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3.28 Million Job Losses Is Just the Start

Not the last. Photo: John Minchillo/AP/Shutterstock

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Last week, 3.28 million Americans filed initial claims for unemployment benefits, indicating they had just lost their jobs. While 3.28 million is on one level a shocking figure — it’s five times higher than the number of initial jobless claims ever in one week — it also, in a way, seems low. According to the Bureau of Labor Statistics, there were 158 million employed Americans in February. Given the unprecedented level of economic disruption caused by coronavirus — mandatory and voluntary closures of so many businesses, “nonessential” workers sent home — is it any surprise that a bit more than 2 percent of American workers lost their jobs last week? If anything, the number feels like it should be higher. And it will get higher.

Ben Casselman, who covers economics for the New York Times, lays out on Twitter some reasons to believe this significantly understates the blow to the employment situation. The 3.28 million figure doesn’t include people who are ineligible for unemployment benefits because they are self-employed. (The rescue bill currently working through Congress will give many of them access to unemployment benefits, but it’s not law yet.) It doesn’t include people who mistakenly believe they are ineligible, and it doesn’t include people who weren’t able to get through to state unemployment offices that are slammed with people trying to make claims. I would add also that this is a chaotic time — lots of people who have lost their jobs face other disruptions in their lives, like their children’s schools being closed — and some people who lost jobs last week may not have gotten around to claiming unemployment benefits, especially if they lost their jobs late in the week. And of course, it doesn’t include people who lost their jobs this week or will lose them next week.

So I would expect the unemployment numbers to go much higher. This one-week change is already enough to take us to almost 6 percent. I’m still skeptical of the St. Louis Federal Reserve Bank’s “back of the envelope” estimate calculating the unemployment rate could go as high as 30 percent — the calculation is based on entire employment categories going to zero, when in most cases at least some fraction in most categories will either be able to work remotely, deemed so essential they must keep working, kept on the payroll despite not coming to work, or located in a region of the country not engaging in a shutdown. But I also think some of the investment bank forecasts seem awfully optimistic, like Morgan Stanley expecting unemployment in the spring quarter to be “just” 12.8 percent on average.

The good news is Congress has taken the right approach in responding to this employment crisis. The rescue bill expands unemployment benefits to categories of workers not ordinarily covered and also greatly increases their generosity, adding $600 per week in benefits for up to four months. That means unemployment will replace 100 percent of lost earnings up to an annualized salary of about $50,000 in most states (the precise figure will be higher or lower depending on the generosity of a state’s unemployment insurance benefits prior to the crisis). Those payments are on top of the $1,200 payments going to most American adults regardless of employment status, and will go a long way to cushion the economic blow of this unprecedented (but necessary) interruption to the American economy.

Today’s 3.3 Million Job Losses Is Just the Start