There is no Joy in Mudville; There is no V-shaped Recovery

by Mark Schniepp
October 2020

Oh, somewhere in this favored land the sun is shining bright;
the band is playing somewhere, and somewhere hearts are light,
and somewhere men are laughing, and somewhere children shout;
but there is no joy in Mudville — mighty Casey has struck out.

— Ernest Thayer, 1888

While there is conjecture on this, for a V-shaped recovery to occur, we would need the level of employment to return close to or at the level last recorded in February of this year. And we would need that to occur, by say, the end of 2020. Initially the labor market recovery was quite fast, as workers were recalled back to their jobs when the economy reopened in mid to late May. But further restrictions on business activities during the summer, and continued restrictions in all California counties today, have led to tepid improvement in the state’s labor markets.

The September employment report released on Friday was quite meek and the pace at which jobs are being restored will not reinstate all of the job loss by December, or anytime in 2021 for that matter.

So much for the V-shaped recovery. We’ve been warning you that a quick rebound in economic activity was improbable when the Spring lockdowns extended into mid and late May in Mudville, aka California. And when the economies opened up partially and everyone breathed a sigh of relief there was genuine hope that men would laugh and children would shout . . . .

But cases started rising and instead of moving towards Phase 4 opening, California reversed, meaning the Governor’s office effectively closed businesses again, or required them to operate at restricted capacities. Travel was limited or stymied by smokey environments or closed national and state forests and parks. Few planes were flying due to slack consumer demand and hotel occupancies remained at or below 50 percent.

The new Blueprint for a Safer Economy was instituted to keep California very safe, but the criteria for opening is onerous, and the long waiting times between tiers is clearly destructive to business, creating permanent business losses and extending the period of ultimate recovery. But that is the current environment we are living in, and it is the principal reason for the sluggish labor market, and persistent unemployment in the state.

More layoffs in the hotel industry are coming. More layoffs from the airlines are coming. Disney recently announced 28,000 layoffs of domestic employees is coming; largely due to the inability of Disneyland to open. And even if they do, they will open at a limited capacity (where the need for all those employees will be meaningfully reduced). Consequently, California labor markets face lengthy recovery prospects. Clearly, the economy must be allowed to fully open to jump-start hiring and restore joy in Mudville.

That will occur with the successful dissemination of the vaccine, due out soon. Or the coronavirus will ultimately burn itself out as we speculated might occur 4 months ago. Look for either of these conditions to occur next year. Either way, when economic restrictions are lifted, economic growth will surge.

Bloomberg, September 30, 2020

The California Economic Forecast is an economic consulting firm that produces commentary and analysis on the U.S. and California economies. The firm specializes in economic forecasts and economic impact studies, and is available to make timely, compelling, informative and entertaining economic presentations to large or small groups.

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