I don’t know if this actually the right way to look at it, so please feel free to tear this apart, but I keep hearing mention that this is “temporary unemployment” or “artificial” or whatever else since we are being forced to stay inside. And, that as soon as this thing is over, we will immediately be robust and rolling in expansion, income, jobs, etc. I just don’t think that’s true and so I did a little digging. As much as this has started as artificial, when should we consider it prolonged and “real”? Would considering the average duration of unemployment for a US individual be relevant? According to this statistic since 1990, maintaining >20 weeks of unemployment would be abnormal until 2008/09 (financial crisis) and >30 would be abnormal since 2015 –
It took 5 years to get to <30 again which sustained for 5 years until 2020.
Pair this up with the unemployment rate trend since 1990, and you have a scary, long-term scenario that doesn’t go poof, back to normal –
Our current – We are currently in week 4ish of the unemployment spike – June puts us at 12+; July 16+; August 20+. “Experts” are obviously torn on when normal life will actual be back functioning at all. If you consider the average weeks someone was already spending on employment and % of population unemployed before this, I don’t think that this is something that rebounds quickly. The average duration isn’t going to magically reverse to the normal 20-25 week range and reduce to 3-6% (from perceivably >20% minimum at this point, currently around 17% probably going to more like >30% before this is over). It’s going to take time for businesses to have the volume and revenue to hire people back. I know not to discount the American consumer, but I know from polling my friends, family, neighbors, clients that they are 1) concerned (maybe even scared depending on age), 2) money is getting tighter by the day regardless, 3) no one anticipates this thing over before June, 4) they have almost unanimously communicated they will be cautious with spending and socializing when restrictions are lifted.
As a funny side note, I couldn’t find my primary credit yesterday because it was buried so deep in my wallet. I used to use that thing at least once a day. I got my bill this month and laughed – $274 mostly from pre-existing subscriptions/misc. Granted I don’t use it for groceries, but I haven’t been spending on gas (normally a tank a week), eating out (>3x /week), misc shopping (couple times a month), etc. Bottom line – I know I can’t be the only one.
So, what’s my point? I don’t know if there really is one other than to challenge the idea that this thing is artificial, a blip, TEMPORARY. I think we have no idea the sustaining damage of this to the economy over the next 6 months, let alone 1-3 years. I am trying to balance optimism with realism. I think this thing goes red for a little while longer.
What do you think?
My bias because I think it’s relevant to know where I’m coming from – I’m a mid-20’s, non-college grad, small business owner in a niche service industry with no business/personal debt.
Disclaimer: This is a guest post and it doesn’t necessarily represent the views of IWB.