COVID-19 Causes Record Unemployment Surge

Sean Mauro, Contributing Writer

The Department of Labor reported the largest weekly unemployment spike in history last month as the Coronavirus outbreak causes closures and layoffs across the country.

Breaking the previous record of just 695,000, 3.3 million Americans applied for unemployment in the week of March 15, a spike that is five times greater than the worst week reported during the great depression.

Despite February reporting showing a half-century low unemployment rate of 3.5 percent, economists have forecasted that the rate has already risen to its greatest height since 2015.

According to a Federal Reserve analysis, job losses from the COVID-19 crisis could total up to 47 million. This would result in an unemployment rate of 32.1 percent, far surpassing the historical high of 24.9 percent during the great depression.

Despite closures and layoffs continuing across the country, some analysts are confident that the actual unemployment rise will not reach these heights. The projections were released prior to the recent stimulus package being passed, and do not account for how it will increase unemployment coverage, along with other changes. Furthermore, the numbers may not include those who will leave the workforce willingly during this health crisis.

The discrepancy is due to an inability to pinpoint exactly what jobs will be lost during this time. “Likely layoffs” are not necessarily inevitable layoffs. Any number of jobs categorized under this label could actually result in a layoff during this crisis.

Because of this, many economists believe the Federal Reserve projection represents an extremely rough estimate. Analysts report that the unemployment rate could still be as low as 10.5 percent, or as high as 40.6 percent depending on what metric is used.

Between these two figures, there are many possibilities, and 32.1 percent is believed to be a pessimistic projection by certain analysts. Some economists believe that the Federal Reserve estimate considered “likely layoffs” far too much, and therefore overestimated the unemployment rate.

Regardless, current April forecasts show unemployment continuing to rise, with job loss projections for the month ranging from 500,000 to 5 million.

Goldman Sachs offers one of the most pessimistic projections, stating that unemployment will rise to 15 percent in the coming weeks. Goldman forecasters also projected that GDP will shrink 34 percent in the next three months, down from a 9 percent loss last quarter. If this projection holds true, it will be the greatest GDP downturn on record.

Layoffs have already risen severely over the last month. States have struggled to manage the massive amount of people applying for unemployment in the lasts few weeks. In many cases, application websites have been crashing due to excessive traffic.

States have begun dealing with applicants on a schedule based on last name. Applicants are given staggered days and times when they can apply to ease the burden both online and in person.

With no end to the COVID-19 crisis in sight, closures and layoffs continuing and states having difficulty dealing with the rise of unemployment applications, the projections of a rise in unemployment offer a chilling prospect of economic downturn over the next few months.