Back in January, Wilbur Ross, the US Commerce Secretary, believed that COVID-19 would accelerate the return of jobs to the US. Unfortunately, as the economy comes to a standstill, businesses close their doors and people are asked to stay at home, it seems the very opposite is taking place.
With the US economy being so important around the world, its status is often seen as a sign of how the global economy is faring. In particular, employment figures out of the US are often seen as some of the most important releases on the global economic calendar.
As the coronavirus crisis has taken more of a hold in the US, the expected impact on the economy has continued to grow. Some Federal Reserve economists are now expecting the unemployment rate to top 30%, which would mean around 47 million people out of work.
To put that into perspective, during the Great Depression in the 1930s, the unemployment rate hit 24.9% and since then it has not breached 11%.
But what are the current figures showing us?
The figures for US unemployment claims are released weekly and are usually one of the first ways to determine any issues in the labour market. For the third week in March, this figure stood at 3.3 million. That was the highest number of initial jobless claims since records began in 1967.
However, just a week later this was exceeded once again, as jobless claims came in well above forecasts at 6.6 million. This gives a combined 9.9 million claims in the last two weeks of March alone. Equivalent to a 6% increase in unemployment.
It wasn’t necessarily unexpected that claims would increase, but the huge number did concern the markets. Although, the impact of this was offset by the expectation of the stimulus bill.
What separates this economic slowdown from previous recessions is that we have not been in situations where the economy is basically being shut down in the way we’re seeing now. 32 out of 50 states have implemented steps to slow the spread and some include stay-at-home orders, like what we’re seeing in nations around the world.
Non-essential businesses are being forced to close and the collapse in revenue means that employees are being laid off in record numbers. This isn’t just concentrated in a certain area of the economy either. Even though retail, restaurants and travel may be some of the hardest hit, the reports show that those impacted include manufacturing, construction, wholesale, health and social assistance. Virtually every sector and industry is affected.
However, we’re still not at the end game yet. The virus continues to spread and, as a response, more states are expected to announce stay-at-home measures and nations will extend their lockdown situations.
On the plus side, support is going to be provided for anyone that has been laid off. In the US this takes the shape of a $2 trillion relief bill. This is also a unique situation where a huge boost to the economy is just around the corner as the coronavirus curve flattens and the economy begins chugging along once again. Let’s hope it’s sooner rather than later.