(CN) — As the Covid-19 pandemic infects economies around the world, the U.S. Department of Labor reported 6.6 million people applied for unemployment insurance benefits over the last week—roughly 2% of the country’s population.
This more than doubles the 3.2 million record set last week and may be just the beginning. Researchers at the Economic Policy Institute in Washington estimated the country will lose 19.8 million jobs by July.
Another economist at the Federal Reserve Bank of St. Louis estimated that with 66.8 million jobs now at high risk for layoffs, the unemployment rate can conceivably hit 30%.
“Ultimately, we're going to see a massive amount of people disconnected from the labor market,” said Julia Wolfe, state economic analyst for the Economic Policy Institute.
“If you're a restaurant worker and you're out of work right now, your entire industry has closed,” Wolfe added. “There's no other employment that you can seek, and so it's so critical that we have a strong response that helps people make ends meet.”
That response begins with the $2 trillion CARES Act passed by the U.S. Senate last week, but economists point to other important economic safety nets like paid sick leave and incentivizing businesses to retain employees.
As of April 1, the U.S. Centers for Disease Control and Prevention estimates 3,603 Americans died from Covid-19, with 186,101 cases confirmed in the country. Both state and federal governments cite the pandemic for causing the economic downturn.
"Nearly every state providing comments cited the Covid-19 virus,” the Department of Labor explains in Thursday’s report. “States continued to identify increases related to the services industries broadly, again led by accommodation and food services. However, state comments indicated a wider impact across industries."
Alaska reported the highest rate of unemployment claims with 2.8% of its population applying for benefits, followed by Connecticut at 2.7% and New Jersey at 1.6%.
With 362,012 claims for unemployment insurance, Pennsylvania has the highest number of claims, citing “layoffs in the transportation and warehousing, accommodation and food services, administrative, support, waste management and remediation services, and health care and social assistance industries."
Ohio, Massachusetts, Texas and California also processed more than 100,000 applications each.
According to the Economic Policy Institute’s analysis within the last two weeks, “every state in the country reported its highest initial unemployment claims ever.”
This report only reflects initial claims filed and does not applications for continued benefits. The Federal Reserve Bank of St. Louis reported 3 million continued claims as of March 21. By comparison, the country reached 6.5 million continued claims for uninsurance benefits in 2010.
“It was very clear that economic activity was going to have to be curtailed to slow the spread of the virus,” said Dr. Jeffrey Zax, professor of economics at the University of Colorado Boulder.
“The long-term consequences remain to be seen. If we manage it so people can go back to their places of work and return to their work in a certain reasonable amount of time, recovery should occur quickly,” Zax explained. “If we let businesses close, the recovery will be slower.”
If social distancing completely dissolves the relationships between employees and their employers, both will end up expending resources to return to business as usual — employees will have to file new job applications, and employers will have to recruit and hire new workers.
With few financial incentives encouraging businesses to retain employees on payroll through the pandemic, layoffs become likely but not inevitable. On Tuesday for example, restaurant conglomerate Craftworks laid off 18,000 service employees across its Old Chicago, Gordon Biersch, and Rock Bottom chains. Meanwhile east of Denver, Colorado, the Sand Creek Lounge is able to keep six bartenders on salary through its mandatory closure.
“We are the kind of bar that is always open. We’re open Christmas and Thanksgiving,” said the Aurora bar’s owner, Richard Engel. Until he closed the doors on March 17, the Sand Creek Lounge had been in Engel’s family for three decades.
Last week, 61,583 Coloradans filed initial claims for unemployment insurance benefits. The Centennial State’s previous high hit 7,749 in 2010, during the great recession.
But Engel considers the people at the bar family.
“I stay in touch with my staff, I touch base with them all once a week through my manager, so we know where everybody is and we know where most of our customers are,” Engel said. “We have the phone-tree fanning out because when we reopen, we want you to be there.”
Engel said he worked out a payment plan with his landlord and hopes other sectors of his supply chain also retain their employees, because he values those business relationships.
“Best case scenario is nobody's found another bar,” Engel said, looking forward to the day the stay-at-home orders lift. “And everybody has disposable income, they haven't all lost their jobs and they can afford to go out and get a beer.”
From British prime minister Boris Johnson to U.S. Surgeon General Jerome Adams and Colorado Gov. Jared Polis, leaders around the world agree things are going to get worse before they get better.
As more businesses lock up shop and layoffs increase, Wolfe at the Economic Policy Institute said not to conflate the state of the stock market with the health of the economy.
“If politicians are saying that the cost of slowing down the economy is too high, well the cost of human life is the alternative,” Wolfe said. “We should really be looking at how people are doing, that's what the economy is about, all the working people who are creating this value and how it's impacting their world and their life.”
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