The Ugly (But Short) Truth on Unemployment
Happy Friday all,
Light is at the end of the tunnel. Some States will start opening up. We will see how things in Clark County and Nevada in general operate. And that’s all I am going to talk about directly in terms of COVID and politics… if you know me, you know I stay out of this publicly…
I’ve spent a lot of time with posts discussing how we are seeing impacts, severe or not, in the housing market. I look at Equity, I look at Mortgage Rates, etc. We haven’t touched TOO much on the economy in general, and we have yet to talk about Unemployment… until now.
Unemployment is not avoidable, especially when so many businesses have been forced to shut down. I even know Realtors here that while self employed and ‘essential’ are still seeking benefits if possible. For many people, it’s been very rough, and we hope as you read this, you’re either gainfully employed, or actively enjoying retirement. If you are unemployed, we hope you’re receiving your benefits and know that this too shall pass.
Here’s what we know. Unemployment, by the numbers, is at or near all time highs. In terms of actual filings, we are absolutely higher than ever in history, as we have a much higher population than we did during the Great Depression. However, in the most recent Goldman Sachs report, we anticipate Unemployment to hit 15% this year. Far higher than we want of course. That’s 1 in 7 people. That’s a lot of people out of work, and about 4-5x MORE than earlier this year when the market was moving and the economy was in a Bull Market.
If you look at the data attached above, we have the Current Crisis compared to the Great Depression of 1930-1935, and the Great Recession of 2008-2013. Two things to note. The first is that I have been saying in almost every post, that this is not like the last time. Indeed, it’s not. This time, it will be worse than the last time, in terms of how low we do get. That’s unavoidable. We topped off about 10% during the Great Recession, and looks like we will hit that number by more than 50% or so this year. However, looking further, the economists with Goldman Sachs expect this to be a checkmark type down swing; Sharp Down, quick return to ‘normal’. If you look at what they are projecting, they believe 2021 will mimic 2013, and then come back. Also, this time will be much less significant than the Great Depression, however, as that was 90 years ago, our work force today can’t imagine what that was like, so best to not even describe it.
The second point on this I want to make is the LENGTH of time for deep unemployment and recovery. Both the Great Depression and the Great Recession show 6+ years of instability. We’re going to fall off a cliff (and already have started to), but economists do believe it’s a 1 year outlier.
If you look at the Line Graph we created with the data points, you’ll see the other two economic downturns had a ramp UP (year 2 was worse than year 1). In the event of the Great Depression, Year 3 was the worst, which of course, is part of the reason we still call it the GREAT DEPRESSION. Notice that our chart, as anticipated by Economists, expect us to START with a max level, and then work itself down. So, yes, we’re going to have our work cutout for us, but the work should be short term. People have lost and will continue to lose jobs. We know that. But we also believe that this will be a short term shift in our ever altering economy. The retraction and job loss will spring back. People will go back to work. That much we know.
Have a great weekend. We’re almost there!
-GZ