While many financial institutions brace for the long-term implications of COVID-19, very few people feel good about the economy. A working, well-tested vaccine will undoubtedly help, but until then, many people are on edge.
Today’s read comes from the WSJ, and the topic is how COVID-19 will soon impact white-collar workers in the United States. With Stimulus-2 still waylaid by political debate, households need a solution quickly. Some metrics are looking better, but the full picture is gloomy, and now white-collar workers are experiencing pain.
- Unemployment has fallen from its pandemic peak of near 15%, but the rate stood at 8.4% in August, up from 3.5% in February, according to the Bureau of Labor Statistics. Unemployment for the arts, design, media, sports, and entertainment was 12.7% in August, more than triple its year-earlier level. In education, it more than doubled to 10.2%. Sales and office unemployment was 7.8% in August, up from 3.8% in August 2019.
The article cites a perspective by Discover’s CEO:
- It could get worse. “The pain so far in the economy has largely been at the lower end of the pay scale,” said Discover Financial Services Chief Executive Roger Hochschild, adding that many of “the white-collar layoffs are still to come.”
And, the insight is credible.
- By some measures, the outlook for higher-earning workers appears worse than during the 2008 financial crisis. In August, about 3.3 million people age 25 and over with bachelor’s degrees or higher were unemployed, up from 1.2 million in February, according to the Bureau of Labor Statistics. During the last downturn, that number peaked at about 2.2 million.
- Postings for jobs with salaries over $100,000 were down 19% in August from April, while postings for all other salary categories increased, according to job-search site ZipRecruiter Inc.
Part of the problem is the outstanding debt of all types. With deferrals ending, and financial cushions exhausted, credit can soon look very gloomy.
- The coronavirus has spared few industries and expanded unemployment benefits designed to replace the average American income didn’t cover all the lost pay of higher-earning workers, especially in or near expensive cities. The extra $600 weekly payments expired in July, putting them even further behind.
- “What I see happening here is a core assault on successful college-educated families, which are the new breed of middle-class American families,” said Anthony Carnevale, director of the Georgetown University Center on Education and the Workforce. “There’s a professional workforce that’s getting slammed.”
- Roughly six months into the pandemic, many lenders that let borrowers skip monthly payments now expect to get paid again. They have set aside billions of dollars to cover potential losses on soured consumer loans—an acknowledgment that America’s decadelong debt binge has come to an end.
It is the jobs, the jobs.
- Postings for jobs with salaries over $100,000 were down 19% in August from April, while postings for all other salary categories increased, according to job-search site ZipRecruiter Inc.
- America’s biggest banks have indicated they are preparing for a protracted downturn to hurt businesses in industries that weren’t immediately affected by shutdowns.
- JPMorgan Chase & Co. says it expects the U.S. to add roughly 5.4 million jobs in the third and fourth quarters. That would leave the U.S. economy with about 9.2 million fewer jobs since February.
- “The pandemic has a grip on the economy,” Citigroup Inc. CEO Michael Corbat said when the bank reported second-quarter earnings in July, “and it doesn’t seem likely to loosen until vaccines are widely available.” This month, the bank said many customers that previously enrolled in deferment programs are making payments.
There is no quick fix. Expect more info to come (after the mask of payment deferrals ages away, Stimulus-2 arrives, and perhaps a working vaccination).
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group