“Even though the shock was severe and rapid, the healing process will take much longer,” said Danielle DiMartino Booth, CEO and chief strategist of Quill Intelligence.
The extraordinary loss of 20.5 million jobs in the United States is easily the biggest decline in a month since the government started tracking data in 1939. The unemployment rate rose to 14.7% in April , the tallest since the Great Depression. It is rather the peak alone 3.5% in February and 4.4% in March.
Even relatively optimistic economists have told CNN Business that the job market will not fully recover by the end of next year.
“There has been too much damage to get back so quickly,” said Ethan Harris, head of global economic research at Bank of America.
“Too much damage”
The White House itself is acknowledging that the carnage isn’t nearly over.
Kevin Hassett, a senior economic adviser to President Donald Trump, told CNN Poppy Harlow on Friday that the unemployment rate is likely to reach 20% in May.
Hassett called mass layoffs “heartbreaking” because “every unemployed person is a person whose life is now in turmoil.”
By the end of 2020, Bank of America expects the unemployment rate to drop to 9.6%. It is still a very large number, almost equivalent to the worst months of the Great Recession.
The big concern is that until there is a vaccine, many Americans will not go to restaurants, concerts, stadiums or do anything involving a crowd.
“People will regulate themselves. Just because your governor says you can quit, it doesn’t mean you will,” said Harris.
Bank of America expects the unemployment rate to drop to 7.5% by the end of 2021 and not reach pre-crisis levels until 2022.
JPMorgan: recovery could take over ten years
PNC chief economist Gus Faucher sees a slower recovery where a return to healthy unemployment levels of 4% or 5% does not happen for three or four years.
And although the unemployment rate could drop dramatically, he said, there will likely be pockets of unemployment for years in areas of the economy that are most sensitive to the pandemic.
“There will be permanent job losses,” said Faucher, especially in areas such as entertainment. “We will see a structurally smaller retail sector. Many small businesses – despite the paycheck protection program – will fail. And there will be permanent changes in travel and tourism.”
Still others warn of an even more grueling recovery.
“To get back close to 3.5% unemployment, we’re talking over ten years with any kind of rational modeling,” Chief Investment Officer at JPMorgan Asset Management told Bob CNN Business.
He noted that after the Great Recession, the United States took six years to return to 5% unemployment after the Great Recession. And it took another 3-4 years to reach 3.5% unemployment.
“People think there will be a V-shaped recovery. We are not seeing it,” said Michele. “It will take some time for unemployment to drop to something reasonable.”
The response to health is fundamental
If there was a positive side to the employment report, 18 million people indicated that they expect to be hired by their employer. This suggests that many workers are optimistic about the way ahead.
“Such prophecies can be self-fulfilling,” said Hassett, the White House economist, adding that the figure “surprised me.”
Hassett told CNN that this rate could rise further, hitting 25% before “hoping” for a fall after a transition period this summer.
Economists have pointed out that the damage done to the labor market shows why it is so critical for public health authorities to keep the pandemic under control. They called for a strong enhancement of coronavirus tests and trace.
“If you don’t have monitoring and testing, this recovery will be very small,” said Harris of the Bank of America. “People need to know that the disease is not rampant. This effort, which has been somewhat delayed, is absolutely critical.”
Will the Americans pass as before?
It is not just the health crisis that could change consumer behavior.
The shocking speed of the economic shock could convince Americans that they were once willing to aggressively spend on squatting.
“For the first time in our lives, U.S. families have had to face the reality of what it means not to save money on a rainy day,” said Booth, CEO of Quill Intelligence and a former Federal Reserve official.
“If there is a new frugality when we get out of this crisis,” said Booth, “the economy is in a sharp awakening.”
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