Monday, July 13, 2020

'October Surprise' - Recovery is mainly fizzle and little sizzle

If there is an “October Surprise” it won’t be a surprise to economists and business leaders because of what we see as a wimpy recovery.

After the fastest recession in U.S. history, the economic recovery may be fizzling reports David Lynch at the Washington Post.

There is no “V-shaped” recovery. What is out there resembles an L-shaped trend. Here are examples of how American business is reacting to the pandemic from Lynch’s report.

After two surprisingly strong months, the economy could begin shedding jobs again this month and in August, Morgan Stanley warned Friday. Many small businesses that received forgivable government loans have exhausted their funds while some larger companies are starting to thin their payrolls in preparation for a longer-than-expected downturn.

In a worrisome sign, more than two months after states like Georgia lifted their shelter-in-place orders, layoffs are spreading beyond companies that provide services requiring direct human contact. As disruption from the pandemic lingers, this could mean that the job loss is starting to feed on itself in a classic recessionary spiral, economists said.

Businesses have to be conservative and cautious and resize their business for the worst-case scenario of an economy that doesn’t bounce back,” said Coronado. “We’re now seeing the normal recession dynamics we were trying to avoid.”

As the virus has raged longer than first expected, some companies are concluding that they just don’t need as many workers as they did in February, said Heidi Shierholz, former chief economist at the Labor Department.

"These are more of a normal recession layoff. It definitely has a more permanent feel to it,” said Shierholz, now with the Economic Policy Institute.

  • “United Airlines announced plans to lay off more than one-third of its 95,000 workers.”
  • “Brooks Brothers, which first opened for business in 1818, filed for bankruptcy.”
  • “Bed Bath and Beyond said it will close 200 stores.”
  • “Harley-Davidson last week said it was eliminating 700 jobs as part of a restructuring plan it described as unrelated to fallout from the pandemic”
  • “Wells Fargo, the nation’s fourth-largest bank, is drawing up plans to cut “tens of thousands” of jobs later this year”
  • “For Levi Strauss, booming online sales were not enough to offset the impact of the closure of most of its retail outlets in March and April. The company said last week it would lay off 700 workers, aiming to trim quarterly expenses by $100 million.”

… Now states such as Florida, California, Texas and Arizona are setting daily records for coronavirus cases and more than 70 percent of the country has either paused or reversed reopening plans, according to Goldman Sachs.

[In contrast,] Jared Kushner, the president’s son-in-law and a senior White House adviser, spoke of hopes “that by July the country’s really rocking again.”

"I created the greatest economy we’ve ever had. And now we’re creating it again,” [Trump] said before leaving for Florida.

Come again?

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