Thu | Mar 28, 2024

Jobless nears 10m in US since virus outbreak

Published:Friday | April 3, 2020 | 12:17 AM
AP
In this March 13, 2020 file photo, unionised hospitality workers wait in line in a basement garage to apply for unemployment benefits at the Hospitality Training Academy in Los Angeles.
AP In this March 13, 2020 file photo, unionised hospitality workers wait in line in a basement garage to apply for unemployment benefits at the Hospitality Training Academy in Los Angeles.

MORE THAN 6.6 million Americans applied for unemployment benefits last week – doubling a record high set just one week earlier – a sign that lay-offs are accelerating in the midst of the coronavirus outbreak.

Combined with last week’s report that 3.3 million people sought unemployment aid two weeks ago, the United States economy has now suffered nearly 10 million lay-offs in just the past few weeks – far exceeding the figure for any corresponding period on record.

The stunning report Thursday from the Labor Department showed that job cuts are mounting against the backdrop of economies in the United States and abroad that have almost certainly sunk into a severe recession, as businesses have shut down across the world.

“This kind of upending of the labour market in such a short time is unheard of,” said Heidi Shierholz, an economist at the Economic Policy Institute, a progressive think tank.

Further signs of a surging wave of lay-offs are likely in the coming weeks. Seth Carpenter, an economist at Swiss bank UBS, estimates that about one-third of last week’s claims had been delayed from the previous week, when state offices that handle unemployment benefits were overwhelmed by a surge of online and telephone claims. Yet many of those offices are still struggling to process all the claims they have received, suggesting more claims will be pushed into the following week.

The magnitude of the lay-offs has led many economists to envision as many as 20 million lost jobs by the end of April. That would be more than double the 8.7 million jobs lost during the Great Recession. The unemployment rate could spike to as high as 15 per cent this month, above the previous record of 10.8 per cent set during a deep recession in 1982.

Employers are slashing their payrolls to try to stay afloat because their revenue has collapsed, especially at restaurants, hotels, gyms, movie theatres and other venues that depend on face-to-face interaction. Auto sales have sunk, and factories have closed.

Roughly 90 per cent of the US population is now under stay-at-home orders, which have been imposed by most US states. This trend has intensified pressure on businesses, most of which face rent, loans and other bills that must be paid.

The reversal in the job market has been dizzying. Four weeks ago, weekly unemployment claims amounted to only 211,000, near a 50-year low. Since then, they have jumped thirtyfold.

“Four years of jobs gains have evaporated in the span of two weeks,” said Daniel Zhao, an economist at the jobs website Glassdoor.

Requests for jobless aid soared in all 50 states last week. In California, nearly 900,000 people sought benefits, almost four times the previous week’s figure, and equivalent to five per cent of the state’s workforce.

Rescue package

How long the waves of lay-offs last – an unknown – will be a key factor in determining the depth of the recession.

The US$2.2-trillion rescue package that was signed into law last week includes US$350 billion in small business loans that can be forgiven if the companies use the money to retain or rehire workers. This provision could help limit future lay-offs or lead some companies to recall employees back to work.

“The programme is unprecedented, generous and ambitious, and could be successful,” said Luke Tilley, chief economist at Wilmington Trust. “That said, it is challenging to roll out quickly.”

The economic rescue package also added US$600 a week in jobless aid, on top of what recipients receive from their states. This will enable many lower-income workers to manage their expenses and even increase their purchasing power and support the economy.

It also makes many more people eligible for jobless aid, including the self-employed, contractors, and so-called ‘gig economy’ workers, such as Uber and Lyft drivers.

Those reforms are crucial at a time when most economic activity has come to a standstill, advocates for low-income workers say.

“The huge volume of new claims suggests that at least some states are being as inclusive and expansive as possible in defining who qualifies,” said Rebecca Dixon, executive director of the National Employment Law Project. “That’s important.”

The legislation will also help fund unemployment benefits for workers whose hours have been cut. That would enable these people to replace some of their lost income with unemployment aid, even as they keep their jobs.

About 26 states allow workers with reduced hours to claim benefits. Most economists support doing so because it encourages companies to cut back on hours rather than lay off workers.

Today, Friday, the government will issue the March jobs report, which economists forecast will show a loss of 145,000 jobs. That report is based on data gathered mostly before the spike in lay-offs began two weeks ago. Though relatively small, that loss would end a record-long 113-month streak of job growth.

AP