Money has been moving like lava through the economy for almost two months now amid the coronavirus shutdowns resulting in millions of layoffs, which some bank officials like J.P. Morgan’s Bob Michele, say will keep unemployment high for at least a decade. The bleak prediction comes as the April jobs report, published today, reported that 20.5 million people joined the ranks of the unemployed. If we consider a study done by the Economic Policy Institute, the real figure could be twice larger.
Meanwhile, mortgage lending has slowed to a standstill as credit availability tanked 26 percent since February and laid-off workers around the country are finding they make more money collecting unemployment than cashing their payroll check. Michele speculated about what might happen “when Paycheck Protection Program (PPP) runs out of money”, venturing that curbed consumer spending will cause even more layoffs in the near future.
But the dangers of an exceptionally slowed-down U.S. economy can and is already starting to have an acute effect on the rest of the world. Brazilian Economy Minister Paulo Guedes, warned yesterday of an “economic collapse” as a result of the measures put in place to stem the coronavirus outbreak. The sudden downturn has left Brazilian President Jair Bolsonaro’s plan to “re-start” Brazil’s economy in the dust, as the IMF predicts a 5.3 percent contraction to the Brazilian economy this year.