With over 38 million U.S. unemployment claims in nine weeks, one economist says the situation is “grimmer than we thought.”
Even as states begin to reopen for business, a further 2.4 million workers joined the nation’s unemployment rolls last week, and there is growing concern among economists that many of the lost jobs are gone for good.
The Labor Department’s report of new jobless claims, released Thursday, brought the total to 38.6 million since mid-March, when the coronavirus outbreak forced widespread shutdowns.
While workers and their employers have expressed optimism that most of the joblessness will be temporary, many who are studying the pandemic’s impact are increasingly worried about the employment situation.
“I hate to say it, but this is going to take longer and look grimmer than we thought,” Nicholas Bloom, an economist at Stanford University, said of the path to recovery.
Mr. Bloom is a co-author of an analysis that estimates 42 percent of recent layoffs will result in permanent job loss.
“Firms intend to hire these people back,” he said, referring to a recent survey of businesses by the Federal Reserve Bank of Atlanta. “But we know from the past that these aspirations often don’t turn out to be true.”
The precariousness of the path ahead was underscored Thursday by the Federal Reserve chair, Jerome H. Powell. “We are now experiencing a whole new level of uncertainty, as questions only the virus can answer complicate the outlook,” he said in remarks for delivery at an online forum.
The economy that does come back is likely to look quite different from the one that closed. If social distancing rules become the new normal, causing thinner crowds in restaurants, theaters and stores, at sports arenas, and on airplanes, then fewer workers will be required.
Large companies already expect more of their workers to continue to work remotely and say they plan to reduce their real estate footprint, which will reduce the foot traffic that feeds nearby restaurants, shops, nail salons and other businesses.
Concerns about working in close quarters and too much social interaction could also accelerate the trend toward automation, some economists say.
New jobs are being created, mostly at low wages — for delivery drivers, warehouse workers and cleaners. But many more jobs will vanish.
“I think we’re in for a very long haul,” Mr. Bloom at Stanford said.
Torsten Slok, chief economist for Deutsche Bank Securities, agreed that the government’s latest report pointed to lasting job losses. Even with states reopening, “the hemorrhaging has continued,” he said.
“I fear that maybe there is something more fundamental going on,” particularly in occupations most affected by social distancing rules, Mr. Slok added. He expects the official jobless rate for May to approach 20 percent, up from the 14.7 percent reported by the Labor Department for April.
A household survey from the Census Bureau released Wednesday offered further evidence of the widespread pain: 47 percent of adults said they or a member of their household had lost employment income since mid-March. Nearly 40 percent expected the loss to continue over the next four weeks.
Nonetheless, Larry Kudlow, director of the National Economic Council, knocked down the idea of extending unemployment benefits. “I do not believe that more government spending is going to give us a strong and durable recovery,” he said Thursday at an event sponsored by The Washington Post.
Emergency relief and expanded unemployment benefits that Congress approved in late March have helped tide households over. Roughly three-quarters of people who are eligible for a $1,200 stimulus payment from the federal government have received it, according to the Treasury Department.
Workers who have successfully applied for unemployment benefits are getting the extra $600 weekly supplement from the federal government, and most states have finally begun to carry out the Pandemic Unemployment Assistance program, which extends benefits to freelancers, self-employed workers and others who don’t routinely qualify. The total number of new pandemic insurance claims reported, though, was inflated by nearly a million because of a data entry mistake from Massachusetts, according to the state’s Executive Office of Labor and Workforce Development.
Mistakes, lags in reporting and processing, and the weeding out of duplicate claims and reports have clouded the unemployment picture in some places.
What is clear, though, is that many states are still struggling to keep up with the overwhelming demand, drawing desperate complaints from jobless workers who have been waiting two months or more to receive their first benefit check. Indiana, Wyoming, Hawaii and Missouri are among the states with large backlogs of incompletely processed claims. Another is Kentucky, where nearly one in three workers are unemployed.
The $600 supplement has become a point of contention, drawing criticism from the White House and Republican congressional leaders who object to the notion that some workers — particularly low-wage ones — are getting more money in unemployment benefits than they would on the job. But many have also lost their employer-provided health insurance and other benefits.
Sami Adamson, a freelance scenic artist for theater, events and television shows, received the letter with her login credentials to collect benefits from New Jersey only on Monday, more than two months after she first applied.
She said her partner, who is in the same line of work, had filed for jobless benefits in New York and quickly received his payments.
By the time Ms. Adamson heard from New Jersey, a design studio had called her for a temporary assignment. She plans to eventually reclaim the lost weeks of benefits, but for now she is helping to make face shields in a large warehouse where assembly-line workers are spaced apart, handling plastic, foam and elastic.
“I don’t think I’ll need aid for the next two or three weeks,” Ms. Adamson said, “but I’m not sure too far ahead of that.”
Nearly half of the states have yet to provide the additional 13 weeks of unemployment insurance that the federal government has promised to those who exhausted their state benefits. Workers in Florida — which provides just 12 weeks of benefits, the fewest anywhere — are particularly feeling this pinch. And while several states, including those that pay the average of 26 weeks, have offered additional weeks of coverage during the pandemic, Florida has not.
Small-business owners who were hoping the Paycheck Protection Program would enable them to keep their workers on the payroll contend the program is not operating as intended.
Roy Surdej, who owns Peaches Boutique in Chicago, applied for a loan after he was forced to close and the pandemic eliminated the season’s wave of proms, quinceañeras and graduation celebrations.
Under the program, the loan turns into a grant if he rehires the 100-person staff he had built up in February in anticipation of selling thousands of ruffled, sequined and strappy dresses during the spring rush. But he said that would be impossible, given the income he had lost and the restrictions that continue to pre-empt social gatherings.
“No way can I qualify for full forgiveness,” said Mr. Surdej, who said revenue had dried up. “It’s devastating for us,” he added, saying he had no clue when he would be able to reopen and begin rehiring. “If the government can’t adjust the dates to allow us to use it properly so we can survive, then I won’t use it.”
At the same time, the Congressional Budget Office warned that businesses able to use the Paycheck Protection Program might end up laying off workers when the program expires at the end of June.
Several states have warned workers that they risk losing their benefits if they refuse an offer to work. Federal rules enacted during the pandemic say that workers are not compelled to return to unsafe working conditions, but just what constitutes such conditions is not necessarily clear.
On Tuesday, Democratic senators sent a letter to Labor Secretary Eugene Scalia to “clarify the circumstances” so that workers are not “forced to choose between going back to work in unsafe conditions, or continuing to social distance and losing their only source of income.”
Workers with child care responsibilities can stay on unemployment if public schools are closed, but once the term ends, a lack of day care or summer programs is not considered a legitimate reason. Nor are self-imposed quarantines.
Officials can lift stay-at-home and business restrictions, but then what happens? “There are lingering concerns about health, family situations, kids not in school, relatives who are sick and needing care,” said Carl Tannenbaum, chief economist at Northern Trust. “There’s going to be a very slow and gradual process of reopening and restoring employment beyond just a declaration from the statehouse or the county seat.”
Tiffany Hsu, Jeanna Smialek and Alan Rappeport contributed reporting.
By: Patricia Cohen and Tiffany Hsu, Jeanna Smialek and Alan Rappeport contributed reporting.
Photo: The Atlantic
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