Bank Of America: Three Million People May File For Unemployment Benefits
Bank of America has come out with a frightening prediction—by next week, three million people will have filed for unemployment benefits due to the economic effects precipitated by the coronavirus.
The coronavirus outbreak has substantially changed the business landscape. Cities have been shut down. Workers are told to stay home and self-quarantine themselves. This has rapidly escalated from a health crisis to a stock market crash to a free-falling job market.
Sectors, such as airlines, travel, hospitality, restaurants, retail, sports and entertainment and cruise lines have all been severely impacted. Consequently, large amounts of people will be downsized or their hours drastically cut.
Michelle Meyer, chief economist for Bank of America Merrill Lynch, said in a note, “Our forecast is based on a compilation of news reports which show roughly 270k applications have been filed over 19 states through Wednesday.” She added, “Extrapolating from these numbers, initial jobless claims will easily be in the millions, showing the immense economic disruption the COVID-19 outbreak is having on the U.S. economy.”
Investment bank Goldman Sachs predicted about 2.4 million people will file claims. In its analysis, Goldman estimates huge decreases in revenue for at least six major areas. The bank foresees 30% to 95% drops in revenue for casino gambling, sports and entertainment, hotels, transportation, restaurants and retail goods. With the loss in revenue, job cuts will quickly follow.
The United States Department of Labor reported 281,000 new claims for unemployment insurance last week. This represents a 33% increase in initial unemployment benefit filings, as approximately 70,000 more people applied compared to the prior week. To put this into context, for the last 100-plus months, the U.S. economy had uninterrupted growth in employment. We were hitting record-high employment numbers almost each and every month. Now, it's uncomfortably clear that the winning streak is over.
According to outplacement agency Challenger Gray & Christmas, we may see up to 4 million hospitality workers lose their jobs by summertime. The Economic Policy Institute estimates—similar to Bank of America— that as many as 3 million workers could be downsized. It's anticipated that 4.6 million workers will lose their jobs, according to the Travel Industry Association alone.
A number of states have reported that they’ve received an overwhelming amount of calls regarding how to file for claims and other related questions. New York’s online system briefly crashed due to the excessive volume.
“States are just not in a position to respond to this,” said Michele Evermore, a senior policy analyst at the National Employment Law Project. “They’re at historically low levels of funding and they’re moving into a state where there may be historically high levels of claims within a couple of weeks.”
Concerned over the rapid increase in unemployment claims, Trump's administration requested state labor officials to temporarily withhold releasing the numbers, according to the New York Times. The report also claimed that they should only use vague terminology such as "very high" or "large increase," relative to the unemployment rate and not the actual numbers. Critics may say that Trump doesn’t want to be politically embarrassed by the escalating increase in unemployment, as record-setting high employment was one of his crowning achievements. It could also be viewed as a way to stem any further panic. The eye-opening numbers may spook investors, which in turn could cause the stock market to drop and make companies consider more layoffs.
Joseph Stiglitz, a Nobel Prize winner in Economics, is highly concerned about the upcoming high rate of unemployment. In an interview, Stiglitz said, “It’s likely to be massive. Whether it will wind up to be the 25% that characterized the Great Depression or the 25% that characterized the Greek crisis, that’s yet to be seen.”
This news is gravely disappointing. The workers who have benefited over the last number of years are now being impacted the most. These tend to be hourly wage earners, gig-economy workers and other lower-paid professionals, who usually do not have a lot of savings. With the jobs in their sector drying up, there is little chance of finding new employment. It may be a challenging and scary time for many Americans.
In addition to worrying about safeguarding your health, it looks like millions of people will also have to be concerned over how to put food on the table, keep a roof over their heads and make it through this inhospitable time period.
In response to the severe spike in unemployment and recognition that this trend will not only continue, but exponentially grow, President Donald Trump plans to dole out a $1 trillion fiscal stimulus package. The bill is said to include direct payments to people to assist them in getting through this treacherous time.