Life Post Corona Virus
By: Jesus Ramirez
Last week another 6.6 million people filed for unemployment bringing the total to 16 million.
What does this mean for the economy as a whole?
This means that at least 10% of the workforce is without jobs. 16 million Americans who aren’t spending as much if at all beyond the basic necessity. And yet we see the market continue to rally.
There is a disconnect between companies continuing to lose revenue and the bullish attitude that investors have. There’s an extreme difference between what’s happening on your street and on Wall Street. Speaking with friends and colleagues the idea seems to be that once the
Corona Virus is contained life will continue as we knew it beforehand. I don’t know if that’s the case.
As of six days ago the industry being hit the hardest is Leisure and Hospitality, rightly so with stay at home orders and travel restrictions in place. The industry saw a decline of at least
459,000 jobs in the last month.
Behind this industry is Health Care and Social Assistance with a decline of 61,200 jobs, Professional and Business Services at 52,000 lost jobs, and Retail Trade at 46,200 lost jobs. The general expectation is that the majority of these people will get their jobs back once all of this is over.
I believed this too, however, with lost revenue will the hotels, nursing homes, and retail chains be able to afford to bring everybody back?
Even if 75% of the 16 million unemployed get their jobs back, regardless of the societal circumstance, that still leaves 4 million without jobs.
Secondly, it was originally reported that the Airline Industry was projected to lose $113 Billion,
now analysts are saying it will be much more than that. Until COVID-19 shows signs of containment there is no telling how much they will actually lose.
The CARE Act is providing airlines $50 billion, $25 billion in the form of grants for employee payroll and the other $25 billion in the form of loans. This means that U.S Airlines are responsible for $88 billion in losses right now and the other $25 billion later.
The U.S Government made sure they are getting more than an I-O–U from airlines if they chose
to accept grants they cannot administer involuntary layoffs, pay cuts, or furloughs until
September 10th. Also, their executives cannot purchase a large amount of their stock to increase the stock price until that same date.
If airlines choose to accept loans they are left with the United States Government holding significant power in their company. I tell you all of this to remind you that Commercial Airlines account for five percent of the Nation’s GDP at nearly $1.7 Trillion.
With this information alone, you would think that the market is in a steep decline, at least that’s what I and the rest of the team at Healthier Money thought. Open a new tab and check the
Dow or the S&P 500, they’re rallying.
The only answer I could come up with is investors are jumping in for the short-term with the announcement of the Feds newest $1.2 Trillion aid package. Maybe they’re holding on for the extreme long-term when all of this is over, but I do not see everyday life reverting to what it was anytime soon, if ever.
The Federal Reserve is projected to give out 6 trillion dollars in aid packages total. This is going to have to be paid back somehow. Some will be paid back from loans with minimal interest whether by small businesses, or corporations.
Our thought is that we cannot keep this low tax, low-interest-rate environment while the government is continuing to metaphorically print money. Sooner or later the average citizen is going to have to pay for this.