This Thing is Far From Over
by Michel Ouellette JMD, ll.l., ll.m.
The latest numbers on unemployment are astounding
“Take My Word for It: This thing is Far From over”.
The economic impact of the pandemic is staggering. Millions of people have lost their jobs over the past few months as the coronavirus pandemic continues to ravage the economy.
What does this mean for the future of the economy? How will we recover and get people back to work while staying safe and healthy? Where do we stand compared to the situation we lived during the Great Depression and the Great Recession?
As far as I am concerned, in terms of depth, I think it will be as deep as even the Great Depression, way more than the Great Recession and it is going to take some time to get back to under 10 percent unemployment. It took a decade to fully recover from the Great Recession of 2008-09 and the coronavirus has essentially wiped out all those job gains in a matter of three months.
As for the housing market, my expectation is that housing prices will go down. Millions are out of work and the ones who could afford it do not want to do open houses or are hunkering down. A bigger question is whether there might be structural problems in the housing market. With some mortgage borrowers getting the ability to put off payments, the nonbank “servicers” are getting squeezed. If a bunch of those companies start to fail, it could cause a huge problem.
In Canada, this is a non issue but, in the US, the pandemic and huge job losses will definitely make some people question the logic of tying health insurance to employment. That said, I am not convince the pandemic will result in the creation of a single-payer, American government-run health care system soon. Not all Democrats are in favor of it, and there are powerful special interests in Washington who oppose the idea, pandemic or no pandemic.
Both in Canada and the US, some unemployment recipients are earning more on unemployment than they did working. The same for most of Canadian students. This his cause for major incentive issues as employees are called back to work. Why would I go to work if I am making more money staying home?
The problem is that millions of people lost their jobs and the governments wanted to send them relief. The argument that people are paid a replacement rate higher than what they earned before for a couple of months is only drawing attention away from the real issue. When employers are expanding, they often want to offer hiring incentives. What would they be able to afford if we stay at the levels we have now?
Layoffs, so far, have been concentrated among lower-paid workers and affected mostly low-income family. This s summer, as people continue to hunker down, we will continue to see hurt in workers. People who did OK financially so far are essential services employees and white-collar workers who can easily do their jobs from home.
If the economic downturn continues, few people will be immune from the economic hardship. Law firms, lobbying shops, corporations, unless they change their business model, will have a hard time keeping their business going indefinitely and at the same profit margins if everything remains pretty closed down and no vaccine seems imminent.
Take my word for it: “This thing is far from over”.
Michel Ouellette JMD, ll.l., ll.m.
Systemic Strategic Planning, Crisis & Reputation Management