Thanks to COVID-19, entire segments of the economy are shutting down. Millions of jobs are disappearing. Soon, evictions and foreclosures will start. Lines at food pantries will lengthen. Space at homeless shelters will fill up. More kids will move back in with their aging parents. Personal and corporate bankruptcies will explode.
Eventually the government money being used to help people survive and prop up the stock market and many companies will run out.
That’s when it’s going to get really ugly.
The Economic Death Spiral
The coronavirus is a medical issue, but it has caused a severe economic problem that is only going to get worse as we enter the death spiral of lost jobs meaning less consumer spending leading to even fewer jobs. For example:
- Retail sales are plummeting.
- Malls are unable to collect rent.
- Travel and tourism are down. Down 98 percent in Hawaii. Down 30 to 90 percent in other states.
- Airlines are cutting back flights and laying off workers as airports are empty.
- Furloughed hotel workers may never go back to work.
- Airplane manufacturer Boeing is laying off tens of thousands and scaling back production because no one is buying airplanes.
- Hertz, the rental car company, is forced to sell 200,000 cars from its fleet as part of its bankruptcy
- New car sales in June fell 30 percent despite lower interest rates.
- The restaurants business is collapsing. Not just home-town independently operated restaurants, but chains, too. California Pizza Kitchen just declared bankruptcy and Dunkin’ Donuts is considering the closure of 800 locations.
It’s also important to remember that the United States is the engine that pulls the global economy. U.S. dollars flow to many other countries and help sustain their economies. This includes tourist dollars which have disappeared as Americans are not traveling internationally. It also includes money sent home by legal and illegal immigrants working int he U.S., many of whom are no loner employed. Of course, Americans are spending less money to buy goods manufactured overseas because they have less money.
The only thing that can possibly reverse this economic death spiral is a safe and effective treatment or vaccine. Even then, it will take some time to climb out of the hole we have dug.
By the Numbers
Despite talk about a new plateau, cases of COVID-19 in the U.S. are creeping up towards 70,000 again, with 67,200 cases reported in the past 24 hours. That brings to total U.S. case count to 4,502,500. There were 1,237 deaths yesterday due to COVID-19 for a total of 152,431.
Florida continue to report record breaking numbers while an increase in cases in New Jersey leads us to doubt the New York Metropolitan area will be able to maintain its low numbers over the coming months.
But Florida’s numbers will likely drop over the next few days as testing sites have been closed due to Hurricane Isaias which looks like it will rush up the East Coast of Florida, brushing Georgia, before it potentially makes landfall in the Carolinas.
Globally, the number of cases jumped 273,000 to 17.334 million and deaths climbed by 6,230 to 374,038.