The Second Wave

We are getting hit with the second wave of layoffs. People whose salaries were covered by PPP and people who were furloughed in March are now finding out that business has not returned, and money is running out.  They are being laid off, joining those that were laid off in March.  New PPP guidelines allow for employers to use PPP money to pay furloughed staff to lay them off and still qualify for loan forgiveness.

The Federal Government has been creative with unemployment numbers. People receiving pay via PPP are employed.  However, they are employed using government money – unemployed people are also receiving government money. Same purse, different pocket.  As early PPP recipients, told they had to spend their PPP allowance within 8 weeks to qualify for loan forgiveness, are approaching their 8th week, they have spent their money. They are starting to lay off employees, as business has been slower in returning. This is going to grow unemployment numbers.  The stock market will react poorly to greater numbers.  A correction in the markets becomes inevitable.  A second wave – a second correction is coming.

The $600 per week special Covid-19 allowance for the unemployed is due to run out July 31st. Lawmakers are debating whether to extend this or create a “Return to Work” bonus. If it is not extended, the real pain of unemployment will be felt by many. A second wave of hurt.

The government has printed an extraordinary amount of money. By calling them loans they are balancing their books. As the loans are converted to grants, they will have to recognize this free money. A second wave of debt recognition is coming.

What does this mean for you?

More people unemployed. More downward pressure on salaries and wages. What can you do? Keep your costs as low as possible.  Allow time to rebuild your business. Our March newsletter predicted business would not start returning until September and even then, would build slowly into the first quarter 2021. Some people felt we were being overly pessimistic. I hope you were one of those that paid attention in March.

We are here to help businesses recalibrate and job seekers to find employment. We won’t sugarcoat anything. Contact Nick Reid or Imelda Bermudez to discuss your needs confidentially.

Nick Reid:  (310) 948-8769

Imelda Bermudez:  (424) 393-9896