The “Winners” during Covid are about to lose big
The best story I have heard about someone with a tough lot in life finally getting “his/her” payback during these past few months follows. Imagine this is happening all over the country plus or minus a few dollars, hours worked, and so on. And then consider the fact that it all ended yesterday – this “too good to be true” deal for millions of laborers hitting a brick wall as the $600/week expanded unemployment benefits came to a screeching halt last night with no new deal yet in place.
Hanover, NH, parking lot of unnamed location, mid-June 2020:
“John, here’s what’s killing me. Some of my guys have come back to work. I’m grateful they are here. But I’m having to pay them cash (ie. under the table). When I laid them off in March and April, they had been making $800/week give or take with me… $20-25 per hour full-time laborers. My part-timers maybe $400-600 per week. When Covid hit, they started receiving a good chunk of that amount, call it half but usually more, plus the additional $600/week from the Feds. So all of a sudden my full-timers are making $1100+ per week – more than ever before – while sitting at home, having fun, screwing off, whatever.”
Pause. In the white-collar world, this scenario is often known as vacation, or a paid sabbatical, despite the fact that many of the educated professionals out there wouldn’t be able to live on such paltry sums described above. That said, many of those same professionals lamented loudly and publicly that this situation hurt them and their businesses because people were “disincented” from returning to work. That is correct. Why would anyone really want to return to work that, to be honest, always paid them stipends that created the perpetual struggle their lives have become? I applauded these paid breaks… not because they were good for our business, but because they were good for the people who needed a break, especially during Covid when everyone is being told to “shelter in place”. Finally they were getting a “decent” deal.
“John, now that businesses like ours are permitted to get back up and running, I needed my guys but they won’t come back. So what I had to do was offer them what they were paid before, but in cash so it wouldn’t be tracked as they didn’t want to lose their new benefits while they lasted. So a full-time guy now makes $1,900 per week, which is really like $2,200 because he’s not paying taxes on the last $800/week, and he’s never had it better. The whole thing is bullshit. But I don’t know what else to do.”
So very quietly, without much fanfare, hundreds of thousands, if not millions, of struggling laborers in all kind of businesses have been getting their cake and eating it too. Some of us have celebrated that. Finally.
But today, August 1, it ends. The $600/week is gone. And many of the jobs they didn’t want to return to or begrudgingly returned to on the side have disappeared permanently or reduced employee counts. This bubble described above, invisible and unknown to many, has popped – at least for now while Congress can’t get to a deal they agree on.
And with that comes the end of that false sense of security and the ability to keep consumer spending (online and bricks and mortar) as high as it has been. As Nick Hanauer in Seattle has said many times over, the wealthy can only buy so many pairs of blue jeans. You need everyone to buy blue jeans to create a strong economy. And those affected by these expanded unemployment benefits are soon going to accept holes in the knees of their jeans for a lot longer than they did up until now.
So I wish I could predict the markets moves in the coming weeks and months as a result of what I see as a huge change in our economy, that is taking place exactly as I write this, but I’ve been wrong so many times I dare do so. But it seems to me the market’s strength does depend on consumer spending, and with employers still struggling (especially as PPP runs out for most) and not having jobs for people to return to, this could get ugly on many levels.