Another 2.44 million Americans filed for unemployment benefits last week, as the economic devastation from COVID-19 continues to exact a severe toll on the US labor market more than nine weeks on from the first apocalyptic set of jobless claims figures.
The previous week’s numbers (which were marred by a clerical error in Connecticut and other possible anomalies) was revised down by 294,000 to 2.69 million from 2.98 million.
The four-week average is now 3.042 million, down by about 500,000.
I say this every week, but it always bears repeating: There’s really no “silver lining” in this. Yes, the trend is lower. And it does appear as though the peak seen in late March won’t be revisited (likely ever again). But that’s small comfort. Remember, the numbers in late March were 10 times higher than the old record, set in 1982 – 10 times.
So, the fact that we’re now seeing “just” 2.4 million people filing is small comfort. These numbers are still multiples of anything witnessed prior to the epidemic.
The nine-week total is now 38.6 million. Continuing claims rose to 25.073 million for the week ended May 9.
The question here is not whether “the worst is over”. Nor is the question about the “pace” of the rebound. Obviously, the question is how structural this proves to be.
That is: How many of the jobs lost over the past two months will be recovered?
April’s jobs report – the worst in US history by a country mile – showed the number of people who are classified as “temporarily” jobless surged as a percentage of the total. In fact, that figure was nearly 80% (see here).
Let’s hope that classification (i.e., “temporary”) proves to be accurate.
The worry is that even if the Paycheck Protection Program and other extraordinary measures taken to keep workers on payrolls prove effective in the near-term, they will not prevent unemployment from resetting structurally higher.
If consumer preferences change, or if many small businesses are driven to bankruptcy by the time a vaccine is found, elevated unemployment levels may not be “temporary” after all. Workers could return to payrolls, only to be let go later. Not at the pace we’re witnessing now, obviously. But rather as a kind of “slow bleed” from a cut that refuses to heal all the way.
Don’t mistake that for some apocalyptic prophecy. I’m not suggesting the unemployment rate will stick in the double-digits forever. I’m simply saying that if even 5% of America’s restaurants go out of business (versus some estimates of 25%), or if shopping habits change such that brick and mortar ceases forever to be a viable model (and we were already approaching that threshold before anyone knew what “COVID-19” was), then it seems entirely plausible to suggest that a return to sub-4% unemployment may take quite a while.