Apr 23, 2020 - Economy & Business

High unemployment could be here for a while

Dion Rabouin, author of Markets

Illustration: Eniola Odetunde/Axios

Unemployment is likely to hit levels not seen since the Great Depression and remain elevated, economists warn, weakening the U.S. economy and making a V-shaped recovery increasingly doubtful.

Why it matters: That will be true even if states allow businesses to reopen sooner than expected, as surveys show most Americans aren't ready to go back to their normal routines.

The big picture: Many are looking to China's return from its coronavirus outbreak as a model, but the U.S economy is "a different ball of wax," S&P Global chief U.S. economist Beth Ann Bovino tells Axios.

  • The U.S. is a democracy and far more reliant on the services sector, which provides 80% of American jobs.
  • "China was locked down for a month and it was specific to one region, whereas [in] the U.S., we’re approaching two months and 90% of the population is under lockdown," she adds.
  • "That’s a big difference in terms of the impact on the labor market."

Driving the news: Analysts expect today's initial jobless claims report to show another 4.5 million Americans applied for unemployment benefits last week, taking the total number of filings to more than 26 million in just the past five weeks.

Between the lines: While unprecedented government spending has helped boost sentiment on both Wall Street and Main Street, it is unlikely to accomplish its goal of keeping most workers tied to their employers, Bovino says.

By the numbers: The Small Business Administration recorded 30.2 million small businesses in the U.S. as of 2018. So, even with the expected Paycheck Protection Program funding of $322 billion being added to the initial $350 billion tranche, that would equal only around $22,250 per firm.

  • "That might help some mom and pop stores that only have one part-time worker, but it’s not going to help those companies that have many more," Bovino says.
  • "I just don’t see the incentive for businesses to hold onto workers. And that’s why we’re seeing all these businesses shed jobs."

To wit, of the roughly 60 million Americans employed by a small businesses, only one-third work at companies with 20 employees or less, SBA data show.

  • And PPP loans are only forgiven if 75% of funds are used to cover employee salaries.
  • That leaves little for rent, utilities, supplies and other costs incurred by business owners, who are seeing significantly decreased or zero revenue.

Where it stands: Ratings agency Fitch said Wednesday it expects global GDP to decline by 3.9% this year, "twice as large as the decline" it predicted just weeks ago and "twice as severe as the 2009 recession."

  • Bovino and S&P Global senior U.S. economist Satyam Panday expect U.S. GDP will shrink by 5.2% this year — about four times their March forecast of a 1.3% contraction — and unemployment will hit 19%.
  • "The current recession has likely reduced economic activity by 11.8% peak to trough, which is roughly three times the decline seen during the Great Recession in one-third of the time," they wrote in a recent note to clients.

Go deeper: Why an effective quarantine is the lesser of two evils

Go deeper

Black workers overrepresented in essential work during coronavirus pandemic

Reproduced from Economic Policy Institute; Chart: Axios Visuals

On a percentage basis more white workers have lost their jobs since February, but that has largely been because black workers in the U.S. are much more likely to work front-line jobs considered essential during the coronavirus pandemic.

By the numbers: Black workers make up about one in nine workers overall, but about one in six front-line-industry workers, according to a study from the Center for Economic and Policy Research.

Updated 7 hours ago - Health

U.S. coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Andrew Witherspoon/Axios. This graphic includes "probable deaths" that New York City began reporting on April 14.

Florida reported on Wednesday its largest number of new novel coronavirus cases in a single day since April 17. 1,317 people tested positive to take the state total to 58,764, per the state's health department. Despite the rise, Florida Gov. Ron DeSantis said bars and clubs could reopen on Friday.

By the numbers: More than 107,000 Americans have died of the coronavirus and over 1.8 million people have tested positive, per data from Johns Hopkins. More than 479,000 Americans have recovered and over 18 million tests have been conducted.

Jun 3, 2020 - Health

Private equity benefits from HHS loans meant to help health care providers during pandemic

Illustration: Lazaro Gamio/Axios

Private equity companies have borrowed at least $1.5 billion from the federal government through programs intended to provide emergency funding to struggling health care companies during the coronavirus pandemic, Bloomberg reports.

Between the lines: Some of the hospitals, clinics and treatment centers benefiting from the Medicare loans — which could plausibly end up being forgiven — are owned by the richest investment firms.