Market comment 2020

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The hope is the waves of stimulus doled out by governments and central banks should eventually buoy economies and spark a revival in hiring. Furloughed or redundant workers would then return to their employers. The risk though is that the pandemic is inflicting a “reallocation shock” in which firms and even entire sectors suffer lasting damage. Lost jobs don’t come back and unemployment stays elevated. That would force workers to retrain or relocate, both of which are hard, and governments to do more than just try to spend their way out of trouble... 

Unfortunately, new research by Bloomberg Economics reckons 30% of U.S. job losses from February to May are the result of a reallocation shock. The analysis -- based on the relationship between hiring, firing, openings and unemployment -- suggests the labor market will initially recover swiftly, but then level off with millions still unemployed...

Other studies carry similar warnings. Research published in May by the Becker Friedman Institute at the University of Chicago estimated 42% of recent layoffs in the U.S. will be permanent.

 U.S. Job Prospects Now: Millions Could Find Jobs Cut for Good - Bloomberg