While some politicians have suggested the number of U.S. coronavirus cases has peaked, the prognosis for employment and the economy isn’t good, economists say.
More than 41 millions of Americans have filed for unemployment insurance since the spread of COVID-19, according to data the U.S. Department of Labor released Thursday. Those job losses show signs of slowing down, but the pandemic’s lingering long-term effects on the economy could play out for decades.
Federal data showed 2.1 million people had filed claims in one week.
That number suggests a possible slowdown in U.S. layoffs compared to recent weeks. In late March, more than 3.3 million Americans filed jobless claims, quadrupling a previous record. That number was quickly eclipsed with 4.4 million claims filed in one week by mid-April. But it “remains incredibly high,” said Stephanie Aaronson, an economist who is vice president and director of economic studies at the Brookings Institution.
Here are three ways to look at how the nation is losing jobs and if reopening could slow this unprecedented plunge.
Job losses during the pandemic quickly dwarfed the Great Recession
“Two million claims a week is just hard to imagine,” said Aaronson, who previously served on the Federal Reserve Board. “The numbers of claims we’re seeing now are outside of historical experience.”
For perspective, she pointed to the rise in unemployment between 2007 and 2009 during the Great Recession. Since the pandemic started, the nation lost twice as many jobs in two months as it did during the entire Great Recession, Aaronson said.
In early April, 42 states had some kind of stay-at-home order in place, and jobless claims ballooned. Now, as more states move to allow businesses to reopen, the increase has slowed. But it’s still growing, suggesting that the kickstart for commerce after strict social distancing isn’t enough to get things back to normal.
And there could be “a second wave of layoffs,” said Till von Wachter, economist and professor at University of California at Los Angeles.
“Businesses that hit the ‘pause’ button may find that business is not as good as they had hoped” when they return, he said.
How long will jobless benefits last?
Before COVID-19 came into the picture, unemployment insurance varied greatly state to state. Capping out at 12 weeks, Florida’s was the shortest benefit. Massachusetts offers the longest time period that people can collect — up to 30 weeks — unless federal benefits or ample jobs are available. That means if you are covered through a federal program, or if you lose your job during a period of low unemployment when it’s conceivably easier to find a new job, Massachusetts doesn’t offer the full benefit period. Most states typically offer up to 26 weeks of benefits, according to the Center on Budget and Policy Priorities.
The CARES Act enabled all states to choose to offer 13 more weeks of benefits, called Pandemic Emergency Unemployment Assistance. Thirty states have accepted those benefits, which are funded by the federal government and expire on Dec. 31.
But there’s a lag in how many people have applied for unemployment insurance and how many people are actually getting it. So far, von Wachter said, roughly 20 million Americans have received unemployment insurance.
Right now, people in lower-wage jobs are more at risk of becoming unemployed, Friedman said. While federal legislation has buoyed people who’ve been left without work because of COVID-19, particularly in restaurants and health care (as a result of people steering clear of doctor’s offices for regular check-ups and elective procedures), von Wachter said there is concern that the supplemental money allotted is not enough to sustain them because rent and bills ate up a higher proportion of their wages than those with higher incomes. That capsized lower-wage workers’ ability to set aside savings and shore up resources that could have helped them during this economic downturn.
Younger generations already hit by COVID-19 Recession
But the cohort most affected by the pandemic-fueled economic crisis may be those who haven’t yet joined the labor market, said John Friedman, an economist and professor at Brown University.
“If you graduate into a bad economy, there’s a permanent impact” on earning potential and lost wages, Friedman said.
Already in California, younger generations of workers have been particularly hard-hit, according to an analysis of state jobless claims conducted by the California Policy Lab. In their study, a third of Generation Z workers and a quarter of Millennials have filed for unemployment insurance, compared to roughly one out of five Baby Boomers and Generation X workers.
Recessions are difficult for everyone, but especially so for high school graduates, von Wachter said. For many, he said, the recession unfolding now “will scar them” for the next decade of their lives. Among those in California who completed their high school education but did not graduate from college, the recent study shows half have applied for jobless benefits.
It is too soon to fully understand what the long-term effects of COVID-19 may hold for the U.S. economy, Friedman said. People are spending money differently with more online purchases and fewer things done in person, like eating out or getting a haircut, but it’s unclear if those changes are permanent. And even when the economy does rebound, and more people are back to work, Friedman said those shifts “may come at large personal costs.”
“People may find a job, but it’s at much lower pay than what they did before,” he said.