Facing shutdowns across the country, businesses have been forced to lay off or furlough employees on a massive scale. Now, economists and investors are scrambling to determine the scope of the problem. US unemployment is expected to stay high for some time, weighing on any economic recovery once restrictions start to lift.
“We’re going up the elevator and down the escalator,” Torsten Slok, chief economist at Deutsche Bank Securities, told me.
Slok believes unemployment will have peaked in April. Economists surveyed by Refinitiv expect to the unemployment rate to have hit 16.1% last month, which would be its highest level since 1939. The US government releases its latest jobs report on Friday.
The assumption right now is that a large portion of unemployed Americans will be able to return to work before long.
“With a high share of those newly unemployed appearing to be on temporary layoff rather than permanently losing their jobs, there is a good chance they will return to paid employment once lockdown measures are lifted,” Andrew Hunter, senior US economist at Capital Economics, told clients Friday.
Capital Economics predicts that even if the unemployment rate did spike to 20% in April, it would still end the year below 10%.
This level of joblessness will inevitably weigh on consumer spending, which makes up roughly 70% of the country’s economic output, Slok said. It’s one reason why he expects the bounce back to look more like the Nike swoosh than a sharp “V.”
Watch this space: The US jobs report on Friday will also contain crucial information about exactly who has lost jobs so far. Economists are interested in how layoffs have been spread across skilled and unskilled workers, and want more demographic information.
How bad is coronavirus for hotels and theme parks?
Stay-at-home orders have crippled the hospitality industry and slammed shares of hotel, travel, and entertainment companies. This week, investors will get a closer look at the damage done — and executives will be pushed to comment on the path forward.
The main event is Disney’s earnings, which arrive on Tuesday. The company, on the heels of one of its best years ever, is now struggling.
This all adds to pressure on executive chairman Bob Iger and CEO Bob Chapek, who will be expected to lay out their plans for Disney’s business in a post-lockdown world.