Job losses remain ‘enormous’: Coronavirus unemployment claims are worst in history

Personal Finance

A woman wearing a face mask walks past the closed Arlington Cinema and Drafthouse movie theater amid the coronavirus pandemic on May 14, 2020 in Arlington, Virginia.

Photo by OLIVIER DOULIERY/AFP via Getty Images

The number of Americans filing for unemployment benefits over the last four months is worse than any other time in modern history.

The fact that new applications for jobless aid remains elevated weeks into the coronavirus crisis points to a fragile economic situation and continued financial pain for many households.

Though the trend has been improving in recent weeks, a spike in coronavirus infections around the country and extinguished federal aid risk more layoffs in the near future.

Sixteenth straight week

Out-of-work Americans filed 2.3 million new claims for unemployment benefits last week, according to Labor Department data issued Thursday.

That includes about 1.3 million claims for traditional unemployment insurance and an additional 1 million through the new federal Pandemic Unemployment Assistance program for the self-employed, freelancers and other workers generally ineligible for standard state benefits.

It was the 16th week in a row — since the week of March 21, when states began imposing lockdown measures — that new applications for jobless benefits exceeded 1 million.

More from Personal Finance:
Fewer Americans may get a second stimulus check
Your income took a hit. Now what?
Households need those tax refunds to cover rent

The highest prior weekly total for new unemployment claims was 695,000, in October 1982, according to Labor Department data. During the Great Recession, the country’s last downturn, weekly claims peaked at 665,000, in March 2009.

Put another way, new unemployment applications during each week since mid-March have been at least twice as high as their worst week of the Great Recession. 

‘Enormous’ job losses

Ongoing job losses point to continued pain for U.S. businesses, even as the country’s official unemployment rate improved  to 11.1% last month from its 14.7% peak in April.

The most recent job losses are more concerning than those earlier in the recession, said Heidi Shierholz, former chief economist at the Department of Labor during the Obama administration.

It’s more likely that recent layoffs won’t be temporary, like many of those in the early weeks had been, as businesses that had stayed open and kept their workforce intact are struggling with a drop in demand for their goods and services, Shierholz said.

“We’re still seeing an enormous amount of job losses,” said Shierholz, director of policy at the Economic Policy Institute, a left-leaning think tank. “And they’re of particular concern because they’re more likely to be permanent.

“Getting laid off in the middle of a very deep recession spells a high likelihood of seeing a big drop in your living standards that is lasting,” she added.

In all, nearly 33 million people were collecting unemployment benefits as of June 20, according to most recent Labor Department data — five times the previous high of 6.6 million hit during the Great Recession.

These individuals may soon see a large drop in household income. A $600-a-week federal supplement to unemployment benefits enacted early in the recession is scheduled to expire after July 31, barring an extension from Congress, which seems unlikely given Republican opposition.

Many businesses may have already or will soon extinguish funding they received through the federal Paycheck Protection Program, which has helped prop up small-business payrolls. Business aren’t currently able to apply for a second round of loan funding.

The economy remains at significant risk in the weeks and months ahead.

Mark Hamrick

senior economic analyst at Bankrate

Despite the elevated level of unemployment claims, the situation has somewhat improved. At the height of the coronavirus-fueled employment crisis in late March, nearly 6.9 million Americans had filed new claims for benefits.

And many of the people who filed new applications last week may actually represent workers who’d been laid off earlier in the crisis, Shierholz said.

They may have waited to apply for aid or had tried to apply but were only recently successful in doing so due to an overload among state unemployment offices, she said.

‘Less momentum’

However, there’s been “less momentum” in the decline of unemployment claims in recent weeks, according to Mark Hamrick, senior economic analyst at Bankrate.

And there are signs that conditions could deteriorate, he said.

“With more bankruptcies and job cuts announced in the retail sector, for example, the economy remains at significant risk in the weeks and months ahead,” Hamrick said.

Brooks Brothers, a high-end retailer, filed for bankruptcy on Wednesday and will close at least 51 of its roughly 250 stores in North America. Bed Bath & Beyond said Wednesday it would permanently close 200 stores over two years.

Further, the Covid-19 outbreak has “recently intensified in some states,” Hamrick said.

The U.S. set a record for new coronavirus cases on Wednesday, with nearly 60,000 infections announced, according to The New York Times. At least five states (Missouri, Tennessee, Texas, Utah and West Virginia) also set single-day records.

“Hopes for an accelerated, sustained and successful re-opening of the economy have hit roadblocks,” Hamrick said. “This raises concern about the economy’s rebound.”

Products You May Like

Articles You May Like

Quicken Loans parent sells shares in IPO below target to raise $1.8 billion
The end of $600 unemployment boost and slim job prospects leaves many struggling to survive
CVS Health raises forecast for year as it adapts to changing health-care habits
Movie theaters were relying on ‘Mulan’ to boost ticket sales, its move to Disney+ is a ‘sucker punch to the gut’
Goldman names new head of digital assets in bet that blockchain is the future of financial markets

Leave a Reply

Your email address will not be published. Required fields are marked *