Breathtaking unemployment figures in the USA

Breathtaking unemployment figures in the USA

New York, 29.3.2020

The closure of a large part of the service industries such as restaurants, hotels and retail shops is expected to slow down the spread of the coronavirus. There is no sign of this. Instead, the US economy is plunging into a deep recession at a rapid pace, with no telling how deep it will sink, nor how long it will last and, perhaps most importantly, who will be hit hardest by this devastating downturn.
This week the Department of Labour announced that 3.3 million people have lost their jobs. A staggering number. Because the previous weekly record was 695,000 in 1982, but even that figure is incorrect, the reality is even more horrific. Because part-time employees, self-employed and gig workers were not included.
In order for this part of the population to survive the crisis, the 2 trillion dollar economic stimulus package passed by Congress provides that every American who earns less than 75,000 dollars should receive 1,200 dollars – a joke. In addition, for the first time, unemployment benefits have been extended to gig workers and the self-employed. Hundreds of billions are also earmarked to help companies stay afloat.
„It’s not perfect“ says Arindrajit Dube, an economist at the University of Massachusetts, Amherst. But raising unemployment insurance and extending eligibility will help millions of people who will lose their jobs, he says, and in that sense the plan is a „big improvement on the status quo.
Many economists see it differently. What this program will not prevent is that some parts of the country will be hit much harder than others. Cities like Las Vegas and Orlando, which depend on hotels and tourists, will be hit hard, according to the Brookings Institution. Regions that are less vulnerable include the booming high-tech cities of San Jose, Provo and Utah. Those worst affected are ‚places with a huge tourism industry‘ , says Mark Muro, co-author of the report.
Muro and his colleagues argue that providing local assistance to these regions must be a top priority. He points out that many of these places have never recovered from the 2008 financial crisis. Not helping them now „is a recipe for more permanent damage,“ he says. „State and local governments will experience a world of pain,“ he predicts.
The aid for local communities provided for in the recovery plan „is not big enough, not flexible enough and not regionally focused,“ he says. He calls for „federal government support to be better targeted to particularly problematic places, including areas that have not recovered from the last recession“.
Based on estimates that the economy will shrink by a dizzying 25% in the second quarter, which ends in June, economists put the number of jobs lost by the summer at around 5 million. The head of the St. Louis Fed even predicts an unemployment rate of 30% and a 50% decline in GDP by the summer. But, of course, nobody knows for sure, partly because we have never experienced a similar crisis before.
„It’s impossible to know how the world is changing,“ says David Autor, an economist at MIT and one of the world’s leading labor economists. „It’s not like anything we’ve seen in a hundred years.“ In every past recession or depression, the economic solution has always been to stimulate the demand for labor to get workers back to work. But in this case, we deliberately stop economic activity and tell people to say at home „It’s not just the depth of the recession,“ author says. „It’s qualitatively different.“
The sudden drop in GDP means a recession with many jobs lost, but author is also worried about small businesses. „They’ll still have bills to pay and many will fail without government help. Their decline will make it even more difficult to get the economy back on track once the virus problem is brought under control. But nobody knows how long it will take, the virus is defeated – and „uncertainty is always bad for the economy“.
One of the biggest fears in view of the upcoming recession is the question if and how the low-wage workers in the restaurants and hotels plus the growing number of people in the gig economy can survive this crisis. Over the last two decades, the proportion of these workers has risen so much that they have become an ever larger part of the US economy. These are people without college degrees and they work in this sector because many skilled and semi-skilled office and manufacturing jobs have been left unfilled. They are people who are so badly paid that they cannot afford social security. „On a good day they are vulnerable, on a bad day they are even more vulnerable,“ says author. „And this is a very bad day.“