Trump will probably have to deal with a 10%-plus unemployment rate come November's election
The U.S. labor market will probably be in a more positive place come election season this fall than the one being battered by the COVID-19 pandemic this spring.
But most Wall Street pros Yahoo Finance has spoken with think that even if the U.S. economy is back to creating jobs later this year as businesses reopen, the unemployment rate will remain above 10%.
Legions of people will have to be retrained to support the jobs of today, which is one factor in the unemployment rate likely staying elevated. It will take time to make that happen, and experts believe the government may have to get involved with a major upskilling program.
The other factor in play is that scores of U.S. businesses simply won’t survive the health crisis currently gripping the country. By extension, those are jobs that could completely go away. And another is that when businesses do reopen, they will be doing so with far less demand, lessening the need to bring back a large amount of their workforces.
“We think the unemployment rate is going to decline relatively slow. By the end of the year, it will still be in the double-digits,” Deutsche Bank chief U.S. economist Matthew Luzzetti told Yahoo Finance’s “The First Trade.” “My concern is that reopening is not flipping a switch, and it’s not just going back to 100% for a lot of these businesses. It will be a much slower process. And it means businesses are operating at less than full capacity for a long period of time.”
Indeed, these will be brutal macroeconomic headlines for president Trump to circumvent in the lead-up to the November election. Trump arguably hasn’t created the existing economic downturn, but by the fall people will be looking for clear plans to return back to work if they haven’t done so already. Frustrations tied to the lack of jobs and sub-par pay could easily be expressed at the polls.
Deutsche Bank estimates the U.S. unemployment rate will fall to 7% by the end of 2021. That would still be light years away from the 50-year low unemployment rate of 3.5% hit at the end of 2019.
To be sure, a 7% unemployment rate would be great compared to right now.
‘Lacking leadership at the federal level’
The U.S. economy shed a record 20.5 million jobs in April and the unemployment rate spiked 14.7%, as the coronavirus pandemic forced businesses across the country to temporarily shut down and lay off or furlough workers. All sectors bled jobs in the month. Upward revisions took the total number of jobs lost in March to 870,000.
In a new interview with Yahoo Finance, Bill & Melinda Gates Foundation co-founder Melinda Gates blamed the federal government for the nation’s economic struggles.
“We are lacking leadership at the federal level in the United States, and it’s highly distressing and disappointing to have 50 state grown solutions is insufficient. It makes no sense and it’s costing people their lives. It’s costing people their health,” Gates told Yahoo Finance’s editor-in-chief Andy Serwer.
She added, “It it impacting families now because if we had good testing and tracing systems like Germany, we would have started to reopen slowly more places in the economy and people wouldn’t be struggling so much to put a meal on their table. The lack of action is really causing harm and hurt unnecessarily in this country. And I'm incredibly disappointed to see that.”
Many unemployed people may also be disappointed, and they will have a chance to vote those feelings come November.
Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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