We are seeing preliminary indications of improvement, but it seems that the road to economic recovery for the U.S. is going to be long (and winding).
Last Friday, June 5th, the Bureau of Labor Statistics (BLS) of the U.S. Department of Labor reported that 2.5 million jobs had been created during the month of May, constituting the largest job growth ever recorded in a single month. Following the May jobs report, the Dow Jones shot up over 800 points, or 3%.
However, it was recently discovered that the last two monthly reports by the BLS have included faulty data: the Bureau had miscounted 4.9 million unemployed Americans as employed. This means that the unemployment statistics were worse than we believed. May’s unemployment rate was really 16.1%, rather than 13.3%, and April’s was 19.5%, instead of the 14.7% reported.
Miscounts notwithstanding, the creation of jobs remains a positive sign for the United States’ economic recovery. Improvement has been observed across a range of other economic indicators, as well, although slight:
- Filings for unemployment have dropped.
- Reservations at restaurants are picking up.
- Travel is resuming and bookings are on the rise.
- Mortgage applications for the purchasing of houses have returned to pre-quarantine levels.
- Consumer confidence has increased. The Bloomberg Consumer Comfort Index rose for the second week in a row – the first two-week increase since January.
Much of this progress has been bolstered by the reopening of businesses and by stimulus packages from the government. Contrary to the 2008 crisis in which the government needed to provide bailouts for big businesses, the COVID-19 crisis is disproportionately affecting small and medium enterprises (SMEs) – and it’s harder for the government to get the aid to them. These 30 million + SMEs employ around 40% of Americans.
On the other hand, following the lessons learned in 2008, the Federal Reserve was able to act quickly, eliminating interest rates in the early days of the State of Emergency and throwing $USD 700 billion into a quantitative easing program. Further support from Congress in the form of a $2.2 trillion stimulus package – the largest rescue package in American history – has offered a degree of financial relief to most Americans and financing for businesses.
However, the recovery has been hampered by the elevated number of new COVID-19 cases (more than 100,000 a week, and on the rise for the first time since April), as well as by the protests in cities across the U.S. related to George Floyd’s death.
The timeframe for the economic recovery of the United States will be primarily contingent upon two factors: the trajectory and evolution of the virus, and the speed of scientific advances. A second wave of the virus – predicted for the fall – would mean a backslide in the U.S.’s economic recovery. Of course, this relapse would be mitigated with the approval of one of the COVID-19 vaccines currently being tested – some of which are showing great promise.
As the U.S. works to rebuild its economy, there will be a variety of opportunities open to savvy foreign companies – with the right guidance. Gedeth can help you identify them and position your business for success. Contact us to find out how.