The Bad News: The Unemployment Rate will be greater than that of the Great Depression.
As I write this, last week was a disaster for the Stock Market with the biggest one week drop in history. Today, the market is still heading downward at negative 3% to 5%. Unemployment numbers are expected to be released on Thursday. It’s not a question of bad, but how bad? Even those persons still working are of questionable productivity with the disruptions in place. Fear dominates over the long term view. There is no “invisible hand” of the market imbued with rational good sense. There are however plenty of frightened human beings.
For a full coverage of St. Lous Fed Reserve Board Member Bullard’s bold announcement, visit: Bloomberg .
But when a Federal Reserve Board Member opines the real possibility of 30% unemployment in the second quarter, 2020, it can’t be treated as hyperbole. [The unemployment rate during the 1929 depression reached and held at about 25%]. The U.S. is a consumer driven economy. Stall consumerism, and you stall the U.S. People in fear of their jobs, and not just their health, will put off buying almost every discretionary item. It’s been said most of what we buy we don’t need. Add to that consumer debt is the sand on which the U.S. economy rests. When that debt goes into default and Banks tighten credit, as they inevitably must, the gears start to come apart.
The unspoken, unwritten, and possibly unseen threat is a terrorist attack timed to disrupt the economy at its most vulnerable. Our security forces are undoubtedly concerned and working overtime, but silent to prevent planting ideas in some crackpot’s head.
The “Fingers Crossed Good News: It won’t last as long as the Great Depression.
The same Fed Board Member who paints the “worse case” unemployment rate scenario also ends on a happy note. He states while the second quarter of 2020 will be hell, to paraphrase, the sky will open and the sun burst forth in the third or fourth quarter with a rapid consumer rebound. Employers presumably will gear up again, calling back all those furloughed employees.
But here’s some more good coming out of evil. We will learn to transition much of our work to virtual environments saving needless travel time in commutes. Employers and their employees will of necessity learn to use internet based audio-visual options such as offered by Zoom, allowing for screen sharing, chat, and document exchange in real time.
But the true good news would be a re-examination by politicians, economists, and policy makers how how this economy has unduly favored the elite !% to 5% that hold 95% of U.S. wealth, and profiteer from prosperity and disaster alike. Also, from an employee rights attorney’s point of view, I predict state legislatures and quite possible Congress will see in the aftermath the wisdom of paid family leave and paid sick leave for companies having resources to pay. Currently, in the FMLA model, for example, those are companies having 50 or more employees.