By Mark Schniepp and Ben Wright
June 26, 2020
We’re becoming more concerned about the job market. We are now seven to eight weeks into the re-opening of the U.S. economy and amidst trillions in fiscal/Fed stimulus, the unemployment rate has failed to make meaningful improvements.
In California, the unemployment rate declined slightly last week, but is still generally moving higher in a disappointing sign of weakness for the statewide economy. Initial jobless claims for unemployment insurance have generally been rising since late May, all through the Phase 2 openings of economic activity.
More sources are beginning to show a slowdown in job market activity, including cell phone tracking data that captures travel patterns to and from places of work. After a clear resumption of commuting across the U.S. and California (with a pause on Memorial Day), progress in work related travel began to stall in early June.
The reasons behind the recent labor market weakness are unclear, but the most likely causes are:
- PPP loans began to run dry, resulting in new layoffs.
- Businesses have been unable to survive the slow, phased re-opening of the economy, particularly in states, such as California.
- Businesses that have remained open have had to reduce their headcounts because of a lack of sufficient revenue.
- Cities and counties have laid off more staff after realizing that initial furloughs were too optimistic.
If the re-opening of the economy does not speed up, sufficient demand from consumers does not materialize to boost business revenues, or the rising rate of coronavirus infections leads to another round of lockdowns, there is a rising likelihood that the U.S. economic recovery could turn into another contraction.
Re-posted by permission June 26, 2020.
Mark Schniepp is 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.