Those readers that are surprised by the high unemployment filings reported by the government on last Thursday have clearly not been paying attention. The numbers are the result of workers not working. The obvious culprit is COVID-19.
The labor market is collapsing. Make no mistake about that. Goldman Sachs has updated its model and now predicts that the US GDP will collapse by 34% in the second quarter of this year. They also predict that the unemployment rate will be 15%.
Those are serious numbers.
Last Wednesday we discussed the upcoming shale oil crisis as Saudi Arabia and Russia continue to try to drive American oil producers out of the market. The resulting job losses will add to the labor woes already exacerbated by the pandemic.
Although it is easy to focus on traditional workers, the labor contraction will also affect the informal labor force and small-to-medium size businesses that will be going out business, or barely surviving. The owners of those businesses will also be entering the labor market to meet their obligations.
The open question is, will the businesses rehire workers? Do they have the financial ability to do so? More importantly, do businesses that learned to have workers work remotely return to their original labor force? Or will they do more with less workers?
Goldman Sachs seems to believe that the economy will rebound. But that does that mean that the rebound, if it does, include the workers, or will there just be more money flowing with less workers?
There is no doubt that the global economy has fundamentally changed.
Who will survive and how is yet to be determined.
Regardless, another billion dollar bailout will be necessary for America to recover.