Will our economy ever be the same again? At this moment, we are still in the midst of the most comprehensive nationwide shutdown in American history, and nobody knows when it will finally end. The primary reason why governors all over the country issued “shelter-in-place” orders was because they wanted to “flatten the curve”, and this was done to keep millions of people from getting the virus all at once so that our hospitals would not be completely overwhelmed. But these “shelter-in-place” orders are not going to completely end this pandemic. In order to do that, a complete and total national “lockdown” would be needed, and that is not going to happen. So the coronavirus is going to keep cycling through our population for an extended period of time until we get to the point where the vast majority of the population has built up immunity and the pandemic naturally burns itself out. So in the end, the total number of people that will catch this virus will be about the same whether the “shelter-in-place” orders were issued or not. But if the number of cases at any one time isn’t enough to overwhelm our medical resources, the overall death toll could potentially be less than it otherwise would have been.
In other words, these “shelter-in-place orders” are likely saving lives, but they are also killing the economy.
On April 3rd, it was announced that more than 6 million Americans had filed new claims for unemployment benefits the previous week, and I told my readers that we would probably never see a week like that ever again.
I was wrong.
This Thursday, it was announced that another 6.6 million Americans filed new claims for unemployment benefits during the previous week…
Another 6.6 million people filed for unemployment benefits last week, according to the US Department of Labor, as American workers continue to suffer from devastating job losses, furloughs and reduced hours during the coronavirus pandemic.
It was the second largest number of initial unemployment claims in history, since the Department of Labor started tracking the data in 1967.
Prior to this year, the all-time record for a single week was just 695,000.
So what we are witnessing right now is completely nuts.
Overall, a total of approximately 16.8 million Americans have filed new claims for unemployment benefits over the last 3 weeks…
Altogether, about 16.8 million American workers, making up about 11% of the US labor force, have filed initial claims for jobless benefits in just the prior three weeks alone. About 7.5 million workers filed for their second week of benefits or more last week.
We already have more unemployed workers than we did at any point during the last recession, and it is only going to get worse with each passing week.
Meanwhile, other economic numbers have been absolutely abysmal as well. National demand for gasoline has declined to the lowest level since 1968, and U.S. vehicle sales have plunged to levels that are absolutely catastrophic…
For the whole month of March, total new vehicle sales plunged 37.9% year-over-year, with fleet sales (rental, commercial, and government) down 27.6% and retail sales down 40.5%. In terms of daily retail sales volume, according to estimates by Cox Automotive, early March sales had been well above the sales on the same day of the week, same week last year.
But by March 13, they were below the year-ago-level and then plunged. By April 1, they were down 71% from a year ago.
I am having difficulty finding the words to describe how bad those numbers are.
If things are this horrific already, what will happen if the U.S. stays shut down for another month or two?
With millions upon millions of Americans out of work and businesses all over the nation currently shuttered, rent payments are not being made on a scale that is unlike anything we have ever seen before. The following comes from Zero Hedge…
Previously we described that over 30% of US renters didn’t pay their April apartment rent as the fallout of coronavirus-induced mass unemployment claims continues to ripple across various key sectors. Despite that some tenants will receive temporary protection from evictions “by a patchwork of federal and local laws” the reality is that as unpaid rents pile up, so will mortgage defaults as landlords struggle to satisfy their obligations – which will in turn affect fixed-income investments backed by said mortgages.
On the commercial side, Bloomberg estimates that about $81 billion in commercial rent comes due on average each month, but of course this is anything but a typical month, resulting in “The delay of a sizable portion of that will put an enormous strain on the complex systems for financing real estate and highlight how quickly the pain caused by social distancing has spread,” as Bloomberg observes.
Domino after domino is going to fall, and the economic pain is going to be off the charts.
And with each passing week, the economic forecasts by the big banks just continue to get even worse.
At this point, JPMorgan is projecting that U.S. GDP will plunge at a 40 percent annualized rate during the second quarter…
JPMorgan economists issued an even more dire forecast, now foreseeing a 40% decline in the nation’s gross domestic product for the second quarter and a surge in April’s unemployment rate to 20% with 25 million jobs lost.
In an earlier forecast, they said second-quarter GDP would be down 25%.
The only period in all of U.S. history when we witnessed anything that even comes close to resembling this was during the Great Depression of the 1930s.
Of course Congress has tried to help by passing several relief bills, but in many instances they aren’t working quite as anticipated.
For example, a loan program for small businesses was originally supposed to provide up to 2 million dollars in emergency help for each business, but there has been so much demand that loans are now being capped at $15,000…
A federal disaster loan program offering up to $2 million in relief is now capping out at $15,000 — and is leaving some borrowers wondering if they’ll even get that.
The Economic Injury Disaster Loan program, an offshoot of the Small Business Administration’s emergency funds system, has faced an unprecedented number of requests amid the COVID-19 pandemic, and is having trouble keeping up and following through with promised loan amounts, The New York Times reports.
As this pandemic stretches on, it is probably inevitable that Congress will pass even more emergency measures, and needless to say the Federal Reserve is going completely bonkers when it comes to flooding the system with money.
Ultimately, what they are doing will create inflation like we have never seen before, but most Americans aren’t worrying about that right now.
What most Americans really want is to get back to work, but Dr. Anthony Fauci and other medical “experts” are warning that may not happen for some time.
The longer the economy is shut down, the deeper this economic downturn is going to become. And we certainly don’t want it to get too much deeper, because the IMF is already warning that it looks like this economic downturn will be the worst since the Great Depression…
The International Monetary Fund sees the world economy suffering its worst recession since the Great Depression this year, with emerging markets and low-income nations in Africa, Latin America and Asia at particularly high risk.
With half of the IMF’s 189 member countries seeking aid, the executive board has agreed to double access to its emergency financing to meet expected demand of about $100 billion, Managing Director Kristalina Georgieva said in a speech on Thursday.
Needless to say, I have been warning of an economic crisis of this magnitude for a very long time.
Let us hope that the “shelter-in-place” orders will be lifted as soon as possible, because that would certainly give the economy some relief.
But things will not be going back to “normal”. COVID-19 will start spreading faster once again once the restrictions are lifted, and a large percentage of the population will remain huddled in their homes because they will be extremely afraid of catching the virus.
So economic activity will remain depressed for an extended period of time no matter what else happens, and meanwhile Congress and the Federal Reserve are absolutely flooding the system with fresh money.
That is a recipe for an inflationary disaster, and our standard of living will experience a very painful adjustment as a result.