to learn they can operate painfully but still operate with a greatly reduced workforce, boosting the bottom line and increasing share holder value. The remaining employees will be tasked to do work previously done by several employees and will not receive additional compensation for it.

On top of that, until we have a vaccine, many people are simply not going to go out and spend money in public.

I appreciate your optimism though and very much hope you are right. I could be completely wrong though, stock market seems to think I am. Every 5 million people laid off is a 5% rally on the S&P.

Personal opinion: We have tilted business too far towards 'share holder value' and C-suite compensation and away from treating employees like real people with lives. The cycle will continue until this changes. We are berating individuals for not having savings but giving these massive corporations a pass and massive bailout. I think we need to fundamentally change what it means to be a publicly traded company in this country.

Opinion note 2: A monthly efficient, meaningful and importantly, universal government injection of cash into households for the next several months could spur a massive recovery and is likely the best solution.

I am expecting to see record business at the local bars when the lockdowns end. The demand is still there.

There are a couple of things:

1) most Americans can’t afford an unexpected $400 expense. This multi-month lockdown will be much more than that. I doubt landlords will simply forgive rent, so any Americans will owe several months of rent without any revenue. That will mean several months of no disposable income to go spend at a bar or a restaurant. That means small businesses like those will suffer longer than essential staples like grocery stores.

2) Travel And tourism are dead and will be dead until a vaccine is available. Are you going to risk getting sick in a foreign country, especially when travel insurance likely won’t cover pandemics anymore? Tourism is definitely a large source of revenue for bars and restaurants will be a huge impairment on revenues as well.

3) People aren’t necessarily going to come back to the same jobs post-coronavirus. They might flock to jobs that pay better or have better health benefits. There might be a significant delay in getting staff up and running or they may need to pay higher wages.

4) more to point 1, many people have multiple part time jobs to afford to live. Losing even one of those jobs will affect them deeply. If they can’t replace their income or get those same number of jobs post-coronavirus, their spending will also be curtailed.

All of these contribute to lower revenues for business owners once the economy “starts back up”. I don’t think it will be a fast recovery. A lot of people will be financially hurt for a while. Owners will need some very thick skin and deep pockets to wait out for revenues to come back. Some may see impaired revenues for months longer, which probably isn’t enough to keep the business afloat.

Social distancing halving (or more) the revenue of such businesses?

The impact changes in consumer behavior will have on business models that employ hourly wage earners is unknown and difficult to model especially in the absence of a vaccine. The value in sharing a car ride to go out for the evening, attending a concert or sporting event, or living in large, (formerly) convenient, densely populated areas is being reevaluated by consumers no matter how much money the federal reserve puts into circulation to bolster these potentially antiquated practices.

The thought of dying, being intubated or having long term respiratory problems that elevate your risk for future medical complications is part of the calculation now.

The upside I see is the amount of money people who are working are saving now that there is much less to consume, though this changes behavior as well.

>freeze mortgages/rents and

The CARES Act has a provision regarding mortgage payments that basically requires that federally backed mortgages be frozen for up to 6 months, should the payee request it and claim to be impacted by COVID-19.

>absorb payrolls as other countries have

CARES Act has $350 Billion set aside for small business payroll expenses. There are separate provisions for Airlines, other specific industries.

Furthermore, the CARES Act has extended and expanded unemployment benefits to anyone impacted by COVID, and has temporarily grown the benefit by $600/week, meaning that unemployment benefits are now total wage replacement (or better) for the median American.

Save capitalism? I think that is a great over reaction, the Great Depression, crash of 87, nor of 2008 stopped it. So I am quite certain this will be but a hiccup when we look back 10 years from now.