A record-setting 3,283,000 people filed for unemployment benefits for the week ending March 21. This represents an unprecedented increase of over 3,001,000 from the previous week’s figures. It’s the highest level of claims in reported history. The huge number of people filing for benefits is above the numbers reported during the financial crisis. In 2009, the week that ended March 28, roughly 665,000 new unemployment claims were filed.
Analysts say that this is just the tip of the iceberg and more people will be downsized due to the economic aftershock of the coronavirus. The loss of jobs reported, coupled with the velocity of predicted additional layoffs, could push the unemployment rate to 5.5%.
The massive spike in new jobless claims is due, in part, to the nationwide lockdown intended to halt the spread of the coronavirus pandemic. One third of Americans are under quarantine. This means that a large segment of commerce has grinded to a halt, necessitating significant layoffs.
Major sectors of the economy have been hit hard. We have accelerated from a health crisis to a stock market crash to a free-falling job market. Sectors, such as airlines, travel, hospitality, restaurants, retail, sports and entertainment and cruise lines have all been severely impacted. Consequently, large amounts of people have been downsized.
On Wednesday alone, it was reported that AMC Theatres furloughed all 600 corporate staff, including its CEO, luxury retailer Neiman Marcus is closing stores and weighing all of its options (including bankruptcy) and Groupon’s CEO and chief operating officer are both stepping down, as the company’s stock price plummets to under $1 per share.
What a difference a month makes. The February jobs report, the economy and hiring were all going strong, continuing the uninterrupted string of over 100-consecutive months of record-setting job growth. The report now seems from another life, as it read, “The Labor Department reported that the U.S. economy added 273,000 new jobs. The unemployment rate, at 3.5%, is one of the lowest in over 50 years.” It’s hard to believe that only a fews months ago the leading gainers in job growth “occurred in healthcare and social assistance, food services and drinking places, government, construction, professional and technical services and financial activities.” Now, workers in these areas are bearing the brunt of the downsizings.
There is some hope for people who have lost their jobs. The new trillion-dollar stimulus package passed by the Senate offers additional relief to people who have lost their jobs. Unemployment benefits have been increased by $600 per week for the first four months. Eligibility has been expanded to gig-economy workers, freelancers and furloughed workers who are still getting health insurance from their employers, but are not receiving a paycheck.
Federal Reserve Chairman Jerome Powell said, “This is a unique situation. People need to understand, this is not a typical downturn.” He tried to offer some reassurance by saying, “At a certain point, we will get the spread of the virus under control. At that time, confidence will return, businesses will open again, people will come back to work.” Powell soberly managed expectations relative to further job cuts adding, “So you may well see a significant rise in unemployment, a significant decline in economic activity. But there can also be a good rebound on the other side of that.”
There will be bright spots. Large online retailers, such as Amazon, healthcare providers, supermarket chains with a strong internet presence, pharmaceutical companies working on cures for diseases, technology companies and services, such as Zoom, that cater to people working from home will all be hiring. Video game makers will thrive as schools are closed and kids and young adults will spend hours playing virtually with their friends. Deep-pocketed global corporations, like Google, Apple, Microsoft and Netflix, will have more than enough money to power through the challenges of the outbreak.
It looks bad now. The trend will continue for a long time, unfortunately. However, we are a strong, brave and innovative nation. We’ve endured and overcome big challenges in the past and will do so once again.