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Unintended and Unexpected Consequences from COVID-19 on the U.S. Legal Tech Job Market: Chapter 2, PPP Ends, Unemployment Rises

TRU Staffing Partners May 20, 2020 at 11:00 PM

This series, “Unintended and Unexpected Consequences from COVID-19 on the U.S. Job Market,” is written by the founder and CEO of TRU Staffing Partners, a global leader in cybersecurity, e-discovery, and privacy placement and career management. Drawing from twenty plus years of experience representing talent and opportunities in global markets and having survived and thrived during and after past economic crises in 2001 and again in 2008–2009, Coseglia aims to help business owners, hiring managers, and both passive and active jobseekers to anticipate moments of change that are likely to occur as a result of the current impact the COVID-19 pandemic has had and will continue to have on job markets across the world. This series will examine how U.S. employment practices, policies, patterns, and people’s behavior may change in the coming months. Each chapter of this series will delve into a specific observation or trend starting with this week’s focus: PPP Ends, Unemployment Rises

Chapter 2: PPP Ends, Unemployment Rises

In the next two to six weeks, the qualifying period of forgivable expenditure of PPP (Paycheck Protection Program) loans will end. Small businesses can keep all of the funds, but the forgivable portion will be clearly calculated and the rest considered a loan that must be repaid within two years of receipt at a 1% interest rate. This seemed like a good deal and a great rate, a brilliant idea to hold over Americans and allow employers to retain their talent while business returned to normal in the late summer months. Unfortunately, as the forgiveness period of the loan expires, nothing has changed fundamentally on the demand side to bolster consumer buying power or business reacceleration for most small businesses in the U.S. Yes, almost all U.S. states are reopening in some capacity in the last two weeks of May, but behaviors have not dramatically changed to ensure business owner confidence that there is enough new or returning business to warrant employing the same roster of people as they have employed prior to COVID and throughout the forgivable loan period of the PPP. Mark Cuban said it best this week: “The only thing that will save businesses is consumer demand. No amount of loans to businesses will save them or jobs if their customers aren't buying.”

As a result, Americans should expect rolling furloughs, redundancies, RIFs, layoffs, and terminations over the months of June and July. As the PPP runs out, with no extension in sight, so will small business owners’ ability to maintain pre-COVID human capital scale. Unemployment in the U.S. is currently at 14.7% (as of the end of April), the highest since the Great Depression. Over the next two months, if greater leniency or forgiveness extension on loans or granting of additional forgivable loans is not provided by the federal government and the SBA, it is possible that unemployment could skyrocket to 25% to 35% before the end of August. Our government has a choice--they could extend forgiveness on existing loans, create new ones, or pay the unemployment on the incoming fallout from the end of the PPP. Regardless of which way they go, the U.S. government is still going to foot the bill for American workers.

So, how does this affect the e-discovery, privacy, and cybersecurity job markets? While these industries are not immune to the inevitable slowdown in the U.S. economy (forget notions of “recession-proof” – this is not like any recession ever seen in modern times), there may be less need for law firms and vendors to disrupt the existing services they are providing. The pulse on the market in those verticals is that business is steady but with many now at maximum talent capacity for servicing existing business in these areas. Layoffs may not spread like the wildfire to be expected in more dramatically affected industries like retail, entertainment, and restaurants, but as small businesses in ESI, privacy consulting/tech, and cybersecurity emerge from the period of forgivable loan redemption, rest assured they are looking at their talent infrastructure and making strategic business decisions as to the necessity of jobs and individuals within their org chart.

Now is the time as an employee to be an overachiever. In the next few weeks, some people may go on hold. Some jobs may go on hold. Some people may never come back. Some jobs may never come back. The next few months will force small business owners to rethink their strategies for the years ahead while there is still cash in the bank and a need to make human capital adjustments in the new post-COVID market.