As the United States has taken unprecedented measures to control the coronavirus pandemic, including business closures, social distancing measures, and shutdowns across all areas of the economy, the labor market has suffered unbelievable losses. New unemployment data released today shows that fighting this virus has caused a historic spike in layoffs pushing the unemployment rate near 15 percent. That’s nearly every job created over the last decade gone in a single month.
We know from more current job data that the actual unemployment rate right now is likely much higher, perhaps over 20 percent. That means that April’s unemployment rate is far in a way the worst this country has seen since the Great Depression. So far, more than 33 million people have filed for unemployment benefits over the last seven weeks. That’s more than 10 percent of the population of the United States and more than the entire population of the State of Texas.
Just two months ago, the unemployment rate was sitting at 3.5%, a 50-year low, and losses are starting to bleed into other areas of the economy, which could point to a longer slower recovery. Finance and professional services jobs have been eliminated as have construction and manufacturing jobs. Even the gig economy hasn’t been exempt. Airbnb has cut 25% of its workforce by about 1900 employees. Uber announced that it would lay off 3700 workers, and Lyft eliminated 17% of its workforce almost a thousand people.
Last week another 3.2 million people filed for unemployment benefits, and while the weekly pace of these claims is slowing, these are some of the worst numbers we’ve ever seen. As millions of Americans each week file new unemployment claims, state systems are unable to keep up. Many people aren’t even able to get through, meaning that this data is likely under-reporting the full scope of the problem.
Here’s what it looks like in America right now: people lined up at food pantries across the country we face the worst unemployment rate, but on Wallstreet, the major U.S. stock markets had their get this best month since 1987. It has never been more clear, the stock market is not the real economy, and if the root of this is the question of how bad will it get and crucially how quickly it worse.
We think the most common answer you’re getting right now from those who study the data and have looked at historical patterns is that it’s going to be a partial recovery. Some sectors and some industries are going to recover a lot faster than others. If you think about industries like travel, airlines, hotels could take a lot longer to come back. Even restaurants right now that are starting to reopen in a few states around the country are doing so at a much smaller capacity. They’re only allowing 20 to 30% based on government rules of people to be in their restaurants.
By definition, that means it’s going to be a slow recovery. We’re in a massive hole where we’re going to dig a little bit deeper, and then it’s going to take us a really long time to get out of it. Take all the people who are on unemployment and put them in one category, then you have at least 10 million more people who are eligible for unemployment, but they haven’t been able to file because the systems are backed up.
Let’s take the third category, or you’ve got one in every four Americans who do have a job have taken a pay cut. So the United States economy is a service-based economy without consumer spending we’ve got no dance party. The 1% needs 99%. We should all be able to have a rational conversation about the fact that there are no good options here.