A pair of reports this week detail just how extensive the damage to the economy has been in our response to China’s coronavirus pandemic. In the first, 42% of job losses are expected to be permanent, indicating no V-shaped recovery. In the second, the world poverty rate is expected to skyrocket, as prosperity across the globe is wiped out.
The report by the non-profit National Bureau of Economic Research (NBER) laid out a grim picture. They found that our post-shutdown economy has produced a meager three hires for every ten layoffs and that 42% of layoffs over the past eight weeks will result in permanent job loss. On top of that, our response — massive federal bailouts and stimulus funding — will have the adverse effect of misallocating resources:
Unemployment benefit levels that exceed worker earnings, policies that subsidize employee retention, occupational licensing restrictions, and regulatory barriers to business formation will impede reallocation responses to the COVID-19 shock.
They go on to say,
Even if medical advances or natural forces bring an early resolution to the crisis, many pandemic-induced shifts in consumer demand and business practices will persist. Thus, much of the near-term reallocative impact of the pandemic will also persist, as indicated by our forward-looking reallocation measures. 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 four policies they cite that will impede a quick recovery after the economic shock:
- Unemployment benefit levels that exceed earnings for many American workers under the Coronavirus Aid, Relief, and Economic Security (CARES) Act;
- Policies that subsidize employee retention irrespective of the employer’s longer term outlook;
- Occupational licensing restrictions the impede mobility across occupations and states;
- Regulations that inhibit business formation and expansion.
Importantly, the NBER paper examines the sudden shift in hiring patterns, as wholesale and leisure industries shift to compensate for massive upswings in retail markets driven by more folks staying at home and shifting demand. The aggregate, however, will result in a massive net loss of jobs.
Across the globe, as the second study notes, poverty levels will increase dramatically. This could wipe out all of the gains in global prosperity since the 1990s, as Fox News writes:
The United Nations has predicted that the economic fallout from the worldwide coronavirus outbreak may end up killing more people than the actual disease itself, a report said Monday.
The virus’ outbreak has decimated the world economy and threatens the lives of millions around the globe who had been emerging from poverty.
The Los Angeles Times reported that economists forecast a global recession that will result in up to 420 million people plunging into extreme poverty, or making less than $2 a day. The U.S. has seen its unemployment levels reach levels not seen since the Great Depression while vulnerable poorer countries consider the virus’ impact on those already impoverished.
The World Bank predicts that the CCP virus will cause the first increase in global poverty since 1998. The UN expects up to 130 million more people to face starvation this year. That includes 30 million children at risk of dying of starvation in 2020.
Jeff Reynolds is the author of the book, “Behind the Curtain: Inside the Network of Progressive Billionaires and Their Campaign to Undermine Democracy,” available now at www.WhoOwnsTheDems.com. Jeff hosts a podcast at anchor.fm/BehindTheCurtain. You can follow him on Twitter @ChargerJeff.
Editor’s Note: Want to support PJ Media so we can keep telling the truth about China and the virus they unleashed on the world? Join PJ Media VIP and use the promo code WUHAN to get 25% off your VIP membership.