Nearly a thousand Americans die of coronavirus deaths a day – more than in any other nation. While Americans constitute 4% of the world’s population, we have suffered nearly 25% of the global number of COVID-D cases and almost 25% of the deaths.
It’s clear that many households were not prepared for the economic downturn The loss of income and the consequent economic crisis hit a middle class that does not have much of a cushion to weather a depression.
A Federal Reserve study found that 6 in 10 households do not have enough liquid assets to cover three months’ worth of expenses. Just five percent of middle-class assets are liquid while almost 60 percent of a family’s assets are tied up in primary residences, retirement accounts, and businesses. 1 in 6 Americans could go hungry amid the Covid-19 crisis.
Even if families could sell their assets, they would be risking their homes, security in old age, and, for some families, their primary source of income. The need for cash is causing people to sell and barter their possessions.
With 74% of U.S. families living paycheck-to-paycheck—including one in four households that earn at least $150,000 per year—the pandemic plunged millions into desperate situations overnight. The U.S. economy has been kept up by economic stimulus of funds, IRS reminds consumers that unemployment income is taxable, meaning the government will get back some of the money it has spent over the next year.
The Brookings Institution took a deep look at pay across the U.S. and found that almost half of workers — 44% — earn low wages. 12 percent of Americans say they can’t cover a $400 expense; the remaining 27 percent said they could cover the expense but would need to use some combination of a credit card, taking out a loan, or selling something.
Almost a third of low-wage workers were below 150% of the federal poverty level. The median pay among low-wage workers was around $10.22/hr. When wages stay the same, they’re not really staying the same.
Personal Savings
Before the pandemic, the overall personal saving rate was relatively low at just under eight percent. While the savings rate has increased since just before the 2008 recession, it is nowhere near historic highs of over 13 percent. The value of savings are they can be drawn upon in an emergency. Sixty-nine percent of Americans have less than $1,000 in their savings account. As the economy falters, many in the middle class will now need to draw on whatever assets they have.
“The real tsunami is coming,” Mark Zandi, chief economist at Moody’s Analytics, tells us “the labor market is set to start weakening again. That leaves us with very little job creation in the rest of the economy but with still high levels of layoffs.” “You’re starting to see unemployment spells last a long time. The longer you’re out of the labor force and disconnected from your prior employer, the harder it is to reconnect.”
Unemployment
Less than a week after President Trump touted a positive jobs report and claimed victory over the economic downturn caused by the coronavirus pandemic, the Department of Labor announced that more than 1.5 million filed new jobless claims in each week of June. Before the pandemic, the all-time weekly high was 695,000 in 1982.
The Bureau of Labor Statistics reports that the employment-population ratio, which is the percentage of adults in the U.S. population who are employed, fell to a record low of 52.8 percent. It was 61.2 percent at the start of the year. Doing the math tells us that nearly 48 percent of working-age adults didn’t have a job in May.
Economists say the employment-population ratio is a truer indicator of the health of the labor market because it counts the people who could be working but, for one reason or another, are not looking for a job. The monthly employment report only counts those who are looking for a job.
One in three Americans say a household member has been laid off or had their pay cut. What’s more alarming is that many jobs are disappearing. A recent report by Bloomberg Economics warned that up to a third of the job losses experienced between February and May may never return.
The real unemployment rate is 21%–and is heading higher. Government data available don’t account for many workers who are still on the job but are expected to be let go. For example, Boeing (BA) announced plans to cut 16,000 workers, with 12,300 of those job cuts already being identified through buyouts or involuntary permanent layoffs. But virtually all of those affected workers are still on the job as of today. United Airlines announced plans to lay off more than one-third of its 95,000 workers. Brooks Brothers, which first opened for business in 1818, filed for bankruptcy. Bed Bath and Beyond said it will close 200 stores.
Many retailers are in bankruptcy –such as Brooks Brothers. J.C. Penney, Stage Stores, J. Crew, Nieman-Marcus, Roots USA, Pier 1, Tuesday Morning, Barney’s, Charlotte Ruse, Destination Maternity, Diesel USA, Forever 21, FTD, Full Beauty Brands, Gymboree, Payless Shoes, Things Remembered, and Z Gallery, and Denim retailer Lucky Brands, Stein Mart. Many of these bankruptcies result in the closing all of their Stores.
Giant Macy’s announced it is cutting 3,900 corporate jobs — 3 percent of its total workforce — to reduce costs as it struggles with the effects of the coronavirus pandemic. The cuts represent about a fourth of Macy’s corporate workforce. It expects to save about $365 million through the layoffs. The cuts represent about a fourth of Macy’s corporate workforce. The department store chain said it expects to save about $365 million through the layoffs.
Other businesses are in trouble, too, such as Chuck E. Cheese files, which filed for Chapter 11. Microsoft will permanently close its retail stores and put its resources into online channels after closing the outlets in late March due to COVID-19. Nordstrom, a major retail tenant finds itself at odds with its landlords. The upscale department store chain has reportedly notified the property owners of its namesake and off-price Rack stores that it will pay only half of its rent costs for the rest of 2020.
The demise of America’s malls can deal a blow to the towns that depend on them.
Malls and shopping centers across the country provide $400 billion in local tax revenue annually, according to the International Council of Shopping Centers.
Millions of additional layoffs could come soon from cash-strapped state and local governments unless Congress provides additional relief and small businesses that have exhausted their borrowing under the Paycheck Protection Program. In a survey of its members, the National Federation of Independent Business said more than half of respondents had used up their loans and 22 percent planned to lay off workers as a result.
Temporary becomes permanent
People who are counting on businesses reopening their doors may be surprised to find that a temporary loss has become a permanent one, said Zandi. Millions of people remain unemployed and the number of jobs being permanently lost is going up each month. The rise in permanent job loss is the latest signal that the economic damage from the coronavirus is likely to be long-lasting. 6 million additional jobs lost may be a best-case scenario rather than the worst-case scenario
.An earlier University of Chicago study predicted that 42% of pandemic job losses would be permanent. These are not just job losses for millions of Americans but an even larger career existential crisis.
The “only way to have a viable economy and society is to control this epidemic.” “It was Trump’s defiance of science, his muddled messaging and his incessant vitriol that has plunged the country into a swamp of joblessness, receding labor participation and slumping business confidence unseen in other developed nations,”
“Here we are, a country so rich in expertise, in resources, in capacities, and yet we’re watching a complete failure of a political response — with a massive loss of life — in real-time,” Economist Jeffrey Sachs said. “It’s quite shocking because Trump not only does not know how to approach this issue but he blocks those who do.”
The nearly $3 trillion worth of pandemic relief measures approved earlier this year by Congress have clearly buoyed the economy, but the effect of those initial programs is ebbing. Many small businesses are running out of loans and grants that kept paychecks going out to at least some workers. State governments are financially distressed. Unless more relief money comes from Washington, more people will experience no-pay paydays.
The first wave of the coronavirus pandemic caused the U.S. economy to shrink at its fastest rate on the record because of the virus. The U.S. economy shrunk at a seasonally adjusted annualized rate of 32.9 percent during the second quarter of 2020 as spurred an economic collapse of record-breaking speed and size, according to the Commerce Department. It is the largest one-quarter plunge in economic growth since the federal government began reporting quarterly GDP data. The staggering contraction beats the last record set in 1958 when GDP shrank at an annualized 10% rate.
During the worst of the Great Recession, GDP shrank at an annualized 8.4% pace in the final quarter of 2008. Before that, the single largest annualized quarterly decline recorded by the Commerce Department was 10% in early 1958. the economy saw its worst quarter in at least 145 years. Federal regulators quietly shredded the most significant banking reform enacted after the 2008 financial crisis last month. When they were done, they patted banks on the back for continuing to shovel cash to their shareholders.
This downturn or depression is likely last well into the year. The average duration of a recession between 1945 and 2001 was 10 months. The middle class faces its greatest threat since the 1930s. Any way you slice it, it’s an ugly, historic economic contraction.
The industries that have seen the most job loss, including hospitality, leisure, and retail are industries where a much higher proportion of women work. The job market is rough for recent college graduates, with 68% fewer entry-level positions available this year than last year.
Making the Mortgage Payment or Rent
Half of U.S. homeowners struggling with mortgages due to COVID-19, researchers say many Americans are thinking about putting up the “For Sale” sign. A survey of 2,000 American homeowners found that 52 percent are constantly concerned about making their mortgage payment on time. Forty-seven percent of the poll say they are considering selling their home because they can’t afford their mortgage anymore.
Researchers say 35 percent of U.S. homeowners admit they’ve missed a mortgage payment during the pandemic. The same amount of respondents said they worry about losing their home. The poll, commissioned by the National Association of Realtors, also found that eight in 10 homeowners say the COVID-19 pandemic has caused an unexpected financial problem in their lives.
More than half of the survey admit they have cut back on their basic expenses to afford paying off their home. Seventy-one percent of homeowners have significantly cut back on buying clothes. Other habits the tough financial times have cut into include buying take-out food (66%), paying for a streaming service (46%), and buying groceries (45%). Another 53 percent of homeowners are selling their own possessions to make extra income.
A separate survey by Apartment List, a search firm, found that fear of eviction has escalated. More than one-in-five renters say they are “very” or “extremely” concerned about being thrown out in the next six months, up from 18% in June.
Thirty-one percent have asked a family member for a loan during the pandemic. Another 22 percent have reached out to friends for help with their bills. Some homeowners have opted for the real longshot, as 19 percent of homeowners admit playing the lottery has helped ease their financial burden.
What Jobs Are Coming Back
Eating and drinking establishments accounted for the bulk of the 7.5 million jobs the economy recovered in the past two months.
Yet restaurants still employed about 3 million fewer people at the start of July than they did before the crisis — a whopping 50% reduction. And the recent outbreak of coronavirus cases means many of those jobs probably aren’t coming back soon.st politics news.
A society in which the rich get richer as the poor and middle-class collapse is not a society that can sustain itself. The Fed and the financial regulators who stripped the Volcker Rule of its meaning are enlisting the country in a two-tiered future: one for the financial elite and another for ordinary citizens of a democracy. They are encouraging banks to take bigger risks as the economy collapses, without taking meaningful precautions. That cannot end well.
The Economy is Cratering. Welcome to the Trump Depression
Economists call 12.5% as the official unemployment rate or “U3” — but in these times, a better measure is “U6,” the statistic which includes “discouraged workers” and people forced into part-time work, or the underemployed. That’s closer to 20%, which is nearer to what you might expect after five months of unemployment topping a million people per week. And even that’s an understatement because none of this really measures the impact on the self-employed very well. The self-employed have come to be larger components of the economy, whether Uber drivers or Instacart deliverers — even the pre-Coronavirus economy was fully half “low-wage service jobs.” Nearly half of economists from leading association predict US economy won’t return to pre-pandemic levels until 2022. The patient wasn’t healthy to begin with.
