Today we are facing monumental COVID19 unemployment that is initially tracked by the weekly number of new applications for unemployment payments — remember this is an insurance policy for which you have paid for years.
By that measure we are at 15% unemployment (those without jobs actively looking for a job which is known by the Bureau of Labor Statistics as U-3 Unemployment, the most common measure referred to by the media).
We are likely headed to 20-25% unemployment before the trend is reversed.
But, we are dealing with a situation that is entirely different than the traditional manner in which we assess these numbers over a long period of time.
Traditionally, we look at these numbers as a means of tracking a trend line to establish the expansion or contraction of the economy. They are trend numbers.
Before the advent of COVID19, the USA was at record high employment.
These numbers subsume — incorporate — people who technically meet the criteria, but who are really “furloughed” rather than classically unemployed.
By using the word furloughed, I am suggesting that their jobs are waiting for them whenever that business re-opens.
They are not “looking for a new job;” they are waiting for the business that formerly employed them to re-open.
It is thought that the number of persons who face a furlough rather than a permanent loss of a position may be as high as 80% of the unemployed.
So, here are the things I want you to walk away with:
1. While it is equally painful if it is you who has lost your job, there is a huge difference between permanently losing a job and being furloughed.
2. Furloughed positions will be filled before new jobs are created.
3. When the economy finally re-opens, furloughed positions will be filled quickly.
Wait a second, Big Red Car
OK, there is one thing that also needs saying: There are probably 20% of all small businesses who were limping along pre-COVID19 who will not magically come back to life. They are going to be fatal victims of COVID19.
Those marginal business will cease to exist. This is part of the normal thinning of the herd that happens every year.
1. 2019 — 22,157 business bankruptcies, 772,646 bankruptcies of all types
2. 2018 — 23,106 business bankruptcies, 779,828 bankruptcies of all types