A bunch of people sold off in a panic, a lot of volatility hit, people like Buffett bought at the bottom (and publicly advised others to do so), so who knows.
Unemployment is artificially high for now. Companies are incentivized through PPP to lay people off, especially with UI bonuses.
How are companies incentivized to layoff staff through PPP? My understanding is one of the eligibility requirements is that you can't have reduced your staff since Feb 15th, and if you have, you need to re-hire them to become eligible.
The entire point of PPP is to incentivize companies _not_ to layoff their staff.
You can lay them off. You just have to rehire them by June 30th. And 75% of the loan must go to payroll, so you can't axe the entirety of your staff. If you can layoff someone who makes close to the maximum for UI, with the $600/week bonus, the laid off make an adjusted $1000/week for the duration of the bonus + qualifying period. That's a pay raise for many employees in the service sector - so the employee is also incentivized to be laid off to make close to as much as they did (or more!) and do absolutely nothing.
This is all contingent on you re-hiring them, of course. Otherwise it's bad for the employees and you might get penalized under PPP. But restaurants around the nation are axing their entire staff and promising to bring them back June 30th, while maxing out PPP loans. Plenty of other businesses, too.
>> The entire point of PPP is to incentivize companies _not_ to layoff their staff.
Yes, I am aware. Would you also believe that the government had competing incentives with another program in unemployment insurance that caused this situation inadvertently?
We almost did this at my company; our accountant ran the numbers and we would have benefited to the tune of nearly six figures in doing so (spending the excess on "qualifying purchases" with the remaining 25% like rent), but I felt bad exposing my employees to the phone trees and websites of the unemployment office. They're overloaded AND incompetent.
Unemployment is artificially high for now. Companies are incentivized through PPP to lay people off, especially with UI bonuses.