The coronavirus pandemic has caused economic uncertainty on top of a massive global public health scare. The two together have created a multiplier effect that makes the stock market reaction much different than during the Great Recession in 2009.
One of the biggest signs of decline came Monday when GE Aviation announced plans to reduce about 10% of its workforce, equal to about 2,500 workers. The company also said it will suspend half of its maintenance, repair and overhaul workers for 90 days.
In a Monday evening news conference, President Trump said attempts to isolate populations in affected cities like New York are causing distress for companies and the economy. "We can't have the cure be worse than the problem," he said repeatedly, at one point indicating that economic problems can cause suicides and the nation faces "more death from that than the virus." He also said the nation can handle the virus and the economy at the same time. "We can do two things at one time," he added.
Hospitals worry they won’t be able to handle an influx of cases in the U.S., while the U.S. Federal Reserve has enacted repeated liquidity measures in recent days.
The U.S. Senate failed to approve a key vote on a $2 trillion coronavirus bill for a second day mid-day Monday, largely on Democrats’ worries that the measure favored corporations too much compared to health care workers and people who have lost their jobs, according to the Washington Post and others.
However, early Wednesday, the Senate announced an agreement of the same magnitude that reportedly includes $250 billion for direct payments to individuals, $350 billion in small business loans, $250 billion in unemployment insurance benefits and $500 billion for loans to distressed companies. Airlines would get grants as long as they avoid layoffs, according to sources that spoke with CNBC.
Sometimes the best examples of how economics are crossed with health worries are shown in the stories of average people.
For example, one analyst reported that his daughter works at a preschool that is closed for a few weeks over virus concerns. She got a note from a friend who needed someone to babysit her infant while she went to work at a hospital.
“Normally, my daughter would have jumped at the chance, but given this is a healthcare worker who is probably exposed or going to be, and that my daughter will eventually go back to work with her regular job with kids, and that she interacts with us and could spread the virus, she declined,” said Jack Gold, an analyst at J. Gold Associates. “I imagine there are many similar stories.”
On the jobs front, restaurants and bars are closed and the travel industry is operating at a fraction of its top rate in recent months. Unemployment may hit 30% in the second quarter because of shutdowns to deal with the virus, along with a 50% drop in gross domestic product, according to Federal Reserve Bank of St. Louis President James Bullard quote in a Bloomberg report.
The Economic Policy Institute made a similar prediction of 3 million jobs lost by summer on March 17.
It isn’t clear how many jobs have been lost, or are likely to be, in the tech sector, which has been whipsawed in the markets in recent weeks. Some engineers who have been laid off or face a layoff may be reticent to talk about their job status until they get another job. Reluctance to speak out is a common occurrence, as LinkedIn has noted.
The LinkedIn site is heavily used by tech workers among its 660 million users. Often people who are laid off don’t update their profiles until after they find their next job; since it is still early days in the pandemic, that hasn’t happened yet, as Protocol pointed out.
LinkedIn economist Karin Kimbrough reported Friday that hiring plummeted in Italy and China after each country issued mandatory quarantines. In China, hiring dropped 45% year over year, while Italy was down 40%.
Based on the timing, LinkedIn said the hiring in the U.S. will begin to slow, sharply, as soon as this week.
“I don’t think anyone was prepared for the economy to come to a crawl all at once,” said Loree Levy, a spokesperson for California’s Employment Development Department in the Protocol report. “This has been a sudden slam. We’re facing unprecedented claim activity.”
Just about everybody in tech seems to know at least one person in the engineering field affected by recent layoffs, but it is difficult to derive any accurate numbers. For those still working, there is that lingering uncertainty.
“I think it’s hard for many people to be motivated and do their best work when they don’t know if tomorrow the other shoe is going to drop,” Gold said. “Uncertainty is not a great motivator, especially since we don’t know how long this is going to go on. And not everyone can work from home, not even in high tech. And it’s not just yourself you have to deal with—what about parents that suddenly don’t have any childcare so they can go to work?”
The uncertainty isn’t helped by rising numbers of virus victims. As of 3:30 p.m. ET Monday, there have been 16,381 deaths and 372,563 cases reported globally by Johns Hopkins University of Medicine. In the U.S, there have been 41,708 confirmed cases, and 501 deaths.