A new report from the University of Chicago found that pandemic-induced layoffs will result in permanent job loss, which shreds the Wall Street narrative of how many of these lost jobs will return once lockdowns are lifted. As if the Wall Street consensus has a damn clue about the job situation in the back half of the year.
The U.S. economy lost 20.5 million jobs in April, and the unemployment rate spiked to 14.7%. Optimism on Wall Street last Friday ramped stocks higher as Wall Street cheered more than 18 million of those jobs lost were considered temporary reductions and were likely to come back once restrictions were lifted quickly.
However, a recent working paper from the school's Becker Friedman Institute for Research in Economics discovered there were only three new hires for every ten layoffs caused by virus-related shutdowns. The authors — Jose Maria Barrero, Nick Bloom, and Steven J. Davis estimated that 42% of the layoffs seen over the last several months would result in permanent job loss:
Drawing on our survey evidence and historical evidence of how layoffs relate to recalls, we estimate that 42 percent of recent pandemic-induced layoffs will result in permanent job loss. If the pandemic and partial economic shutdown linger for many months, or if pandemics with serious health consequences and high mortality rates become a recurring phenomenon, there will be profound, long-term consequences for the reallocation of jobs, workers, and capital across firms and locations," the authors wrote.
The report went on to say that virus-related shutdowns have devastated the U.S. economy with nearly 28 million people filed for new claims for unemployment benefits over the six weeks ending April 25. It said at an annualized rate, the U.S. economy is expected to contract 4.8% in 1Q20 and 25% in 2Q20.
So are they saying that Federal and State employees will also suffer a 42% PERMANENT layoff, as well?
Easy, just raise taxes.
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