At the peak of the Great Depression in August 1932 Unemployment was 25.5%.
Not as bad as that.
At the peak of the Great Recession in October of 2009 Unemployment was 10%.
Worse than that.
The U.S. unemployment rate jumped to 14.7 percent in April, the highest level since the Great Depression, as many businesses shut down or severely curtailed operations to try and limit the spread of the deadly coronavirus.
The jobless rate was pushed higher because 20.5 million people abruptly lost their jobs, the Labor Department said Friday, wiping out a decade of job gains in a single month. The staggering losses are roughly double what the nation experienced during the 2007-09 crisis, which had previously been measured as the worst downturn since World War II. But the economic trauma caused by the pandemic has already surpassed that.
As the virus’s rapid spread accelerated in March, President Trump and numerous governors took steps to put the economy in deep freeze through April in an effort to minimize the spread. This led businesses to suddenly shed millions of workers each week. Analysts warn it could take many years to return to the 3.5 percent unemployment rate the nation experienced in February in part because it’s unclear what a new economy will look like even if scientists make progress on a vaccine, testing, and treatment.
Trump, though, claimed in a Fox News interview Friday that there would be a quick rebound.
“Those jobs will all be back, and they’ll be back very soon,” Trump said.
But Trump’s likely opponent in November’s presidential election, former vice president Joe Biden, said in remarks broadcast by NowThis News that the jobs report illustrated “an economic disaster” that was “made worse” in part by the White House’s slow and uneven response to the crisis earlier this year.
Despite the devastating news about layoffs, the stock market rose Friday with the Dow Jones industrial average up nearly 300 points in the afternoon. Stocks have climbed since early April, largely because of record levels of government aid for businesses and optimism that a cure is near. The lesson from the last recession, however, was Wall Street recovered long before the rest of the country.
“This is pretty scary,” said Lindsey Piegza, chief economist at Stifel. “I’m fearful many of these jobs are not going to come back and we are going to have an unemployment rate well into 2021 of near 10 percent.”
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Job losses began in the hospitality sector, which shed 7.7 million jobs in April, but other industries were also heavily impacted. Retail lost 2.1 million jobs and manufacturing shed 1.3 million jobs. White-collar and government jobs that typically prove resilient during downturns were also slashed, with firms shedding 2.1 million jobs, and state and local governments losing nearly a million. More state and local government jobs could be slashed in the coming weeks as officials deal with severe budget shortfalls.
There was even 1.4 million layoffs in health care last month, as patients have been putting off dental care, minor surgeries and other things beyond emergency care.
Even though the April unemployment figure was horrific by most accounts, economists say the official government rate almost certainly underestimates the extent of the job losses. The Labor Department said the unemployment rate would have been about 20 percent if workers who said they were absent from work for “other reasons” had been classified as unemployed or furloughed. Some people who stopped looking for work were also not counted in the official rate.
What’s clear so far is that Hispanics, African-Americans, and low-wage workers in restaurants and retail have been the hardest hit by the job crisis. Many of these workers were already living paycheck-to-paycheck and had the least cushion before the pandemic hit.
“Low-wage workers are experiencing their own Great Depression right now,” said Ahu Yildirmaz, co-head of the ADP Research Institute, which focuses on the job and wage trends.
The unemployment rate in April jumped to a record 18.9 percent for Hispanics, 16.7 percent for African-Americans and 14.2 percent for whites.
Women’s unemployment was nearly three points higher than men’s unemployment, another disparity that largely reflects the prevalence of women in hard hit hospitality and retail jobs.
Education has emerged as one of the downturn’s starkest divides. While many highly educated white collar workers have been able to do their jobs from home, low-wage workers don’t have that luxury. The result is workers without any college education are losing their jobs at about four times the rate of their college-graduate peers.
In April, the unemployment rate soared to 21.2 percent for people with less than a high school degree, surpassing the previous all-time high set in the aftermath of the Great Recession.
While Congress has approved nearly $3 trillion in aid, it’s been slow to arrive for many. Millions are still battling outdated websites and jammed phone lines to try to get unemployment aid and a relief check. Economists are urging Congress to act now to ensure aid does not end this summer when the unemployment rate is still likely to be at historic levels.
“This unemployment rate should be a real kick in the pants — and maybe even the face,” said economist Claudia Sahm, a former Federal Reserve staffer and expert on recessions. “Congress has to stay the course on aid until more people are back at work.”
There’s a growing consensus that the economy is not going to bounce back quickly like Trump wants, even as more businesses re-open this month. Many restaurants, gyms, and other firms are only able to operate at limited capacities, and customers are proving to be slow to return as they are fearful of venturing out. Many businesses also won’t survive. All of this means the economy is going to need far fewer workers for months — or possibly years — to come.
“It’s not like turning a light switch and everything goes back to where it was in February,” said Loretta Mester, president of the Federal Reserve Bank of Cleveland, in an interview. “We depopulated everything quickly. Repopulating it will take a lot longer.”
Mester said the best cure for the economy at this point is likely more virus testing, monitoring and investment in a covid-19 treatment. Without those measures, people are unlikely to go out and spend again even if stores and restaurants re-open.
“There’s still a lot of uncertainty about the second half of the year,” Mester said. “Consumer confidence has been really, really bad since mid-March.”
Many businesses initially did temporary layoffs because executives believed the shutdowns would be short-lived. About 18 million of the unemployed in April said their layoff was temporary, according to the Labor Department data, versus only about 2 million who said their job loss was permanent. But permanent layoffs are expected to escalate as time goes on. The Labor Department surveyed workers in mid-April.
“This is a catastrophe. When things go over a cliff, they usually they don’t recover quickly,” said David Blanchflower, an economics professor at Dartmouth College.
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