Financial Impact of the Coronavirus Economy
Last week, 5 million more Americans filed for unemployment. In four weeks, the newly unemployed total is over 20 million. In one short month, coronavirus has wiped out nearly nine straight years of growing employment. This figure of 5 million dwarfs the previous high in 1982, when 695,000 people filed for unemployment benefits.
At its peak in February 2020, 152 million Americans were gainfully employed. With a loss of 20 million jobs due to COVID-19, the US now has fewer people employed than it did during the summer of 2011 when the country was still burdened by the effects of the great financial crisis. Today, there are approximately 132 million people employed in the country, the same number that was reached in late 2004.
Retail Sales Hit Hard as Well
Record unemployment is only one effect of coronavirus. Retail sales have plummeted as well. The US Commerce Department reported a March decline in sales of 8.7 percent. The last time monthly retail sales plunged to that degree was nearly 30 years ago. However, amongst all the doom and gloom, there are bright spots in the economy. Grocery store sales skyrocketed by over 26 percent. Non-store retailers such as Amazon also benefited with Amazon sales rising by a healthy 3.1 percent. Although department store sales dropped by 20 percent, general big-box stores such as Walmart and Costco saw sales climb by over six percent.
Sales of clothing dropped by 50 percent year on year, food and beverages are down 26 percent, vehicle sales were down 26 percent as well. Businesses that bucked the trend were few, building materials and health and personal care sales were slightly up.
Tax Revenue Dives
The massive loss in jobs has caused a free-fall in federal tax revenues. Up through February 2020, federal taxes withheld from employees’ paychecks were up six percent year-on-year. As companies shed workers, tax receipts slowed and then turned negative. In the week through April 10, tax revenue dropped over 14 percent when compared to April 2019.
Although tax revenue can appear sporadic when looked at one-week at a time, the trends become more reliable when the numbers are looked at over a month-long period. With 15 million people claiming unemployment benefits, the economy is far worse than it was in the 2007 through 2009 recession when the fall in federal tax receipts hit eight percent.
$2 Trillion Rescue Plan
The federal government launched a $2 trillion rescue package. The package is not a stimulus in the real sense of the word. The bulk of the money is targeted as a replacement for lost income. For four-months, unemployment benefits will get a boost of $600 per month. Rather than last for 26 weeks, which is the norm, unemployment benefits will last for 39 weeks. In addition, self-employed individuals will qualify, whereas, in the past, this sector was not covered.
Corporations under stress can benefit from a $500 billion bailout fund, $75 billion of which is reserved for specific industries.