Will We See Another Unemployment Explosion Come October 1?
Since the effects of COVID-19 were felt on the economy, the weekly first time unemployment claims have continued to shrink. They are still at elevated levels but they are greatly improved compared to when things first hit.
Many view this as a positive sign while others feel it is a natural course since the initial wave is always the worst.
The Fed and Congress have done a lot to try and keep people working. Thus far, the money put out there has not equated to a very robust job market. Some might contest that since the May jobs report saw a record 2.5 million jobs created. However, in comparison to 40 million first time claims, this is a drop in the bucket.
One of the programs that was put together was a loan program given to companies that kept employees on the payroll. The airline industry was obviously hard hit and it received $25 billion in an effort to keep people working. This did result in achieving its intended goal, the airlines kept people employed.
There is one caveat to this: the loans are forgivable if the companies keep people employed for the 6 months after receiving the loan.
Since the airlines are not going to give this money back, they will hit this target.
Which brings up the vital point: what happens come October 1st when the mandate is gone? I think we can all guess what is going to take place.
Executives at the airlines are already making preparations. With air travel still off by an enormous percentage, and not likely to return anytime soon, layoffs are coming. Most of the airlines have started to offer early retirement packages to their personnel. This will help to reduce staff especially among the pilots.
It is not enough though and we will see more done.
Another question is how many other industries are in the same situation. There is no doubt that many companies took the money to "try and buy time". After all, that was the intent of the program. Nevertheless, since a V-shaped recovery seems off the table, there is a good chance that any improvement in the employment numbers could be offset when Fall rolls around.
The airline unions have asked Congress for billions more in aid to try and carry them through March 2021. This would double the 6 month loan that was already granted.
Unfortunately, most workers will not be covered in this manner. If they were fortunate enough to work for a company that was "paid" to keep them on, when that money runs out, they will be out the door. There is no way companies that are in industries that are still suffering diminished revenues will keep staff on when it cannot justify it.
We might get a few month reprieve from the bad employment news before it starts again. There is a 90 day window before the loan stipulation starts to run out and then we could see affected industries start to hand out the pink slips.
It appears Congress is aware of what is going on. There is serious discussion in the Senate about another trillion dollar stimulus package.
My view is this one will not be the last. A spike in employment come Fall would lead to calls for another round.
This is a new normal.
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Posted Using LeoFinance
