Unemployment Nightmare Lurches Economy into Depression-Era Scenario

  • U.S. jobless claims surged to 1,000% of financial crisis highs with 6.6 million new filings.
  • The data suggest the coronavirus recession will be deeper and longer than predicted.
  • The U.S. is on track to suffer depression-era conditions if job losses continue.

U.S. jobless claims doubled this week, with 6.6 million people filing for unemployment benefits amid coronavirus shutdowns. That’s 1,000% as high as the peak of the Great Recession. Over the past two weeks, about 10 million people lost their jobs.

Unemployment Spike Could Be Dangerous

Of course, the reason Great Recession job losses don’t look quite as shocking is because they happened over a longer period of time. The enormous spike we’re seeing today is the result of millions losing their jobs at once rather than over the space of months.

Which is more dangerous? It remains to be seen.

Unemployment claims have risen by roughly 10 million in just two weeks. | Source: New York Times

Michelle Meyer of Bank of America Merrill Lynch pointed out that the economy has never seen a shock of this magnitude all at once.

What usually takes months or quarters to happen in a recession is happening in a matter of weeks

Could Unemployment Reach 50%?

A new study from the University of Chicago shows that only about 34% of jobs can be performed from home. Accounting for the essential healthcare workers who make up roughly 12% of the workforce, just under half of the nation’s jobs can be done during lockdown.

Unemployment levels could surpass those seen during the Great Depression. | Source: Everett Historical/Shutterstock.com

Can the unemployment rate jump as high as 50%? It’s possible, but unlikely.

Not everyone who can’t work will be laid off, especially with government help in place. But that makes unemployment estimates of 32% sound very realistic. To put that into perspective, unemployment reached 24.9% during the Great Depression in 1933.

GDP Estimates Range from Terrible to Apocalyptic

The fallout from…

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