As the coronavirus spreads throughout the U.S., it’s started to create an economic meltdown, triggering hundreds of layoffs in the past week alone and ending the longest-ever bull market for the Dow Jones Industrial Average.
Over the past 11 years, a surging labor market, strong consumer confidence and soaring financial markets have fueled the longest economic expansion on record in the U.S. But as the virus ripples throughout the country, investors are increasingly worried about the toll it could take on the economic outlook.
On Wednesday, after the World Health Organization declared the coronavirus outbreak a pandemic, all three of the major indexes plummeted, with the Dow Jones Industrial Average ending the day in a bear market, meaning it had lost 20 percent from their February peaks.
"Economists may look back and discover that we entered the recession on Feb. 21, the day the stock market started falling,” said Andrew Challenger, vice president of global outplace at Challenger, Gray & Christmas Inc. “The catalyst for the recession: the impact of the coronavirus on the global economy.”
Industries at the ground level, like cruise ships, international tourism, hotels and airlines have all been suffering, along with companies that depend on China, which responded to the outbreak by clamping down on manufacturers and shuttering factories, for its supply chain.
Official statistics show a very healthy labor market, with 273,000 jobs added in February, the Labor Department said last week, and the unemployment rate at a half-century low of 3.5 percent. But companies were surveyed about their payroll before the virus began to impact growth, and economists are bracing for a weaker number in March as supply chains come to a halt and people stay home and spend less.
According to The Washington Post, the economic pain is already translating into layoffs at a wider range of industries, including bakeries and chain restaurants.
At the Port of Los Angeles, the busiest port in the country, 145 drivers have been laid off and others have been sent home without pay as massive ships from China stopped arriving and work evaporated, the Post reported. Christie Lites, a stage-lighting company based in Orlando, laid off more than 100 of its 500 workers across the country. The company is expected to lay off 150 more, its CEO Huntly Christie said.
After the South by Southwest festival in Austin was canceled because of the virus, at least 50 people lost their jobs, according to the Austin Chronicle.
Demand for air travel has also plunged swiftly around the globe. According to the trade organization Airlines for America, the downturn in demand could cost airlines somewhere between $63 million and $113 billion in lost revenue this year. Although major airlines have not started layoffs, nearly all of them have canceled routes and many have implemented a travel freeze.
Still, the number of Americans filing new claims for unemployment insurance fell last week for the second time in a row, suggesting the labor market has not been impacted in a major way. The Labor Department said Thursday that applications for unemployment benefits dropped by 4,000 last week to a seasonally adjusted 211,000. Economists are watching the jobless claims, typically a good indicator of layoffs, for signs that the virus has started to seep into the economy.
In February, however, manufacturing activity grew at a slower-than-expected pace. The ISM manufacturing Purchasing Managers Index dropped to 50.1 from 50.9 in January, bringing it back down to the brink of a below-50 reading that indicates a recession in the sector.