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Friday, March 27, 2020 1:00 am

Landmark jobless filings dubious sign

1st omen of lasting damage virus will cause economy

Associated Press

WASHINGTON – Nearly 3.3 million Americans applied for unemployment benefits last week – almost five times the previous record set in 1982 – amid a widespread economic shutdown caused by the coronavirus.

The surge in weekly applications was a stunning reflection of the damage the viral outbreak is inflicting on the economy. Filings for unemployment aid generally reflect the pace of layoffs.

Layoffs are sure to accelerate as the U.S. economy sinks into a recession. Revenue has collapsed at restaurants, hotels, movie theaters, gyms and airlines. Auto sales are plummeting, and car makers have closed factories. Most such employers face loan payments and other fixed costs, so they're cutting jobs to save money.

As job losses mount, some economists say the nation's unemployment rate could approach 13% by May. By comparison, the highest jobless rate during the Great Recession, which ended in 2009, was 10%.

“What seemed impossible just two weeks ago is now reality,” said Nancy Vanden Houten, an economist at Oxford Economics, a consulting firm. “The US economy will experience the largest economic contraction on record with the most severe surge in unemployment ever.”

The economic deterioration has been swift. As recently as February, the unemployment rate was at a 50-year low of 3.5%. And the economy was growing steadily if modestly. Yet by the April-June quarter of the year, some economists think the economy will shrink at its steepest annual pace ever – a contraction that could reach 30%.

In its report Thursday, the Labor Department said 3.283 million people applied for unemployment benefits last week, up from 282,000 during the previous week. Many people who lost jobs in recent weeks, though, have been unable to file for unemployment aid because state websites and phone systems have been overwhelmed by a crush of applicants and froze up.

That logjam suggests that Thursday's report actually understates the magnitude of job cuts last week. So does the fact that workers who are not on company payrolls – gig workers, freelancers, the self-employed – aren't currently eligible for unemployment benefits even though in many cases they're no longer able to earn money.

Asked about the record applications, President Donald Trump said the figures were “fully expected.”

“It's a lot of jobs, but I think we'll come back very strong,” he said.

With layoffs surging, a significant expansion of unemployment benefits was included in an economic relief bill nearing final approval in Congress. One provision in the bill would provide an extra $600 a week on top of the unemployment aid that states provide. Another provision would supply 13 additional weeks of benefits beyond the six months of jobless aid most states offer. The new legislation would also extend unemployment benefits, for the first time, to gig workers and others not on company payrolls.

Separate legislation passed last week provides up to $1 billion to states to enhance their ability to process claims. But that money will take time to be disbursed.

In Florida, Jessy Morancy of Hollywood was laid off last week from her job as a wheelchair attendant and customer service agent at Fort Lauderdale Airport. Morancy, 29, called the state unemployment office Monday to file for unemployment benefits but encountered a recorded message telling her to call back later.

She was also concerned that even a full unemployment benefit of $275 a week would be less than half of what she earned and insufficient to provide for her children, ages 10 and 7.

“I'm still in a state of shock,” Morancy said.

Worsening the problem, most state agencies that handle unemployment claims are operating at historically low funding levels and staff intended to handle a trickle of claims. Just weeks ago, the job market was in the strongest shape it had been in for decades.

Wednesday, the New York State Department of Labor tweeted, “If you have been unable to get through our phone and/or online system this week, please keep trying.”

Worldwide, the United Nations estimates up to 25 million jobs could be lost in the economic upheaval. That would exceed the 22 million lost during the 2008 global financial crisis.

In Europe, companies are laying off workers at the fastest pace since 2009, according to surveys of business managers. Official statistics that would reflect the outbreak's impact are not yet out. But companies have been announcing tens of thousands of job cuts. Major car companies and airlines are suspending most of their operations, putting tens of thousands of workers on leave, many with only a partial salary.

Ellen Zentner, an economist at Morgan Stanley, said in a note to clients that 17 million jobs could be lost through May – twice the entire 8.7 million jobs that were lost in the Great Recession. She expects the unemployment rate to average 12.8% in the April-June quarter, which would be the highest since the 1930s.

Still, Zentner also expects the economy to start recovering by the second half of the year. But it will take time for things to return to something close to normal, she projects: The unemployment rate could still top 5% at the end of next year.


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