Washington – Companies and customers have canceled travel plans and factories deal with incomplete supply chains because of the coronavirus outbreak. If employers responded by cutting jobs, the damage to the economy would grow significantly.
For this reason, a series of barometers in the labor market will be those that provide some of the most important signs about the state of the economy in the coming weeks and months. So far they have not revealed a great impact.
Generalized layoffs can turn decelerations into one or two sectors – say, travel and manufacturing – into a large-scale crash for the economy in general. When workers lose their jobs and their salary, they usually reduce their expenses. His friends and family who continue to work are worried about their own work situation and begin to be more aware of their expenses, a circle that can cause even more job cuts.RELATED
Layoffs “tend to influence others” layoffs, said Tara Sinclair, an economist at the Indeed website. “We are really worried that this spiral could happen.”
On Friday, the government will publish its February labor report, which may not reflect much of the damage caused by the virus. The data in the text was collected mainly in the second week of the month, before the virus began to spread in the United States.
Economists have predicted that the February report will show that 170,000 jobs were added and that the unemployment rate remained at a very low 3.6%, according to data provider FactSet.
As the number of new jobs increases above 100,000 per month, the unemployment rate should remain low and the economy will avoid a decline, said Mark Zandi, chief economist at Moody’s Analytics. If the monthly rate of increase in employment fell below that level for a sustained period, the unemployment rate would probably increase.
“Once the unemployment rate begins to rise, it is when the threat of a recession really arises,” Zandi said.
A general rule, developed by Claudia Sahm, a former Federal Reserve economist, is that the probability of a recession arises once the three-month average in the unemployment rate increases by half a point from its lowest level in the last year. That means that if the unemployment rate exceeds 4% over a period of several months, a crisis could occur.
The best indicator of the level of unemployment is the government’s weekly report on requests for unemployment support, which can only be requested by people who lost their jobs.
The most recent data, released on Thursday, were encouraging: they showed that 3,000 fewer people applied for unemployment support, for a total of 216,000 in the week ending February 29. It is practically the same amount as the average during the last month and is at a very low historical level.
“If this is becoming a recession, there will have to be layoffs,” Zandi said.
At the moment the labor market looks tough, according to several indicators. Sinclair said Indeed’s data reveals that companies still do not reduce their number of vacancies, which shows that they are still willing to hire staff.
And on Wednesday, the ADP payroll processor said companies added a solid 183,000 jobs during the month of February. That figure, however, was possibly driven by an unusual warm climate that promoted hiring in the construction sector and in a category formed mostly by restaurants and hotels.