With 8.2% of the population receiving benefits as of April 4, the unemployment rate has shattered the last record of 7% set in 1975.
(CN) — Covid-19 has put estimated 26.8 million out of work since the U.S. declared a national emergency, according to new figures Thursday showing that 5.2 million people filed claims for unemployment insurance last week.
At this time last year, 196,364 Americans applied for benefits. The federal agency estimates 8.2% of the population was receiving benefits as of April 4, defeating the last record of 7% set in 1975.
On average over the last month, an average of 4.2 million Americans filed initial claims for benefits each week.
Many more paychecks shrank, according to an April 3 Pew Research Center report that estimates 1 in 4 Americans are working reduced hours.
“What we are going through is traumatic on every level,” said Heidi Shierholz, senior economist at the Economic Policy Institute in Washington. “We will minimize that trauma by following what public health experts want us to do.”
Amid growing economic turmoil, some lawmakers are weighing when to lift stay-at-home orders, but most economists urge the country to stay the course.
Fewer Americans filed for benefits last week than in previous weeks, but this is not necessarily a sign of decline as many applicants saw delays when state unemployment agencies implemented additional federal funding.
Investment firm Goldman Sachs projects unemployment will reach 15% by the end of the third quarter with few opportunities for re-employment.
“So far, the silver lining is that most job losses are coming in the form of temporary layoffs, and that federal unemployment beneﬁts have been raised sharply, but the separation of workers from their jobs is nevertheless dramatic,” Jan Hatzius, chief economist of Goldman Sachs, said in a statement.
At 11.9%, Rhode Island has the highest rate of insured unemployment in the country, followed by Pennsylvania, Nevada and Washington state, all with rates above 9%.
By far, Georgia saw the largest increase in initial claims during the first week of April with 256,312 more applications than the previous week. Michigan, Arizona and Texas also saw enormous increases, while California, Pennsylvania and Florida were among states that reported a decline in applications for unemployment benefits.
The variability falls in line with calculations from both George Mason University and the Economic Policy Institute that show how economic turmoil and recovery vary state to state and county to county. Local economies with higher numbers of digital jobs are less rattled than parts of the country with bustling service and hospitality industries.
Whether small business funding from the federal CARES Act staunches the bleeding remains to be seen. The Small Business Administration as of Monday approved $247 billion in loans to 1 million businesses, averaging $239,152. The program is expected to hit its cap by the week’s end.
With restaurant dining rooms closed, food service and retail top many states’ lists of lost jobs, but it may be surprising to consumers to see how wide these categories go.
“People in the events industry are the bottom of the totem pole,” said Jeremy Bronson, owner of Occasions catering in Denver. “People think about their restaurant servers, they think about bartenders at their favorite haunts.”
Although Occasions pivoted to produce frozen meals, it still cut costs with employee layoffs.
“Having to choose who we would have to furlough was very difficult,” Bronson said. “Nobody is out there really thinking about banquet servers and the people who work florist shops or run cables at AV events or play in wedding bands.”
While Occasions is one of millions of businesses to apply for federal Paycheck Protection Program loans, not all employers are eligible.
Many trade associations like the Colorado Women’s Chamber of Commerce don’t qualify for the federal loan program. Kristen Blessman, the organization’s president, worries about how to keep the lights on with hosting fundraising events all but impossible.
“Oftentimes people look at this as a luxury, and the unfortunate thing for us is that the Women’s Chamber exists to advance women in business,” she said. “I don’t think that’s a luxury, but my fear is that the mission and efforts won’t be considered as important when people are trying to keep the lights on.”
To say many were blindsided by the pandemic is an understatement.
“The kind of economic crisis that we’re facing is just different in kind from economic crises of the past,” said Sloan Speck, associate professor of tax policy at the University of Colorado Boulder. “It’s so fast and hit so many people so hard.”
The CARES Act provides a lot of options, from an Employee Retention Tax Credit to a $600 bump in state unemployment benefits. Although it can be difficult to figure out the best path forward, Speck encouraged businesses to apply for aid as quickly as possible and cautioned against jumping to layoffs.
“There’s been some conversation about whether just going on unemployment actually gets more money into people’s pockets than staying employed, and I think that talk is really dangerous,” Speck said. “There are a bunch of well documented psychological benefits to staying employed through a recession — people’s mental well-being is just much better.
“The flip side of that is that it is really costly to reassemble your workforce, much more costly than people think right now,” Speck added.
Other analysists including at Federal Reserve Bank of St. Louis point out that health insurance is often tied to employment, a key resource for any household battling an illness.
Twenty million hardworking Americans are nonetheless unemployed and isolated in their homes.
“I’ve never not worked,” said Brittne Whitney, of Lancaster, Pennsylvania, who was recently laid off from her human-resources job at an emergency restoration business. Although the company was deemed essential, her position and several others were not.
As soon as she was old enough to work, Whitney took a job at McDonald’s and worked at a Panera through college. When she gave birth to her daughter, she built a brief maternity leave out of vacation time and short-term disability benefits, then went straight back to work.
Even now, Whitney wants to work. So far, she’s applied for new jobs and interviewed with a staffing company, hoping to line something for when businesses open back up. But she’s also using some of this extra time to reflect.
“This was kind of an eye opener for me, like, hey, focus on what you really want to do,” Whitney said. “Do I really want to do human resources? I always really wanted to be an owner of a cafe or convert a building into some sort of event space and rent it out, so it’s time to either formulate a business plan or decide I really want to get a certification in human resources while I have downtime.”