The U.S. Department of Labor reported March 26 that jobless claims from Americans displaced by the coronavirus pandemic soared to 3.28 million — a record high, shattering the Great Recession peak of 665,000 in 2009 and the all-time mark of 695,000 in 1982.
It will get much worse before it gets better, according to economist Jason Reed, assistant chair and teaching professor of finance at the University of Notre Dame's Mendoza College of Business.
"Unsurprisingly, with the country on lockdown, the number of jobless claims jumped to over 3 million, a 1064 percent increase from the previous week,” Reed said. “I expect this number to keep rising as workers heed orders to shelter in place.”
With a historic coronavirus bailout package being fast-tracked through Congress, fiscal stimulus is on the way, but Reed said “we’re not out of the woods yet.”
“The state of jobless claims and unemployed workers will certainly get worse before it gets better,” he said.
“Diving deeper into the numbers, the restaurant industry was likely one of the hardest hit industries in our economy. Data from Open Table indicates a 100 percent year-over-year decrease in seated diners for the week of March 23rd. To put that number in perspective, the restaurant industry makes up roughly four percent of GDP and 10 percent of the working population. Additionally, we can expect that certain subsectors of the retail trade industry are also facing unprecedented levels of jobless claims, as non-essential businesses close to help reduce the spread of coronavirus,” Reed estimated.“These numbers will translate into a huge surge in the unemployment rate, when the U.S. Bureau of Labor Statistics reports March’s numbers in early April."
Once restrictions are eased, can we expect a quick economic turnaround or a longer jobs recovery? It will depend on the risk aversion of consumers, Reed said.
“If the virus continues to spread, then consumers will likely limit their interaction with others,” he said, “But if the virus appears contained, the federal government rolls out more comprehensive testing and medical supplies and stronger fiscal stimulus, we might see a faster recovery. The virus dictates the timeline of recovery, not governments or individuals.”