Recession Can you hear it? Can you hear the warnings and predictions of long-term and unrelenting job losses amidst this coronavirus pandemic? Or, do pronouncements of a lightning fast economic recovery and immediate bounce back to low unemployment drown them out? Can you process the sustained detriment the economy is likely to suffer after experiencing never-before-seen unemployment numbers occurring in just a matter of weeks?
Certainly, it would be wonderful if the economy would experience a quick recovery. It would be wonderful if unemployment levels actually bounce back immediately to where they were in early March 2020. There is no limit of commentators, experts and analysts who proclaim that these things will indeed come true. But it’s getting harder and harder to ignore the warnings because it’s getting harder and harder to ignore the data. And since the economy is largely driven by consumer confidence, it’s also very difficult to push forward information that risks driving down confidence and contradicting the many rosy and uplifting proclamations.
But here’s the truth—three bitter truths—about coronavirus job losses, the economy and unemployment.
The Three Bitter Truths
Despite the rosy scenarios, research and data clearly indicate that (1) a huge portion of the job losses are indeed permanent; (2) the coronavirus recession—arguably a depression—will last much longer than many are prepared to admit; and (3) the unemployment numbers are actually higher than currently reported.
1. The bitter truth is that 42% of all coronavirus job losses will be permanent.
This statistic has to be one of the most underreported of all and the most staggering. Day after day the Trump Administration announces that all the jobs are coming back, and all the newly unemployed will be able to return to their jobs real soon. However, research, history and data do not support this message.
While it does seem that the majority of people will be able to return to their jobs after the coronavirus lockdowns are lifted and the economy fully opens, far too many will learn they no longer have jobs to return to. The Becker Friedman Institute of the University of Chicago reports that COVID-19 is causing reallocation shock that’s both driving “the fastest reallocation of labor since World War II” and causing the elimination of millions of jobs. It finds that “42 percent of recent layoffs will result in permanent job loss.” To learn more about reallocation shock and how it has simultaneously led to massive upticks in both hiring and layoffs, read this BFI report.
Beyond BFI’s findings, there is more evidence to support the prediction that millions of job losses will become permanent. For example, CNN reports that GE will permanently cut 13,000 aviation jobs in response to the pandemic and a few other aviation factors. MGM Resorts laid off some 63,000 workers in March, and the company is now acknowledging that many of those coronavirus layoffs may become permanent. Then you have the bankruptcies. So far, major retailers including Neiman Marcus and J. Crew have filed with more companies at risk. But small business may suffer most of all. FEMA reports that up to 60% of small businesses never recover from a disaster. Surely, COVID-19 must be classified a disaster—right?
If 42% of the coronavirus job losses really do end up being permanent, this would be a devastating blow for the unemployed and for the economy. Given that 33.5 million people have filed new jobless claims so far, it stands to reason that approximately 14 million people could end up not having a job to return to at all.
2. The bitter truth is that the coronavirus recession will last far longer than many will admit.
The CBO predicts that unemployment will reach at least 16% by 3rd quarter. This would surpass even the 14% rate of the Great Depression. The CBO also informs that unemployment will linger at highs of 10% or better for the remainder of 2020 and for much of 2021. Americans struggled deeply getting through the Great Recession when unemployment hovered at just under 10% for years.
What’s worse is that if the CBO’s predictions prove true, millions more Americans will face unemployment—many who aren’t yet even contemplating such a predicament for themselves. Whether you’re currently unemployed, worried about becoming unemployed or you are comfortably secure about your job, I recommend you focus your mind on this bitter truth, and consider taking these action steps to prepare for a long drawn-out, struggling economy.
3. The bitter truth is that unemployment is currently closer to 25% instead of 14.7%.
On Friday, the Bureau of Labor Statistics released unemployment numbers for April. The 14.7% unemployment rate corresponds with the devastating toll coronavirus has taken on the nation and across the globe. And though the April unemployment rate is quite astonishing, especially considering that it was just 4.4% in March and 3.5% in February, it didn’t come as a surprise.
In fact, many experts and researchers were predicting that the rate would actually be higher with MarketWatch’s Jeffry Bartash finding that the unofficial U.S. jobless rate is at best 20% and likely as high as 25%.
Bartash’s findings are in line with what Treasury Secretary Steven Mnuchin acknowledged today on Fox News Sunday when he announced that real unemployment could already be at 25% and will likely get worse.
Can you handle the truth? What about the three bitter truths regarding coronavirus job losses, the economy and unemployment?
If people could and would process and understand that millions—millions—of the newly unemployed won’t actually have jobs to return to, that the economy isn’t going to just snap back very quickly or that the unemployment rate will exceed that of the Great Depression and then hover at the highs of the Great Recession, do you think they’d prepare differently? Do you think this would focus their minds and attention on alternative jobs and alternative career options? Do you think Congress would do more?
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