The Economy Under COVID-19: Notes from the Trenches

There are currently two crises underway simultaneously. The advance of the novel coronavirus is taking a terrible toll in terms of physical and emotional well-being. At the same time, job losses resulting from ‘social distancing’ are sending the economy into a tailspin. To fight on both fronts, governments are advancing rescue packages of never-seen-before dimensions. Every day, the tremendous number of factors in play reconfigure in a new way. These ‘from the trenches’ notes attempt to shed some light along a murky pathway.

CNN reported Wednesday night (April 1, 2020) that 350,000 retail workers had been placed on furlough since Monday (March 30, 2020), i.e., over a period of just three days. For an individual worker, a furlough may seem no different than a layoff at first, but there is an advantage. A furloughed employee will be able to qualify for unemployment insurance easier because he or she doesn’t have to prove they’re looking for a job. They still have one, even though it’s in limbo. For an employer, once the wheel spins fully around, it will be able to restore its workforce faster and without having to go through vetting hoops.

In the Great Depression of the early 1930s, the U.S. unemployment rate soared to 24.9% (one-quarter of the workforce). In the Great Recession of 2008-2009, joblessness peaked at 10.0% (one-tenth of the workforce). Some analysts are projecting the unemployment rate this year, 2020, will reach 17.5%. Such a figure has the appearance of taking an easy route to the answer. It’s simply a calculation of the mid-point between 10% and 25%. As a ‘best case’ figure, 20% seems more likely.

There’s a prioritization of expense items that family heads will need to wrestle with as bills come due. Payments for food and beverages, hydro and water (utilities), and rent or mortgages will come first. But where in the ranking, in this time of isolation, is one to place invoices for smart phone services and Internet access?

Versus their 52-week highs, four major stock market indices closed March as follows: the DJI, -25.4%; S&P 500, -22.6%; NASDAQ, -18.5%; and the TSX, -24.3%. Earlier in March, NASDAQ, like the other indices, descended into ‘bear’ territory (-20% or more), but it has since climbed a step or two out of the basement. Now it’s only in the ‘correction’ zone (-10.0% to -19.9%). Remarkably, NASDAQ now sits on a par with its level of a year ago. Even in the worst of times, the high-tech sector continues to rule.

Read the previous article here: The Economy Under COVID-19: Notes from the Trenches – April 1, 2020.

Alex Carrick is Chief Economist for ConstructConnect. He has delivered presentations throughout North America on the U.S., Canadian and world construction outlooks. Mr. Carrick has been with the company since 1985. Links to his numerous articles are featured on Twitter @ConstructConnx, which has 50,000 followers.