The dramatic surge in unemployment in the April BLS (Bureau of Labor Statistics) data comes with little surprise. The current rate of 14.7% is the worst since the 1933 high of 25%. Initial layoffs in areas of hospitality, leisure, transportation, and retail were followed by reverberations in supporting fields and in white collar occupations. April saw the loss of 20.5 million jobs bringing the total to nearly 33.5 million jobs lost in the past seven weeks. The current rate of unemployment is widely thought to be an underestimate due to its omission of discouraged workers—those no longer looking for work, estimated at 6.4 million—and those who were not counted for other reasons. A person is not counted if s/he is working part time (estimated at 11 million up from 4 million before the pandemic) or working reduced hours and/or at reduced pay. Additionally there is a category of workers who are not included in unemployment data and are not on sick leave or vacation but are absent for atypical reasons not specified. This number is currently at 9 million though it normally averages about 1.5 million.
Not surprisingly, the repercussions have hit groups differentially with the hard hits among women, at 16.2% unemployment representing 11.9 million lost jobs compared to 10.4 million for men. Male unemployment stands at 13.5%. In contrast, the 2008 recession hit harder in construction and related occupations which had a disproportionate impact on men. The pandemic has also reversed the gains made in recent decades among minority workers. Minority workers, African Americans and Latinos, have been hard hit with rates of unemployment at 16.7% and 18.9% respectively. White unemployment is 14.2%. Fears of these groups ability to regain the improved levels of employment are realistic since low wage workers are the ones who most often suffer the most dramatically when the economy contracts.
The alleged silver lining is that 78.3% of those affected report anticipating being temporarily out of a job and being rehired as the repercussions of the corona virus recede. Is this optimism justified? It is anyone’s guess but it is unlikely that all of these workers will have a business or job to go back to. As the closing down of the economy persists, in spite of pockets of progress in some areas to resume “normal” business, there is reason to believe that the new “normal” will look different from the presumed norm. Some small businesses will likely close for good while others are likely to open with diminished volume and workers. Larger businesses, many of which are seeing white collar layoffs, stand a good chance of contracting in the future. It is safe to say that no one can accurately predict what the future holds though some economists are estimating that the current unemployment rate, if it was to be most accurately accountable, is really at about 20%, moving closer to the 25% seen in the height of the depression in 1933. It is also a good bet to say that local, state and federal budgets will constrict from a combination of spending to support the unemployed and Covid-19 related expenses coupled with a loss of revenue from reductions in income and spending. One dramatic example can be seen in the state of California, considered the fifth largest economy in the world. Governor Newsom had anticipated a surplus of 5.6 billion for the state budget of 2020-2021 and now the state budget office estimates predict a 54.3 billion deficit, with 3/4s of that impacting the new budget year starting in July. It is hard to say how the various levels of the government will respond to these deficits amid projections of protracted negative economic repercussions of the virus. The best hope for a safe return for economic normalcy hinges on a vaccination which is likely at least a year or more in the future, at best.