Yet the economy — and tens of millions of unemployed Americans — remain devastated by the economic freeze that resulted from the coronavirus outbreak. The job market's epic collapse will be vividly illustrated in Friday’s employment report for April, which is sure to be the worst in decades.
With the potential for much of the economy to reopen in the coming months, at least some portion of America's laid-off workers will likely be called back to work. Yet layoffs could also rise again if state and local governments are forced to reduce their staffing or if a second wave of infections forces another round of shutdowns later this year.
Against that backdrop, what is the state of America’s job market, and where might it go from here? Here are some questions and answers: WHAT DOES THE DECLINE IN JOBLESS CLAIMS SIGNIFY? Last week, 3.2 million people sought unemployment aid, down from all-time high of 6.9 million at the end of March. The new record level that was set in March was 10 times the the previous high. Some economists see the decline in applications for unemployment aid as a sign that the job market may at least be bottoming out.
A majority of states are starting to reopen some categories of businesses, typically with some restrictions on close contact, or plan to do so soon. Partly as a result, Ian Shepherdson, chief economist at Pantheon Macroeconomics, projects that applications for jobless aid will gradually fall below 1 million by mid-June. That would still exceed any weekly figure before the coronavirus struck.
Claudia Sahm, director of macroeconomic policy at the Washington Center for Equitable Growth, cautions that a second wave of layoffs could result if state and local governments must sharply cut spending this summer because of revenue shortfalls. Congress is debating whether to provide hundreds of billions of dollars to states to prevent such cuts. But it's unclear whether the additional funding will be approved.
Tax revenue for state and local governments has fallen sharply because of the catastrophic economic slowdown even while their need to spend more on health care and social services, like unemployment benefits, has spiked.
“The hole is so big,” Sahm said. “They're going to have to fire a bunch of teachers and firemen.” WHAT ABOUT ALL THE LOANS TO SMALL BUSINESSES? There's no sign yet that those loans have helped stem layoffs or encouraged more rehiring. That could change, though, in the coming weeks. The federal government has provided $660 billion to the so-called Paycheck Protection Program. This program lends money to small businesses and offers to forgive those loans if the companies use most of the money to retain their workers or rehire any they laid off by June 30.
The jobless claims report Thursday showed that a total of 22.6 million people are now receiving jobless benefits, a sharp increase of 4.6 million from the previous week. Paul Ashworth, an economist at Capital Economics, suggested that the figure “is a little disappointing since it suggests few people are being recalled to work.”
Still, that data is from two weeks ago, so it might not yet reflect the full impact of the government loans. ARE THE SELF-EMPLOYED AND GIG WORKERS RECEIVING BENEFITS? In about half the states they finally are. Thursday’s jobless claims report showed that nearly 1 million self-employed, contractors, and gig workers, who previously weren’t eligible for unemployment aid, are now receiving it under a program set up by a federal relief package. An additional 1.2 million have applied for benefits. Many states have had to set up new computer systems to process those claims, which delayed benefit payments to millions of people.
WHAT WILL FRIDAY'S JOBS REPORT LIKELY SHOW? It will likely be the worst monthly jobs report since modern record-keeping began after World War II. The unemployment rate is forecast to reach 16%. That would be the highest rate since the Great Depression and up from just 4.4% in March. As recently as February, the jobless rate was at a 50-year low of 3.5%, a testament to how violently the job market has since tumbled.
Economists have forecast that the government will report that the economy shed 21 million jobs in April. If so, it would mean that nearly all the job growth in the 11 years since the Great Recession ended has vanished in just a single month.
Shepherdson estimates that the eventual jobs report for May could show another sharp loss of perhaps 13 million jobs, with employment growth potentially returning in June. SOUNDS TERRIBLE. ANYTHING ELSE?
Yes, unfortunately. Even those stunning figures won’t fully capture the magnitude of the damage the coronavirus has inflicted on the job market. Many people who are still employed have had their hours reduced. Others have suffered pay cuts. Some who lost jobs in April and didn’t look for a new one in light of their bleak prospects won’t even be counted as unemployed. A broader measure — the proportion of adults with jobs — could hit a record low.
HOW MANY OF THESE JOB LOSSES ARE TEMPORARY? One possible sign of hope is that most laid-off workers expect to return to their jobs once their businesses have reopened or the economy has picked up. Polling by The Associated Press and NORC Center for Public Affairs Research indicates that nearly eight in 10 households that suffered job losses expect to return to their previous employer. That would make a recovery much quicker than usual: It's far easier for workers to return to their previous jobs rather than to train for new ones or shift to entirely new industries.
Still, many economists worry that as the threat from the viral outbreak persists, many small businesses will go bankrupt, and many temporary layoffs will become permanent. “For a lot of these furloughed workers, a non-trivial number will have no job to go back to, because the company they worked for will have failed or will need fewer workers than they used to," Sahm said.