- In less than one month, the coronavirus pandemic has displaced more than 10% of American workers, outpacing the worst month of the Great Recession.
- Even if jobless claims decline from current levels, it's possible that more than 20 million jobs will be lost.
- Economists have estimated that the unemployment rate could spike above 10% and go as high as 20%.
- "The new normal for UI claims will be the canary in the coal mine for how long effects of the crisis will linger for the millions of newly unemployed Americans," said Daniel Zhao, an economist at Glassdoor.
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Less than one month of data shows just how deeply the coronavirus pandemic has rocked the US labor market — and many economists expect that pain will continue.
In the week ending April 4, 6.6 million Americans filed for unemployment insurance. the Labor Department reported Thursday. While the weekly jobless-claims number narrowly missed posting a third consecutive record, it still showed that layoffs are continuing at an astounding clip.
A total of 16.8 million people have filed for unemployment benefits in three weeks. That means more than 10% of American workers have been laid off and sent in claims, according to the Economic Policy Institute.
"The numbers are so large," Michael Gapen, Barclays' chief US economist, told Business Insider. "The conclusion is staring you in the face about what happened to labor markets beginning in the middle of March."
The weekly unemployment report was the latest data to show the depth of the economic harm of the coronavirus outbreak in the US. To curb the spread of the virus, most of the country is practicing strict social-distancing orders that have kept people at home and closed nonessential businesses.
In addition, the Federal Reserve and the government have taken sweeping action to provide support and essentially freeze the economy until it can be reopened later. On Thursday, the Fed announced another $2.3 trillion in aid for businesses and state and local governments. Congress has also been working on further relief after President Donald Trump enacted a record $2 trillion relief bill at the end of March that expanded unemployment and more.
The number of claims in the past three weeks is a 2,500% increase over the pre-coronavirus period, EPI data shows.
"For a benchmark, this is as if the entire adult population of Michigan, Minnesota, and Wisconsin applied for unemployment insurance in the last three weeks," the EPI economists Elise Gould and Heidi Shierholz wrote in a Thursday note.
Gould and Shierholz said they expected the situation to get worse before it gets better, pointing to estimates that total job losses could exceed 20 million. "The scope of suffering is overwhelming," they wrote, adding that "this recession will exacerbate existing inequalities by race and ethnicity."
Worse than the Great Recession
The coronavirus pandemic is now on track to inflict worse damage than the great recession in just one month, according to Daniel Zhao, a Glassdoor economist.
The nearly 17 million people who filed for unemployment in the past few weeks is "several times greater than the 3.27 million Americans laid off or discharged in the worst month of the Great Recession," Zhao said, pointing to data from the Bureau of Labor Statistics.
In addition, weekly jobless-claims reports are an undercount of economic pain, as not all workers who are laid off file for benefits, and not all those affected by the crisis are eligible.
"Claims over the last 3 weeks are likely enough to raise the present unemployment rate over 10 percent, higher than any point in the great recession," Zhao wrote. In March, the unemployment rate ticked up to 4.4% from 3.5% in February.
Unemployment-insurance claims could also be supported by the expanded benefits provided by the stimulus bill, he said. The additional $250 billion allotted for unemployment adds $600 per week to state benefits through July 31. But that money hasn't gone out yet, as the system is still being set up.
"The new normal for UI claims will be the canary in the coal mine for how long effects of the crisis will linger for the millions of newly unemployed Americans," Zhao said.
What a downward trend in UI claims might mean
Still, there may be some good news in this week's report, even if the damage is severe. Because jobless claims declined on a weekly basis, there is hope that the economy is past the peak of layoffs due to the coronavirus pandemic and will start to see a gradual downward trend.
"We do expect them to continue to come down from here, but obviously it's still going to be an awful employment report," Gapen said, referring to the April nonfarm-payrolls report to be released in May.
And even if claims do start to fall off, it doesn't mean unemployment won't reach record levels.
"While we think that data for the period ending March 28 represents a peak in first-time claims during the current recession, large numbers of people will continue to report job losses for the next several weeks, which will send the overall unemployment level well above 20%," the RSM chief economist Joe Brusuelas wrote in a note.
He added that "the only real question is whether this crisis will result in an unemployment rate of higher than the 24.9% posted in 1933."
However, Brusuelas acknowledged that a swift economic recovery was becoming increasingly unlikely.
"It is time to retire those calls for a V-shaped recovery and hope that a significant release of pent-up demand will cause the economy to snap back," Brusuelas said.
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