NEW YORK (Reuters Breakingviews) - April really was the cruelest month. Over 20 million Americans lost their jobs, according to the Bureau of Labor Statistics, bringing the unemployment rate to an eye-popping 14.7% – the highest since at least the 1940s. But the headline number leaves out much of the Covid-19 economic story.
The report makes for grisly – if unsurprising – reading. The economy shed roughly a decade of job gains. The figure dwarfs the 8.7 million jobs lost in the Great Recession that lasted from December 2007 to June 2009 and suggests an annualized second-quarter GDP contraction north of 30% is possible. It represents the highest recorded losses in the report’s seven-decade history, and includes the wipeout of almost half of the country’s leisure and hospitality jobs.
Comparing this to previous crises and slumps is of limited use, because the United States has never intentionally shut off almost 30% of its economy before. But other things are different too. For one, Friday’s figure doesn’t necessarily paint an accurate income picture. Federal stimulus has added $600 a week to jobless benefits, making them, on average, actually higher than normal salaries in a majority of states, according to the New York Times.
This is only temporary and the levels vary by state, but it’s still a huge difference from previous crises. The $1,200 one-off payments made to many Americans also mean households, overall, might not see income decline as much as the depressing statistics would suggest.
Just as the record lows in unemployment before Covid-19 didn’t give a full picture, the highs present a similar problem. The headline unemployment figure leaves out workers who aren’t looking for jobs. And it classifies over 18 million workers as being on temporary layoff – but it’s impossible to know whether they will be rehired. After the lockdown, demand may remain depressed because people are scared to, say, go to restaurants or spend much at all.
Jobless figures during the decade-plus expansion didn’t account for the low quality of jobs, limited benefits, and low labor-force participation rate. Unfortunately, Friday’s statistics mostly make clear what was already known – that the U.S. economy is in an induced coma – without giving clues on how or when it will wake up.
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