ECONOMIC CAUTION AND UNCERTAINTY CLOUD THE SKIES

Published on August 6, 2020

Caution is one cloud hovering over the economy as new U. S. Jobless Claims for last week came in today at 1.19 million, down from the prior week of 1.42 million. Daniel Zhao, Senior Economist with Glassdoor stated, “Falling unemployment insurance claims is a positive sign the recovery is progressing cautiously." Emphasis on cautiously as a total of 30 million people continue claiming unemployment benefits, while roughly 55 million have filed unemployment since the onset of COVID-19. Zhao went on to say, “However, this report also shows that unemployment benefits remain a vital life preserver for tens of millions of Americans during a health and economic crisis.”

According to Heidi Sheirholz, Director of Policy at the Economic Policy Institute, “There are 14 million more unemployed workers than job openings, meaning millions will remain jobless no matter what they do.” However, the trend is moving downward as the highest number of weekly claims reached 6.8 million in March. 

Uncertainty is the other cloud hovering over the economy as new applications for a Paycheck Protection Program (PPP) loan are scheduled to expire in two days on August 8. Sen. Mitch McConnell stated recently, “The popular PPP loan program … we think desperately needs to be renewed, has been enormously successful.” A recent survey by the National Federation of Independent Business indicates almost 50% of the (PPP) borrowers will need additional funding in the next 12 months.

$130 billion of the $650 billion remains available; however, Treasury Secretary Steven Mnuchin has said, “That money we want to repurpose for other issues.” This sentiment sheds light on the uncertainty surrounding the availability of additional funding for small businesses both in the first round or a potential second round.

House Small Business Committee Chairwoman Nydia Velazquez (D-NY) said in a recent (PPP) hearing that approximately 110,000 small businesses have already permanently closed with 7.5 million facing a similar outcome, all of which underscores the need for additional stimulus.

Now is the time for a business owner to review the budget, balance sheet, income, and cash flow statements to accurately project growth and profitability. Adding an interim, or fractional, CFO to the advisory team can create alpha (added value and return on investment) and mitigate economic caution and uncertainty.