The damage from the lockdown is spreading. More news is emerging about the devastation that took place in just the first full month of the closure.
The damage will continue to grow the longer the shutdown continues. At some point it will start compounding, growing at a faster rate out of proportion to the time that is passing. Keeping the economy closed now is unnecessarily so the compounding damage is a choice.
Merely a few of the articles in recent days:
- Guess on GDP shrinkage in next quarter
- Disproportionate number of poorer households hit by job losses
- Collapse of tax revenue in New York state
- Collapse of home sales in Southern California
- Another retail chain announce store closures and another announces liquidation
It is imperative to reopen the economy in full, not just for ‘curb-side delivery.’ If we don’t open soon, I fear the following articles will be mild in comparison to what we will see in the future.
This discussion will be posted on several of my blogs.
5/16/20 – Fox Business – US GDP could sink over 40%: Atlanta Fed – Federal Reserve Bank of Atlanta is forecasting a 42.8% drop in GDP for the second quarter of 2020.
Yes, you read that right – over 40% drop.
This follows a 4.8% drop in the first quarter which reflects only a couple weeks of the shutdown.
A few pieces of information point to a severe drop. Retail sales dropped 16.4% and industrial production dropped 11.2% in April. I’ll make a not-so-wild guess May will be almost as bad.
5/14/20 – Disrn – Nearly 40% of low-income households hit by job loss – The economic shutdown is disproportionately hitting lower income households.
A Federal Reserve Governor pointed out the disparity.
Percent of people who were employed before the pandemic who have lost a job in the household during March:
- 39% – household income below $40,000
- 19% – households with annual income between $40K and $100K
- 13% – households with income greater than $100K
The overall statistic is that 20% of people who were employed in February had a job loss in the home during March. The damage is disproportionately falling on poor people.
The 20% amount is more severe that the new claims for unemployment would suggest, which were discussed yesterday. Keep in mind these are two different measurements; the Fed analysis is for loss of job by anyone in the home while the unemployment claims is a tally of individuals who filed for unemployment.
5/16/20 – Bloomberg Quint – N.Y. Tax Revenue Plummeted 68% in April, State Comptroller Says – New York State government is starting to feel the pain most businesses and the vast portion of employees are feeling. State tax collections in April 2020 were $3.7 billion compared to $11.6 billion in April 2019. A large unquantified portion of the drop is due to postponing tax filing day from April 15 to July 15.
Article mentions that here in California the governor proposed a cut in state spending by a mere 9%. State employees will take a 10% pay cut, which I’m guessing translates into one unpaid furlough day every two weeks.
Anyone want to make a guess on whether or when that goes from 2 days every four weeks up to 3 days, for a 15% pay cut?
5/19/20 – Daily Bulletin – Coronavirus chill drops home sales 31.5% in Southern California – The cited drop of about one third, 31.5%, was for April which is the first full month of the governor’s ordered economic shutdown.
Some underlying indicators show the severity of collapse in the resale market. An economist who studies the industry is quoted as saying 50% of sellers pulled their house off the market and 40% of buyers pulled their written offers. New listings for the month dropped 60% compared to the prior year.
Yeah, that looks like a collapse with shrinkage of new listings coming on the market, listed houses being pulled off the market, and offers on listed houses being withdrawn. Only thing missing from the article is how many contracts fell out of escrow. Reverberations will last a long time.
5/15/20 – Fox Business – Office Depot closing stores, laying off 13,000 workers – Layoffs will be spread over the next three years. Many stores will be closed.
5/19/20 – Las Vegas Review-Journal – Pier 1 going out of business, closing all 540 stores – Company has been in bankruptcy reorganization since earlier this year. They have decided to liquidate as result of the pandemic, meaning they will permanently close 540 stores.