When COVID was beginning to be understood, governments around the world shutdown their economies to save lives. COVID spreads between humans and to stop or slow the spread, have social distancing. That makes great public health safety and lives were saved, it makes terrible economic policy because 50% of the economy is based on large crowds and interactions between people. For the moment think about professional sports – the front office staff can (the Cleveland Browns put out a video how they remotely managed the draft), the players and all the people who service the fans need to be face to face contact. It is a little hard to throw a virtual football and have it caught to gain a score, unless you are playing a video game.
In an article by Alexandra Olson and Mae Anderson of the Associated Press – they interviewed people from around the US who had steady jobs, when the economy was closed some of the people did extra training as they took to stay in (extra training is always a great choice), but now their companies are reopening they need fewer people.
On a broader scale, instead of adding more to Unemployment, the rate of Unemployed went down from 14.7% to 13.3% as some jobs, but not all of them. In a study by University of Chicago’s Becker Friedman Institute for Economics, their findings indicated 42% of the layoffs will be permanent. This includes many small and medium sized business as well as those in the retail trade. As states reopen will people stay away from hotels, travelling and sport and entertainment venues?
At the start of the collective slowdown, in April 78% of the people saw the slowdown as temporary. In May the number was 73% or reality was beginning to be felt and the need for the next government stimulus package, particularly the extra $600 a month in Unemployment benefits.
After 2008, it took 5 years before 8.8 million people who were employed again. This time for every 10 layoffs there have been 3 new hires, the University of Chicago study showed.
Linking to dividend paying stocks, the COVID situation created many unknowns and it depends on what you do for an income and we all think we are the last to be let go and the first to be recalled. Sometimes it works that way, sometimes it does not, but reality or cash flow begins to set in. In your personal life you need to worry about cash flow to pay the bills; in investing you need to ensure companies make profits that can pay dividends. Sustainable dividend paying companies give you more options and it life having many options is always a good thing.
There are more questions than answers, till the next time – to raising questions.