Kenneth Rapoza, Senior Contributor
A closed sign is seen posted on the door of a Cafe in Lower Manhattan on March 19, 2020 in New York City. (Photo by Johannes EISELE / AFP) AFP VIA GETTY IMAGES
“Many businesses have been shut down in recent days by efforts to slow the spread of the coronavirus, and this is already causing widespread layoffs,” says Rose. “Some states have reacted by loosening the rules on claiming unemployment benefits. While this is a wise response, it will result in jobless claims rising that much faster.”
As an example of looser rules for the newly unemployed, Minnesota is allowing applications to be made immediately when people lose their job instead of the usual week.
One day after making that policy change, Minnesota state unemployment claims spiked tenfold the number recorded from the same time last year.
Other states are also reporting more than tenfold jumps. The record high for weekly claims is 695,000 back in 1982. “It appears this week will far exceed this number,” Rose says.
Companies in the service sector are being forced to shut down by state order. Restaurants in Massachusetts were ordered to only do take out recently. Casinos are closed. Grocery stores are reducing their hours, with special hours for those over a certain age, and with health problems that would make catching the virus that causes COVID-19 that much more complicated.
People with untested patients at home exhibiting the primary symptoms of the disease are asked to self quarantine, with their caretakers also asked to quarantine for up to two weeks.
Even in the case when a job is not closed by state’s orders, people living with a COVID-19 patient that does not require hospitalization is out of luck for at least two weeks, and certainly more if they catch it next.
The new coronavirus, which emanated from Wuhan, China back in December, remains a mystery to doctors.
“We don’t know exactly how long it takes people to recover, but from cases globally, recovery times can vary from about 2 weeks to six weeks,” says Dr. Eyal Zimlichman, the chief medical officer at Sheba Medical Center in Israel. “We know that when we treat patients at Sheba, we’re not releasing them until they test negative for the virus twice. We had some patients who recovered in a week or 10 days after the onset of symptoms and other patients who after three weeks still test positive for coronavirus. As long as a patient tests positive for coronavirus, they can still infect others.”
None of this bodes well for a society forced into quarantine. San Francisco now has a shelter-in-place order, wiping out service workers from restaurant wait staff to the local beauty parlor until April 7.
“This is an unprecedented situation where, for good reason, the government has instructed major parts of the economy to close down so that we can win this fight against this virus,” Treasury Secretary Steve Mnuchin told Maria Bartiromo today on the FOX Business Network’s Mornings with Maria.
The first part of the trillion dollar plan circulating through Congress is $300 billion for small businesses to keep people on payroll. If they do not lay people off, they get loan forgiveness for that money.
The second round from the bazooka is checks directly deposited. The plan now is for $500 billion in two tranches. The first one would be $1,000 per person, $500 per child. So for a family of four, that’s a $3,000 one time payment if Congress passes this.
Mnuchin said if passed, checks would start going out by mid-April. If by May there is still a national emergency, Treasury delivers another $3,000.
Others think that a trillion-dollar federal aid program ought to be directed to obtaining more test kits, more testing stations, anti-viral agents, vaccine research and development.
“The $1,000 income support stipulated per person is not a sensible plan,” says Merk Investments senior economic adviser and former St. Louis Fed President William Poole.
The other trillion is for the securities markets to function.
Due to the ongoing dysfunction in the markets for Treasuries and agency mortgage-backed securities (MBS), the Fed will increase the size of its asset purchase program to at least $1 trillion in Treasuries and $500 billion in MBS, thinks Barclays Capital’s New York economists led by Michael Gapen.
“This is a moment where the Fed needs to signal it is prepared to do ‘whatever it takes’ to support functioning in these two important markets,” Gapen and his colleague Ajay Rajadhyaksh wrote in a note to clients yesterday, adding that fiscal support to household and business credit was also part of the big bazooka strategy required here.