ECONOMIC OUTLOOK - March 2020 (Thoughts on the COVID-19 Pandemic)
Photo from Pixabay via Pexels

ECONOMIC OUTLOOK - March 2020 (Thoughts on the COVID-19 Pandemic)

Part 1 (originally published on March 16, 2020)

As the sun rises today, we are at what appears to be the very early onslaught of the virus in the United States. Having ravaged China and subsequently Italy and Spain, it appears that the United States is next.

What to think? What to do? Who do we turn to for guidance, accurate and unbiased facts and information? Unfortunately, our politically polarized environment makes this task a daunting one.

I think CEO of Amazon Jeff Bezos, in a single astute sentence, accurately provides a way to deal with COVID-19 and what will happen afterwards - “Though we are optimistic, we must remain vigilant and maintain a sense of urgency.”

This is the first in a series about how we can help our SME clients to not only survive, but also come out of this pandemic ready to take on a riskier economic environment. Above all, we need to be ready to have the resources and working capital all in place to move quickly and efficiently for the foreseeable future.

In today’s edition, I will summarize the facts about COVID-19 as of this morning, March 16, 2020, then present some actions we can immediately take to help our SME clients endure this surreal global event. In future editions, I will look at the ramifications of COVID-19 on SMEs globally and a myriad of other topics relevant on what we need to be vigilant about in the near and long term future.

As you’ve noticed, COVID-19 has profound implications on our businesses, finances and health. I can’t recall another recent event similar to this. It’s as if the pandemic is like a multifaceted Rubik’s Cube!

Let’s first delve into the facts as of the morning of March 16, 2020. The data source for this information is Johns Hopkins University accurate as of 6:30 EST and was originally published in the Wall Street Journal. Of course, these facts will update as the pandemic progresses. 

  • 169,387 confirmed cases worldwide
  • 6,513 deaths attributed to COVID-19 globally, or about an overall mortality rate of 4%
  • 3,774 cases now reported in the United States and 69 reported deaths.
  • Finally as of today, more than 30 million children will be staying at home as schools are closed.

The key takeaways from this morning’s data are as follows as also noted in the WSJ online edition:

  • For the first time, deaths reported outside China exceed those inside the country where this began
  • A lot [and I mean a lot] of kids are at home, with 30+ million not attending traditional classroom instruction
  • And the Federal Reserve has taken unprecedented emergency actions to prop up the United States economy and prevent a recession from happening

As noted above in this first article I would like to present some actions that we can take as commercial finance professionals to help guide our employees, partners and SME clients through this crisis. The genesis of these seven excellent and practical ideas is an article authored by McKinsey & Co., in a Briefing Note dated March 9, 2020. The article covers a wide range of topics including critical indicators of the impact of COVID-19, the potential economic impact of the virus, supply chain challenges, and other topics. I will utilize the Exhibit as published in the Note in this article.

The key actions that companies [regardless of size, industry, geographic location, etc.] can immediately take are noted below in bullet form. I will look at each in future articles and present ideas on how firms like ours in the commercial finance industry can use to help our businesses and SME clients navigate uncharted waters.

COVID-19 Action Steps

  1. Protect your employees
  2. Set up a response team
  3. Look at stress, liquidity and contingency plans
  4. Supply Chain
  5. Stay close to clients
  6. Practice
  7. Demonstrate purpose

I hope this opening article will help in the nearly overwhelming tasks of maintaining stability, managing this crisis, remaining optimistic and simultaneously be vigilant. Interesting times, for sure!

Part 2 (originally published on March 17, 2020)

As the sun rises today, we awaken to the reality of the financial power COVID-19 has on our financial markets in the United States. Even after a series of unprecedented financial moves by the Federal Reserve to help mitigate some of the financial fallout from the virus, all major stock indices recorded significant losses yesterday. And it appears that, absent some miracle occurring, short term prospects for the markets in the United States are not promising. 

Very quickly, a recap of the facts as of the morning of March 17, 2020; a day that we find all Saint Patrick’s Day activities abandoned. The data source for this information is Johns Hopkins University accurate as of 6:30 EST and was originally published in the Wall Street Journal. Of course, these facts will change and undoubtedly increase as the pandemic progresses.

  • Global death toll of 7,155, up from 6,513 yesterday
  • United States death toll now stands at 68
  • The shutdown of schools continues as the governors of New York, New Jersey, Connecticut tightened restrictions on the public and residents of the Bay area in California were ordered to stay at home. 

I presented in the initial article of this series a McKinsey & Co., list of 7 sets we as commercial finance professionals can do to help guide our employees, partners and clients through this crisis. Here they are again summarized below;

COVID-19 Action Steps

  • Protect your employees
  • Set up a response team
  • Look at stress, liquidity and contingency plans
  • Supply Chain
  • Stay close to clients
  • Practice
  • Demonstrate purpose

The first of the immediate steps we can take is also the most important one - take care and protect the most valuable asset of any business - your employees. Employees are the lifeblood of the business, regardless of industry, location, size, or ownership. From startups to mature firms, a failure to nurture your employees in a time of uncertainty will lead to a financial failure of the business.

Each of us deal with a crisis in different manners and there is no debate that the COVID-19 crisis will be an emotionally challenging experience. Even in the short time frame since rearing its ugly head, the COVID-19 pandemic has disrupted daily life for all people. This fact has caused great uncertainty, anxiety and worry.

It is easy to dismiss this as some passing wave; but we cannot assume that “business as usual” can be a path we pursue until we are out of the woods with the current challenges. This is the time for our leaders to listen to employees and be empathetic to insure that we protect our employees, their families and our community.

A related topic that hasn’t yet surfaced is that for many employees, the COVID-19 crisis is a potentially crippling economic crisis. Even though the United States economy recently recorded strong growth in jobs created and near record low unemployment, the stark reality is that many employees in the United States cannot afford to miss a paycheck or suffer a reduction in pay. Proof of these facts were recently documented in the most recent Board of Governors of the Federal Reserve System publication entitled “Report on the Economic Well-Being of U.S. Households in 2018”, May 2019. The report describes responses to the 6th Annual Survey of Household Economics and Decision Making, and the goal of the survey is to share a wide range of financial challenges and opportunities facing individuals and households in the United States. While most measures of economic well-being and financial resilience are better than those reported in the recent past, significant areas of financial fragility and distress still remain with many in the United States. Most families have experienced gains in their overall financial health since the onset of the most recent economic expansion back in the 2009/2010 period. But even with low national unemployment, there are glaring disparities that still exist by race, education and geography in the United States today at the onset of the COVID-19 pandemic.

One might wonder why or how this is related to steps we can immediately take as leaders to successfully navigate the COVID-19 crisis. There is one simple reason: we cannot assume that our employees are immune to strain in their personal finances or are worried about the impact COVID-19 will have on their personal finances.

Do we know if their household is at risk of losing income of there was a system-wide shut down? How many of them have two or more sources of income that help make ends meet? How many arrive to the office daily living in fear of being laid off or having hours or benefits reduced? How does this impact their ability to perform and serve well? It can’t be a positive motivating factor, can it?

The Federal Reserve provides credible data on household income and can shed light on how many Americans are in a fragile economic situation. As mentioned earlier, while a large majority of individuals reported that they were doing “okay” or “living comfortably”, a sizable number have not accrued the benefits of the 10+ year old United States expansion on a personal basis. Consider these facts from the Report:

  • If faced with an unexpected expense of only $400 USD, a total of 39% of the adults surveyed would be unable to able to cover the bill with cash, savings, or a credit card paid off in the next statement.
  • 12% of the adults surveyed would not be able to cover the expense at all. That’s nearly 1 in every 8 adults!
  • 17% of the adults surveyed are not able to pay all of their current month’s bills in full each month. This percentage would jump to 29% if an unexpected bill of $400 occurred in a given month.
  • On a long-term basis, in excess of 25% of the non-retired adults surveyed over the age of 60 had no retirement or pension savings of any kind.

These facts reinforce why the need to listen closely to the chatter and feedback from your employees as the COVID-19 crisis evolves. We should not assume that all have the ability to weather this storm without significant financial challenges.

So what practical steps and actions can we take to protect our employees? Here are some ideas proposed by the McKinsey reports and other sources I looked at as part of the research on this:

  • Create a “single source of truth” about the pandemic and the headwinds faced by your business. The last thing anyone needs is to have the conversation in the office driven by half-truths, rumors, and gossip. One simple way to do this is to set up a blog or web page internally and post important notices, updates, factual reports [for example, from the CDC/Centers for Disease Control and Prevention in the United States] for all to read and absorb.
  • Provide clear policies and guidelines to all. Make no assumptions about what your employees think or know. Communicate the facts in writing and document them.
  • For the very outset, make it clear to all that you will follow and adhere to the most conservative official guidelines available from credible leading global and local health authorities, like the CDC or WHO. Post on a daily basis updates, directives and mandates directly from these sources. The more facts available to all, the less “sky is falling” rumors and miscommunication will occur.
  • Never stop communicating with your employees. Do it as often as you can on a practical basis.
  • Support all employees with factual health guidance and advice.
  • Along the way, benchmark your efforts and communicate in writing to all what you have done. It is imperative to make sure that they understand all reasonable steps are being taken to insure their health and safety simultaneously while running the business as efficiently as possible.
  • A personal pet peeve of mine are meetings; and specifically “meetings for the sake of meeting” exercises. Immediately develop a low tolerance for these and build a simple operating guide that is output focused. This is the same approach that we need to nurture and utilize while the COVID-19 plague dissipates.

A final thought. Agile yet strong and enlightened leadership to manage this crisis is needed now more than ever. This is true not just in our businesses, but on a state, national and international level. Only when we acknowledge this and focus on crafting solutions that do not assign blame will we succeed in overcoming this crisis.

Part 3 (originally published on March 19, 2020)

The current COVID-19 crisis is a tragedy that includes many facets; a political one, an economic one and most importantly a human one. It is a story rapidly unfolding without a clear answer. Perhaps the only clear aspect of COVID-19 is that the impact will spare no one, country, industry or location. The fact that today’s global death toll is nearly 7,200 according to data compiled by John Hopkins University is truly tragic.

As an industry deeply rooted in serving SMEs with professional working capital solutions via factoring, it is imperative that we act decisively to help address the myriad of challenges they will face as they run their B2B and B2G on a daily basis. At the same time, we need to refocus our attention to making sure we protect our employees, partners and community. And finally, we need to help all of these key players find ways to mitigate the COVID-19 pandemic in whatever ways we can.

These appear to be huge shoes to fill. The question should not be “are we up to it?” but “how do we implement effective strategies for the three tasks presented above?” Individually and as part of a large industry, we must acknowledge that this crisis is unlike any other we have encountered in recent memory. As a result, previous responses may not be sufficient and we will need to be assertive in order to be successful.

There is no shortage of advice from a wide array of sources (credible and otherwise) on action items. I have tried to absorb as many articles and white papers that cover this topic; many focus on specific industries or regions. While they rarely present an identical game plan, one interesting item appears frequently; in the face of COVID-19, doing nothing is not an option.

I have no comment on the potential outcome of COVID-19, as I am not an expert in biology or public health and safety. A significant part of published research outlines multiple outcomes and I’d be more than happy to provide numerous sources if you’re interested. Bain’s Macro Trends Group and McKinsey are two firms that have excellent research in this area.

The duration of the COVID-19 crisis and the effectiveness of responses (international, federal, state, local and others) will have an impact on the magnitude of the action steps needed to effectively respond to the crisis. However, a quick recap of the situation makes sense as a preamble to outlining some actions we can take now.

In every impacted country in the world, the containment effort to slow the spread of COVID-19 will be a major disruption to business as usual. This is true regardless of the extent to which the virus has already spread. We, as individuals and business owners, need to plan for the worst and be very grateful if the worst doesn’t happen. Doing nothing or taking a “wait and see” approach is not a wise strategy to follow. In nearly every industry, there is potential for significant revenue decline. In industries such as travel, dining, hospitality, or transportation, this is a certainty.

As a result, cash crunches and liquidity crises will occur. In the event that there is no firm timeline for crisis resolution, the economy may not bounce back or recover for a long time. Suppressed revenues, which we assumed would be in place only for a short time, could balloon into 2021.

It also seems quite plausible that due to the lack of historical data, panic may occur with our employees, partners, clients and others. The need to communicate honestly and frequently while balancing empathy and leadership will be a requirement for successfully navigating the crisis. Finally, one of the repercussions of the COVID-19 crisis could be a permanent change in behavior by clients and others. This means that the crisis might serve as a catalyst in accelerating trends. Acknowledgment of this increases the chances that we can successfully guide our factoring businesses and clients to success through an anticipated downturn.

So what steps can we as leaders in our industry do to help mitigate the effects of the current COVID-19 crisis and emerge stronger? I have undertaken a significant amount of research and a brief authored by McKinsey & Company [edited and amended below] does an excellent job of answering this important question.

Priorities for Combating COVID-19 Crisis for Factoring Firms

  1. People: Protect Your Employees and Clients
  2. Immediately implement the most conservative known guidelines available for both your employees and clients
  3. Closely and assertively monitor health guidelines and changes in recommended actions from government entities like the CDC and WHO
  4. Over communicate and be 100% transparent; stick to facts, not emotions or rumors
  5. Help with epidemic limiting initiatives in any way practically and financially possible
  6. Financial: Do Stress Tests on your own firm and clients
  7. Look at your own P&L and test it against multiple scenarios
  8. Do the same on clients, especially in industries most impacted by the COVID-19 pandemic [transportation, retail, hospitality, food service, healthcare]
  9. Translate these into revenue/decline models, taking into account revenue, costs, working capital, cash/liquidity on a weekly, 13-week and rolling forward 4-quarter basis
  10. Outline significant operating actions that need to be done on an immediate and intermediate basis
  11. Stay Incredibly Close to your Clients
  12. Adopt a human-centric view of the COVID-19 crisis
  13. The stated goal is to continue to build trust, loyalty and help them through and beyond the crisis
  14. Consult but do not overstep and help them identify revenue mitigation actions if declines in core revenue occur or are coming
  15. Help them find and provide necessary resources to find new/incremental pockets of future growth opportunity, online offerings and others
  16. Take Action and don’t just play defense!
  17. Plan to work towards outperforming others by communicating constantly about the tools, resources and capital you can provide to prospects, clients and partners in a time of crisis
  18. Think about how to expand market share on a M&A basis for firms that don’t have the capacity or staying power to weather the storm
  19. Get ready and prepare now for the eventual recovery
  20. Invest and take care of your employees so they are ready to go when this happens
  21. Think about, plan for and take advantage of changes that will happen with client behaviors, including greater digital access, communications and servicing

It has been said “chance favors the prepared.” There has never been a time in recent history when this statement has been more valid. I believe “chance” will look favorably on the factoring firms who take assertive, organized actions plans now to mitigate the current economic attitude over the near and long term. It will take an all team effort to successfully implement the short list of suggestions offered in this article. I do believe that we as an industry will succeed if we set our minds to it, and as a result we will be better prepared to serve SMEs and our partners now and after the COVID-19 crisis passes and we get work to repair.

Part 4 (originally published on April 3, 2020)

Update to April 2, 2020 Weekly Unemployment Claims Data

My note discussed the stunning data that was released April 2, 2020 on the weekly jobless claims for unemployment in the United States. As mentioned the data for the week was 6.6 million, nearly double the anticipated estimates.

I also looked at some interesting data published before the claims data was announced by Pantheon Macroeconomics. The research looked at Google Trends data on the average daily number of searches for “file for employment”, looking at the number and trend line for the keywords. It found that actual searches rose by 60% last week, compared to the week ended March 21, 2020. The key takeaway from their research was this “If the relationship between the Google data and the claims is linear – we have zero experience of claims at their current level, so this is a guess – it implies that claims jumped last week to more than 5 million.” And the research concludes that because the Google searches are national, nor regional or local, that this made sense to them.

And it turns out, even a prediction of 5 million was way too low.

So their research accurately predicted that the consensus estimates were too low as determined by looking at the Google Search results. And even though the search results have trailed off marginally, they remain at levels never seen before in recent history. So if the relationship between search results and claims is indeed linear, a lot more jobless claims are right around the corner for the foreseeable future.

This is yesterday’s news. So today I decided to update this information by looking at real time data on the same Google search term, “file for unemployment” over a much longer time horizon. As you can see above, the data we looked at yesterday covered only the month of March, 2020. By doing this, this would allow us to compare current search results on Google in prior recessions and economic downturns that have occurred in the United States and see if what is happening now is similar or different to the past results.

I selected off Google Search the longest time duration possible for the search results; stretching back more than 15 years. In that time frame only one recession occurred in the United States for December 2007 to June 2009. Peak unemployment occurred in October 2009 at 10.0%. The decline from peak to trough in GDP in the United States was -5.1%.

As an aside I also learned that since records were kept with some validity in the United States (1790) there have been as many as 47 recessions that have occurred. A recession is commonly defined as two quarters of negative growth in GDP. The average duration of the 11 recessions between 1945 and 2001 is 11 months, compared an 18 month average from ones occurring between 1919 and 1945.

So what did the Google search data reveal over the 15+ years of analysis? The result is below, and I believe that a picture in this case does say a thousand words.

No alt text provided for this image

One other startling development that happened this morning also merits a quick mention and something to think about/ be concerned about. The United States Labor Department this morning reported that for the very first time in almost a decade that the United States economy recorded a net job loss for the week of 701,000 jobs. This ends an unprecedented streak of 113 months in a row of positive weekly job creation in the United States; a streak neatly twice the previous record.

But what is not in this negative number is the caveat that these job losses occurred in the first half of March, before the current swath of stay at home orders, layoffs and closing even began to occur. As a result the current unemployment rate in the United States of 4.4 is likely to double or even triple in the very near future. The CBO [Congressional Budget Office] announced yesterday that the official forecast for unemployment would exceed 10% by June 2020 and remain elevated at 9% until 2021.

Only time will tell and the ability to slow down the COVID-19 pandemic quickly and completely will determine how bad the job losses will be in the United States for the near future. 


As the COVID-19 pandemic continues at full strength in much of the United States, it is becoming clearer that the economic damage done by the virus will be widespread and significant. The first inkling of this unsettling fact appeared last week when an unprecedented surge in jobless claims was announced. From the prior weeks, data of 282,000 claims came the stunning news that the current weeks total was about 3.3 million. At that point, equity and other markets in the United States nearly came unglued and the optimistic chatter was that this would be the highest claim that would occur in the COVID-19 period. Most economists and experts had predicted that the number of claims would be nowhere as high as the 3.2+ million that was actually reported.

To make a long story short, the optimists were wrong that the worst had come and gone. But perhaps what the optimists [and just about everyone else] forgot to take into consideration is that after the tsunami of closings, lock downs and other restrictions became effective, the infrastructure [websites, 800 numbers, etc.] for people to apply for unemployment for the first time were overwhelmed and in some cases, crashed. So everyone who was unable to get aid from last week’s stunning total were rolled forward to this week and was added to the new pile of unemployed workers impacted by additional stay at home rules, layoffs, firing and lock downs that occurred.

So that brings us to the April 2 and the highly anticipated announcement of new unemployment claims for the week just ended. There was a wide range of estimates being bantered about what the new jobless claims numbers would be; but most seemed to agree that the most likely range was in the 2 to 4 million new jobless claims total. A median number seemed to be about 3.1 million +/-.

Prior to revealing the actual April 2, 2020 results it might a good idea to quickly review and discuss why weekly jobless numbers are carefully watched and why they are very important to provide us some insight into the current and near term state of the economy in the United States. Almost all economists, whether in the private sector or in government agree that weekly jobless claims are one of, if not the most important data series to determine how severe a shock is when a pandemic or other event [hurricane, etc.] occurs. But there hasn’t been an event of the magnitude, scope or size of COVID-19 in recent United States history and this makes relying on past behavior to predict future results iffy at best.

When the United States Department of Labor announced that the new number of U.S. workers filing claims for jobless benefits rose to 6.65 million there was shock and disbelief. This meant that not only had the number increased from the stunning total of 3.3 million from the prior week, it has more than doubled. Doubled in a single week.

This also needs to be looked at in a historical context to grasp the gravity of the number. In the worst week of the prior United States recession (2009) the single largest weekly increase was only 665,000 or 10% of the most recent claims number. Again why these numbers are very important to assess the overall health [or sickness] of the United States economy is because weekly jobless claims are the most comprehensive and accurate data about what is happening on the ground all across the United States. Estimates by ivory tower academics and policy newsletters are just that; guesses not grounded in hard facts.

Weekly jobless claims data provide insight into key metrics like:

  • How many businesses are left open and how many have simply closed up shop due the spread of the virus
  • How many businesses have laid off employees due to a crash in the demand for the services they used to provide or the products they manufactured or sold
  • How many businesses are laying off workers to hoard cash and pay what bills they are able to pay
  • How all of these daily events will then impact the supply chain networks for months or longer to come

So as important as it is to understand today’s very unsettling information is to try to estimate/guess what will happen over the next couple weeks or months to the jobless claims data and overall unemployment in the United States. Anyone who categorically announces that they have 100% clarity and accuracy in predicting future data is either clairvoyant or delusional. There simply has never been an event of this scope to help us predict future results with any real accuracy.

However, one very interesting tool that we do have to help us simply didn’t exist 20 or 40 or 100 years ago; namely the internet and more specifically Google keyword search results. A fascinating research article I read [among many others] authored by Pantheon Macroeconomics dated April 2, 2020 had some very compelling analysis and data if a correlation between key words searched on Google and actual job claims does exist.

The research looked at Google Trends data on the average daily number of searches for “file for employment”, looking at the number and trend line for the key words. It found [see graph below from their excellent work] that actual searches rose by 60% last week, compared to the week ended March 21, 2020. The key takeaway from their research was this “If the relationship between the Google data and the claims is linear – we have zero experience of claims at their current level, so this is a guess – it implies that claims jumped last week to more than 5 million.” And the research concludes that because the Google searches are national, nor regional or local, that this made sense to them.

And it turns out, even a prediction of 5 million was way too low.

No alt text provided for this image

So their research accurately predicted that the consensus estimates were too low as determined by looking at the Google Search results. And even though the search results have trailed off marginally, they remain at levels never seen before in recent history. So if the relationship between search results and claims is indeed linear, a lot more jobless claims are right around the corner for the foreseeable future.

So where might this end? What could the total unemployment numbers look like later this spring and summer? Recall that the total is already a scary 10+ million. If what we read online and hear via the media, many states remain ill prepared and are overwhelmed to handle the current let alone future people seeking unemployment benefits. This leads to additional backlogs and eventually higher claims results on a weekly basis. While this could change, it does not bode well for the total unemployment rate in the United States to be as high as 12% to 20% in less than a month.

Only time will tell and the ability to slow down the COVID-19 pandemic quickly and completely will determine how bad the job losses will be in the United States for the near future. 


Mark Mandula is Chief Marketing Officer of Florida-based alternative finance firm United Capital Funding. The firm provides commercial finance opportunities to small businesses with B2B and B2G relationships by funding accounts receivables. Learn more at ucfunding.com.

要查看或添加评论,请登录

Mark S. Mandula的更多文章

社区洞察

其他会员也浏览了