With unemployment claims surpassing 33 million since March, the nation’s near-term economic outlook hinges on whether patchwork reopenings can mend the coronavirus pandemic’s damage — and how soon.
Nearly 3.2 million were added to state jobless rolls last week, the Labor Department said Thursday, and economists expect the monthly jobs report on Friday to put the April unemployment rate at 15% or higher — a Depression-era level.
But even a figure of that magnitude will almost certainly understate the calamity. Officials in some states say more than a quarter of their workforce is unemployed. And experts say it is impossible to calculate how many jobs might come back as states lift shelter-in-place rules.
“We don’t know what normal is going to look like,” said Martha Gimbel, an economist and a labor market expert at Schmidt Futures, a philanthropic initiative.
[Read more: How will Utah’s construction industry rebuild in the coronavirus era? Slowly.]
The biggest questions are how many workers will be willing to go back, how many businesses will have full-time jobs for them, and how quickly customers will return to the shopping and spending habits that stoke the consumer-driven economy.
In addition to weighing the risk of exposure to the virus, some laid-off workers face the prospect of making less on the job than they do on unemployment — including a temporary $600 weekly supplement enacted in a flurry of federal emergency legislation.
At the same time, many employers may not survive, particularly small ones, while others are likely to operate with reduced hours and staff. And most Americans remain uneasy about the moves to reopen, with 67% saying they would be uncomfortable going into a store and 78% saying they would be uncomfortable eating at a restaurant, according to a survey that The Washington Post and the University of Maryland released this week.
“States want to relaunch their economies, but they’re going to be doing so in an environment of high unemployment, reduced income and fear,” said Gregory Daco, chief U.S. economist at Oxford Economics. “It’s not a matter of saying, ‘Hey, go out and spend.’ It’s a matter of people being able to and wanting to.”
While restaurant, travel, hospitality and retail workers were among the first to lose their jobs, layoffs have become more widespread in recent weeks, affecting engineers at Uber, advertising account executives at Omnicom, designers at Airbnb and other office employees.
“We’re still seeing a massive wave of layoffs taking over the U.S. economy,” Daco said. He described the latest job losses as a “secondary wave of the coronavirus recession.”
The different speeds of a return to everyday commerce were evident Thursday in Michigan, where Gov. Gretchen Whitmer said factories could reopen next week but extended the closing of nonessential businesses — and an order for residents to venture outside only for essential purposes — from mid-May until May 28.
Utah began reopening businesses last Friday, so jobless claims filed this week “might be the first indication of some change,” Brooke Porter Coles, a spokeswoman for the Utah Department of Workforce Services, said in an email. “It’s just too early to tell.”
Alaska was one of the first to begin reopening its economy, allowing limited gatherings at graduations, day camps, gyms and other sites starting on April 24. But officials there are nervous about the summer, when 86% of the state’s visitors arrive, mostly on cruise ships. Several major cruise lines have canceled trips to Alaska through the end of the year, and many seasonal jobs are expected not to materialize.
Nonetheless, as restrictions are lifted, employees who refuse calls to return to work without “good cause” will lose access to unemployment benefits, state officials have said.
Pockets of labor demand have been driven by the pandemic. Amazon said it would hire 100,000 warehouse and delivery workers, and retailers like Walmart and Lowe’s said they were filling tens of thousands of positions. The staffing company ManpowerGroup reported more than 5 million openings this week for new or existing jobs, notably in logistics, health, sales, information technology and accounting.
But Daco said many across the country who had managed to stay on a payroll had lower incomes. A lot of companies have scheduled them to work part time, reduced wages or deferred paychecks. Others are experimenting with job sharing.
Michele Capamaggio, 38, said she returned to her retail job in a small North Carolina town on Wednesday to avoid being put on a flexible schedule or fired, losing access to her benefits. The store is limiting its open hours, so she is earning a fraction of the income she received from the government while furloughed.
“Basically, I had to go back,” Capamaggio said over direct messages on Twitter during a 30-minute work break. “Just hurts that I could be making $900 a week at home but will only make $500 a week busting my butt at work and putting myself at risk.”
Still, there are workers eager to return to their jobs.
Nicky Koutsoumbas, 19, earned more from government aid in April than she did in an average month working at a camera shop in Las Vegas, receiving $700 a week in unemployment benefits and $1,200 in stimulus money from the IRS. That helped pad her savings, which she hopes to use to move out of her parents’ house.
“I thought about the money — it crossed my mind,” she said when the shop asked her to return this week. “But I want life to go back to normal, to go to work, to be surrounded by my co-workers, to have something to do.”
But even as people like Koutsoumbas venture back into the workforce, jobless claims keep pouring in. Unemployment offices have scrambled to hire more workers, upgrade computers and add call centers, but are still struggling to process the crush. Applicants complain they have trouble just getting into the system. Many who filed successfully for benefits say there are gaps in their payments, even if they certify their jobless status each week.
Checks have also been slow in coming.
Alexander Talley, 28, filed for unemployment benefits almost eight weeks ago, immediately after he was furloughed on March 13 from his serving job at a high-end restaurant in Palm Beach Gardens, Florida. He received nothing until April 28, when $1,300 in retroactive payments from the Florida Department of Economic Opportunity appeared in his bank account.
So far, only about 40% of the more than 1 million Floridians filing verified claims have begun to receive benefits.
“It was absolutely terrible,” Talley said of filing his claim and waiting for the payment. He didn’t have a laptop, so he had to conduct the process on his iPhone. Often, he said, he felt lost. “The only information I was able to find to keep myself from going absolutely crazy was Twitter and Facebook.”
He began receiving the weekly $600 federal supplement last week.
His landlord threatened to end his month-to-month lease after he and his partner at the time were able to pay only a portion of April’s rent, so Talley’s father stepped in with the rest. His parents have sent Amazon and Publix gift cards and cash, and he has taken advantage of food giveaways of rice and pasta. A few weeks ago, he signed up for food stamps.
“We don’t live a luxurious, lavish lifestyle by any means, but we take care of our bills and we keep the fridge full,” Talley said. “We went from that to instantly not knowing where our income is coming from.”
Keeping their residents afloat while the economy is shut down is putting enormous strain on states. Nine, including California, Illinois, New York, Ohio and Texas, have borrowed from the federal government to reinforce their unemployment insurance trust funds. In the wake of the last recession, 36 states had to borrow $40 billion.
“States will be able to make these payments but will spend many years paying off these debts,” said Jared Walczak, director of state tax policy at the Tax Foundation. “Employers are going to have to pay higher taxes in the future” to repay those debts, which could be a drag during a recovery, he said.
