VE day jobs carnage
It didn’t come as a surprise, but perhaps it was fitting that the carnage in job markets would be confirmed on the 75th anniversary of VE day, as Western Governments achieve a level of economic collapse and authoritarian rule that the Nazi’s could only have dreamt of. 75 years ago our predecessors faced terrible odds with stoicism. Will history regard us snowflakes better?
The political calculation is that it is better to shut everything down rather than be blamed for the pandemic deaths. Digging a hole and hiding in it however, was never a viable strategy when a vaccine isn’t available and perhaps never will be. Unfortunately this is a virus we’ll all have to live with and that there aren’t any easy options where death isn’t included. At some point the economies will have to restart and we’ll find out which end of the current 0.1% to 0.9% range of infection fatality rate estimates we are dealing with. The longer we wait however, the less of a functioning market economy and civil society we’ll have left to go back to.
The weekly insured unemployment data for the US had offered us a clear insight on the devastation in jobs markets from the current lockdowns that were coming down the pipe, with the last weekly data to the 25th April reaching 22.6m of claims, after a weekly increase of +4.6m. Today’s monthly non-farm payroll data showing a month on month reduction in private sector employment of over 19m for April therefore ought not to come as a surprise, albeit it is still shocking, all the same.
Q2 GDP will clearly be a bloodbath. Not just from the direct impact of lower private sector income, but the pullback in all non essential expenditure by large swaths of industry. A couple of months ago, companies were revelling in cheap debt and leveraging up for share buybacks and acquisitions. Now many of this same companies are facing covenant breaches on their debt and are throwing every bit of expenditure overboard that isn’t nailed down. Not only is that going to crater Q2 GDP growth (take your pick from anywhere from -20% to -40%), but in many cases this will impair the rate of potential recovery as companies cut into flesh and bone to stay afloat during a lockdown of uncertain duration.
When Bilbo Baggins played the trolls for time in the Hobbit, at least he had a strategy. With COVID-19 however, the onset of dawn will not consign the virus to stone. So what are our political masters waiting for, herd immunity? By that I don’t just mean the mounting evidence that suggest a much higher rate of infection and asymptomatic cases, including a lower infection mortality rate, but for the cover of mounting public demands for a return to a less constrictive approach. We cannot rely on a vaccine. How long have we awaited vaccines for hepatitis C, SARS or even the common cold? COVID-19 is already mutating and has all the hallmarks or remaining with us as an endemic virus.
If you can do it from a hole in the ground it hasn’t been too bad, but if your business requires any form of social contact, it’s basically been shut down. As a consequence the above, the distribution by sector of the job casualties ought to come as no surprise.