For some time now I have been arguing that June is the pivot point. I still believe it is. There is no doubt that the way things were before Convid-19 are no longer the same. Many graduates wore medical masks to graduations and the ceremonies were streamed online. The Covid-19 generation – from middle school and high school to university graduates will carry this vision for the rest of their lives. Their futures are cemented to Covid-19. Especially their economic futures.
In the first week of June 2020, the pivot point has turned worse for the economy. As if the coronavirus pandemic wasn’t enough to continue to wreak havoc on the economy, the national riots have made things worse.
The American economy is based on consumer confidence. It is driven by disposable income.
When consumers have money to spend on entertainment and other consumables the American economy does well. It does not matter how many widgets Americans make, if the U.S. consumers are not buying them then the rest of the economy suffers.
Although the national unemployment numbers were expected to get worse in June it was assumed that as America continues to reopen that the unemployment rate would start to go down in June. Today, the U.S. Bureau of Labor Statistics is expected to release the unemployment numbers for May 2020.
Some, including myself, expect the unemployment rate to be above 20%.
No matter how bad the number is, it was expected.
What was not expected are the ongoing riots across the country.
Consumers are uncertain about their economic futures. Much of that stems from the uncertainty of the entertainment economic sector which has led to slower opening rates. This has translated into less workers going back to work.
Basically, Americans are afraid to pay to be entertained, first because of the pandemic and now because of the riots.
As long as Americans remain afraid, the economy will continue to suffer.
Companies reported that they cut 2.8 million jobs from their payroll in May. Some economists have celebrated that this recent number is less than what Wall Street estimated.
But May was before the 2020 national riots which have further damaged retail businesses and made Americans fearful of another national crisis.
Wherever the official unemployment rate for May lands today does not consider the recent riots that will make things worse for the economy.
As I have been arguing, June is the pivot point and right now it does not bode well for an economy recovery in 2020.