As coronavirus keeps businesses and offices shut around the world, many workers are beginning to come in terms with unemployment. In the US, the number of people filing for unemployment benefits is rising weekly.
Another 5.2 million workers filed for their first week of unemployment benefits last week, bringing the total number of Americans who have filed initial jobless claims to over 22 million.
The month of April has seen a rise in layoffs and consequently unemployment claims. About 13.5% of American workforce has been impacted and more are expected to be laid off in the coming weeks.
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“As shutdowns continue, job losses will likely extend into other areas of the labor market, such as business and professional services where firms may begin to see lower revenues from a second order pull back in demand,” said Robard Williams, a senior vice president for Moody’s Investors Service noted.
The layoffs started with service jobs, then workers at restaurants, hotels and retailers felt the hit.
Now the pandemic appears set to touch white collar jobs among others it will likely hit if it doesn’t slow down in the next few weeks.
The recent surge in claims trashed all previous records since 1967, according to the Labor Department tracking data. The unemployment trust fund in many states has seen drastic depletion by the overwhelming number of out-of-job people filing.
The events of the last four weeks have depleted the economic gains of the past 11 years, sounding warning that the worst may be just ahead.
While the markets show defiance now and then, the overall performance of every sector of the US economy tells a sad tale of devastation by coronavirus. And it puts workers in a sorry state of uncertain future, even after the pandemic is over.
“As we fully know the current state of the labor market with mass waves of layoffs, the key question turns to how many of these people will be rehired when the economy starts to reopen. We can assume it will take a long time for that to happen but hopefully we’re getting closer to at least getting started,” said Peter Boockvar, chief investment officer at the Bleakley Group.
Government’s efforts to save small businesses and help as many employees as possible keep their job has been stymied by lack of funds, and it has blown the crisis into a disproportionate state. A major contributor to the escalation is the government’s decision to allow independent contractors and others who previously were not eligible to file for benefits.
The numbers jumped significantly in four weeks to 6.066 million with an increase of 2.568 million, in the past week. Though unadjusted data appears promising, economists say it’s not something to rely on given the circumstance.
The unadjusted total stood at 4.9 million, which represents a 20% plunge or over 1.2 million from the past week. According to the Labor Department, seasonal factors should have reflected about 1% gain. That means, compared to a week this time in 2019, the figures should have shown 196,364 claims. Therefore, the coronavirus pandemic has made the little gains insignificant.
Paul Ashworth, chief US economist at Capital Economics said the total claims of 22.03 million filed since social distancing took effect shows a 13.5% drop in household employment, though he expresses hope that the unemployment rate would come down, he said he expects April jobless rate to be 15%-20%.
“Nevertheless, we do still expect the unemployment rate to come down much more quickly than during a normal economic recovery, as temporary layoffs return to work once the lockdowns are lifted, so we still wouldn’t characterize this as a depression-type event,” he said.
Even though the numbers have risen beyond those of the great recession, economists believe that chances of recovery are high since it mostly depends on reopening of businesses.
Meanwhile, many more workers are expected to get laid off as the number of COVID-19 cases increase in the United States, dimming the hope of lifting the lockdowns soon. The US Small Business Administration (SBA) said it has stopped accepting applications for the two programs designed to help small businesses stay in business during crises such as this.
The SBA said on Sunday that the $349 billion Paycheck Protection Program (PPP) that is meant to keep workers on payrolls has been exhausted. And the fund for the Economic Injury Disaster Loan Program (EIDI), offering government loans and emergency grants has also been drained.
While Congress debates injecting more $250 billion to the PPP, many small businesses are laying off workers, increasing the number of filers for the unemployment benefit.
Brad Close, president of the National Federation of Independent Business, said the worst fears of the members just came true. As the congress struggle to reach a consensus on the $250 billion extra fund for small businesses.
“America’s small businesses are on the brink, trying desperately to keep their doors open and support their employees. They have been let down by lawmakers and the bureaucracy, with the smallest businesses most disadvantaged in attempting to participate in the paycheck protection program,” he said.