Rehiring numbers could be fleeting
Do not get too excited about the astounding number of people rehired last month; it could be a dead-cat bounce.
Employers did a great job rehiring 4.8 million people. Never has a nation’s economy put so many people back to work so quickly.
Restaurants led the way, bringing back nearly 1.5 million workers, while nonessential retail stories rehired 740,000. Dentist offices resumed operations, adding 190,000 to the total. But here is an important note: The survey ended June 15, and a lot has happened since then.
The United States has registered 50,000 new COVID-19 cases in a single day, and the national infection rate is climbing. Texas is experiencing exponential growth with more than 8,000 cases recorded Wednesday. The virus is spreading across the country, and it’s not due to protesters.
Analysts at investment bank JP Morgan Chase have been tracking customer spending patterns and infection rates, the Wall Street Journal reported Thursday. They found that when restaurants rang up big tabs, infection rates spiked nearby three weeks later.
The correlation between consumers going out and infection rates is why Texas, California and Florida are shutting down bars and restaurants, and New York is delaying indoor dining. Social distancing remains the only tool to slow COVID-19.
Consumers have learned that spending significant time in enclosed spaces with strangers is risky. Phone data collected by Safegraph.com, and first reported in the New York Times, shows that retail foot traffic in Houston and San Antonio has dropped as infection rates have climbed since mid-June.
We must acknowledge the virus is in charge. Humanity is along for the ride.
The latest unemployment numbers suggest a V-shaped economic recovery. But the spike in cases indicates a downwardleaning W. The peak in the middle is what traders call a dead-cat bounce because even a dead cat will bounce if it falls far enough and fast enough, but that doesn’t mean it’s going to get back up.
Optimists are getting excited over the month-over-month numbers, but the year-over-year
data is what counts. Layoffs went down 57 percent in June from May levels, but compared to April-June 2019, layoffs are up 781 percent, according to Bureau of Labor Statistics data.
That’s double the previous record set in the third quarter of 2001 when economic activity shut down after the September 11 terrorist attacks, according to Challenger, Gray & Christmas, Inc., the global outplacement and business coaching firm. Just as the virus is still spreading through the population, the financial impact is still infecting the economy.
“We are beginning to see the impact of the recession spreading to companies that were not directly impacted by the virus,” said Andrew Challenger, the firm’s senior vice president. “At the same time, companies that attempted to reopen but were only able to attract a fraction of their pre-COVID customers are closing down again.”
Many fear that bankruptcies are only just beginning. The number of corporations defaulting on their debts in the first five months of 2020 has already surpassed the total for last year, according to Fitch, the global ratings agency. (Fitch is owned by Hearst, the Houston Chronicle’s parent company.) “Our assessment suggests that the pandemic fallout will erase more than $5 trillion in revenue from our global corporate portfolio in 2020, or around 20 percent of the revenue generated by these companies in 2019,” Fitch said in a statement.
At the current pace, the amount of money lost in 2020 will exceed what was lost in the Great Recession, Fitch added.
Closer to home, Texas cities are not doing as well in bringing jobs back. Of 180 cities rated by the financial information site WalletHub, Houston ranks 108th and San Antonio is 116th. The problem is Texas’ reliance on oil and tourism, two sectors that are unlikely to recover before late next year.
Congress and the Federal Reserve will need to supply more aid because supplemental unemployment benefits are expiring, and companies still don’t understand the new normal. And each one of us has a role to play too: Wear a face mask.
Investment bank Goldman Sachs estimates a national mask mandate could save the economy $1 trillion by slashing the number of new COVID-19 cases.
“If a face mask mandate meaningfully lowers coronavirus infections, it could be valuable not only from a public health perspective but also from an economic perspective because it could substitute for renewed lockdowns that would otherwise hit GDP,” researchers wrote.
Wearing a mask does not make you a leftist, it is a sign of national unity and patriotism. We are all in this together, and we need to start thinking less about politics and more about saving our nation. People who wear masks are heroes because they are putting the nation and others ahead of themselves.