Job seekers wait in line at the JobLink Career [+]
The U.S. Department of Labor reported unemployment insurance claims for the week ending Saturday, April 11, came in at 5.245 million, a decline of over 1.4 million from the prior week, but still the third highest weekly total ever recorded. The coronavirus has driven the four-week total over 22 million, and the past seven weeks of claims have been:
Unfortunately the job losses and unemployment claims probably won’t fall to zero or even close to it next week and above average claims will probably persist for the next few weeks and maybe even a month or two.
Weekly unemployment insurance claims
The increase in the unemployment rate and lost jobs will be dramatic
The surveys for the Friday, May 8, unemployment report were taken the past week ending today, Saturday, April 18. This means that the four weeks of elevated unemployment claims that have been reported, and the one that will be published next Thursday for the week ending on April 18, will feed into the employment report. It looks as if there could be at least 20 million if not 25 million reported job losses in three weeks.
Using the current 22 million as the number of lost jobs for the report, the unemployment rate could come in at 17%, which is 7 percentage points higher than the Great Recession’s worst month of 10%.
Unfortunately, since there are additional companies announcing layoffs pretty much every day it is “safe” to assume that there could be millions more people unemployed in May. The graph below depicts 22 million jobs lost in April with an additional 6 million the following month and no additional lost jobs in June.
This could be an optimistic assumption if multiple states keep stay at home orders in place or people are reluctant to do much besides what is necessary for their personal life or work even if the orders are lifted.
Additionally, most economists expect the rehiring of employees will occur at a slower rate than how they were laid off. The graph below includes 2 million people being hired in July with 3 million for each of the next five months of the year. In this scenario there will be almost 12 million people, or about 7% of the workforce still unemployed due to the coronavirus at the end of the year. The total unemployment rate would still be over 11%.
Total private workforce
In late March Miguel Faria-e-Castro, an economist at the Federal Reserve Bank of St. Louis, did a “Back-of-the-Envelope” estimate of what June’s unemployment rate and number of layoffs could be due to the coronavirus. As reported by Sarah Hansen at Forbes.com, the blog posting showed that there could be 47 million people let go which would lead to an unemployment rate of 32.1%, higher than the Great Depression’s worst rate of 24.9%.
Faria-e-Castro used analysis from two other blog postings by economists at the St. Louis Fed which were, “Which Workers Face the Highest Unemployment Risk” and “Social Distancing and Contact-Intensive Occupations” in calculating how many people could be laid off. It will only take 1.5 million people filing unemployment claims next week to get to the halfway point of the 47 million calculation.