By Ben Wright
March 25, 2020
California’s statewide “Shelter in Place” orders could shut down 28 percent of the job market. It’s an astounding situation that has virtually no comparable precedent.
We’re talking about 5 million jobs across 400,000 firms, a scenario that dwarfs the 2008-2009 recession when the state lost 1.1 million jobs over the course of 18 months. The coronavirus pandemic has unfolded over just a few weeks.
To arrive at these estimates, we did an industry-by-industry accounting of the jobs that were deemed “essential” by the State Public Health Officer
Along with the jobs at risk, California residents could incur $21 billion in lost wages for each month that the “Shelter in Place” is in effect. Some firms are furloughing their employees with full pay and benefits, but most companies simply can’t afford to do so without an enormous amount of government support.
The $2 trillion (federal) bailout package, which is close to being finalized, will do more to expand unemployment benefits than keep workers from losing their jobs.
The number of statewide layoffs has already broken records and is expected to surpass 700,000 for the week ending March 28.
In a hypothetical scenario where all 5 million workers at risk are laid off completely, the California unemployment rate would approach 30 percent.
That’s unlikely to happen, and we don’t even know if the official statistics will be able to capture the full magnitude of the downturn.
Many of these layoffs and furloughs will occur in the second half of March, meaning that they won’t appear in the unemployment rate until April.
But everyone should be prepared for economic data that would have seemed unbelievable in almost any other context.
Reprinted by permission from Mark Schniepp, head of the Goleta-based California Economic Forecast, an economic consulting firm that produces commentary and analysis on the U.S. and California economies. The firm specializes in economic forecasts and economic impact studies, and is available to make timely, compelling, informative and entertaining economic presentations to large or small groups.
Posted March 25, 2020