WASHINGTON — In the fastest surge of layoffs and economic decline in U.S. history, nearly 17 million Americans have applied for unemployment benefits in the last three weeks, the government reported today.
Economists said the tidal wave of layoffs, triggered by the coronavirus pandemic, suggests the U.S. unemployment rate in April will be 15% or even higher.
Given the speed with which the numbers are rising, unemployment could ultimately reach levels seen only once before in almost 100 years — the Great Depression of the 1930s, when one out of four workers were jobless.
The claims filed in the last three weeks are “a mind-boggling 2,500% increase over the pre-virus period,” economists at the Economic Policy Institute said.
“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 Federal Reserve, anticipating the bleak news in the Labor Department’s latest weekly jobless claims report, announced minutes later that it was creating a new set of programs to provide $2.3 trillion in loans to aid businesses and states and cities.
“We are moving with alarming speed from 50-year lows in unemployment to what will likely be very high, although temporary, levels,” said Fed Chair Jerome Powell, speaking this morning on web interview with the Brookings Institution.
The central bank has pulled out all stops to flood the economy with cash to keep credit flowing and prevent a freeze-up in the financial system, but analysts said the magnitude of the layoffs shows that neither the Fed’s interventions nor Congress’s $2.2 trillion relief package will be enough.
“The major takeaway from the labor market data is that Congress and the administration are going to have to provide more aid to a beleaguered domestic labor force that will face a period of mass unemployment,” said Joseph Brusuelas, chief economist at the accounting firm RSM US.
Already the Trump administration and lawmakers have talked about increasing the $350 billion small-business lending program that could turn into forgivable loans for retaining employees.
Analysts said it’s apparent now that another key part of the emergency aid — expanded unemployment benefits that includes an additional $600 a week in pay through July — also will need to be extended.
Powell, while not endorsing any specific plan, said he supported more federal government actions.
“Broadly, people are undertaking these sacrifices for the common good. We need to make them whole to the extent we have the ability,” he said. “They didn’t cause this. Their businesses didn’t close because of anything they did wrong. They didn’t lose their job because of anything they did wrong.
“This is what the great fiscal power of the United States is for, to protect these people as best we can from the hardships they’re facing,” he said.
President Donald Trump has talked about reopening the American economy relatively soon. The broad shutdown began in mid-March, and some businesses are beginning to prepare for the days when lockdown and stay-at-home orders are lifted.
But the sheer size and speed of the layoffs – coupled with evidence that the coronavirus is now spreading into rural areas and sections of the country that until now reported few cases – suggest that reversing the social distancing policy may still be some distance down the road.
And both factors suggest it will be long and hard climb back up.
Besides the continuing spread of the virus, the layoffs will inevitably cause many workers to become disconnected from their employers, even though most layoffs are being labeled temporary.
For one thing, workers in lower-paying service businesses such as restaurants and retail stores may want to stay on unemployment rolls owing to concerns about personal safety and the relatively generous levels of jobless benefits provided in the recent aid legislation.
“Why work and risk getting infected when one is better off not working?” asked Sung Won Sohn, a business economist at Loyola Marymount University. He noted that in January, on average, unemployment benefit was $385 per week. The supplemental pandemic pay increases funded in the recent legislation raises that to $985 a week through the end of July.
Still, analysts said the pandemic is likely to exacerbate inequalities because the bulk of workers losing jobs are in lower-wage service sectors that are staffed by many minorities and disadvantaged workers.
Powell said that while a recovery may start out gradual and tentative, “there is every reason to believe that the economic rebound, when it comes, can be robust.”
Yet the deeper the job losses, the longer it will take for the labor market to heal. Economists say the jobless rate is likely to remain close to 10% at the end of the year.
“We are trying to be hopeful that the quickest layoffs in history will soon turn to the quickest labor market recovery in history, but we may be just whistling in the dark here,” said Christopher Rupkey, chief financial economist at MUFG Bank in New York.
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