How Long Will These High Unemployment Rates Last?

May 5, 2020 | Commentaries

When the domestic economy shut down in March, millions of workers immediately and unexpectedly lost their jobs. April’s unemployment rate, which will be released this Friday, is expected to show the highest level on record as the coronavirus has essentially wiped out a decade’s worth of jobs created since the global financial crisis.

Everyone agrees that the unemployment rate will be high, almost shockingly so, and this is likely priced into the market. What experts disagree over, however, is how long this high rate will last. As the economy gradually reopens, many jobs will return quickly. An unknown number of jobs, however, will not return in the short term, and may not ever return. We have identified hospitality, tourism and energy as examples of broad industries that could struggle well into 2021.

Like most effects of the coronavirus, the ultimate path of unemployment is unknown. While we hope that things get back to normal as quickly as possible and unemployment abates, we believe that the market is currently taking an overly optimistic view of how quickly jobs will return. This is yet another reason why we believe the April rally in equities may be short-lived, and another reason for investors to be cautious.