The slow-motion train wreck of weekly initial U.S. jobless claims continued as data for the week ending April 11 produced an additional 5.245 million applications, implying a near real-time unemployment rate of 18.1% at a minimum. Once one adds in those not captured by the data, we are almost certainly facing a 20% unemployment rate now.
At this point in the pandemic, roughly one in every seven individuals in the workforce is unemployed. What is equally certain is that the U.S. unemployment rate will break through 20% this spring and likely test the 1933 Depression-era high of 24.9% this year.
Continuing jobless claims for the week ending April 4, which are published with a one-week lag, increased to 11.9 million. Over the past four weeks, 22 million individuals have entered the ranks of the unemployed.
This is indicative of the broad and sustained policy support for the newly unemployed that will be necessary to offset what is going to be a much broader disaster than the policy community has yet to acknowledge.
Broad and sustained policy support for the newly unemployed is needed to offset what is going to be a much broader disaster.
The damage to small and medium-size businesses, which account for just over half of gross domestic product, implies that the first round of aid will need to be supplemented in coming days.
Aid to the unemployed and to state and local governments now reeling due to lost revenues as the unemployment rate soars demands immediate policy attention. If that aid is delayed or not forthcoming, it will cause an increase in public sector unemployment, which will in turn create waves of negative feedback loops through the real economy.
It is likely that by April 16 the monetary aid put forward to support the Small Business Administration’s Paycheck Protection Program will have been fully subscribed.
While this is not a surprise, what is more than somewhat concerning is the dithering on the part of policymakers to supplement the $350 billion Paycheck Protection Program, which is part of the broader Coronavirus Aid, Relief and Economic Security Act (CARES Act).
Sustained aftershocks to the domestic labor market implied by the increase in first-time claims provide vivid insight into the existential challenges faced by the small and midsize business community. Each day that aid is delayed will only serve to boost bankruptcies, unemployment and loan defaults on mortgages, auto and consumer credit.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.