The US Department of Labor registered more than 6.6 million initial unemployment insurance claims for the week ending March 28, according to data newly reported on Thursday morning.
That easily surpasses the previous record, set in last Thursday’s release, which in turn shattered all previous records for initial unemployment filings. And there’s little reason to believe that next week’s report will be any better, with several large states including Georgia and Florida only now moving to adopt the kind of shutdown policies that began on the West Coast earlier in March.
To the best of our knowledge (the official unemployment numbers for March won’t come out until Friday, and they won’t properly account for the layoffs in the final week of the month), this is not yet the highest level of actual unemployment in recent history, with the Great Recession and the brief but intense recession of the early 1980s both seeing double-digit unemployment rates. But the high unemployment of those recessions reflected the accretion of months of job losses.
This time around, the American job market was, as recently as the second week of March, totally fine. (The unemployment rate in February was 3.5 percent.) And then it began to unravel at a shocking pace, with huge swaths of the retail, food service, hospitality, and transportation industries shutting down.
The Federal Reserve responded earlier this month with a set of dramatic new policy tools designed to ensure that cheap credit is broadly available. And Congress enacted its own $2 trillion economic rescue package that includes cash grants to non-rich households, more generous unemployment benefits, and subsidized loan programs for both large and small businesses.
Beyond the obvious public health questions, the big issue now is how bad the secondary and tertiary waves of economic pain will get. You can still order all kinds of durable goods online, but people who’ve recently lost their jobs likely won’t be able to afford them. And people who still have jobs may not feel like taking any chances given the bleak headlines and down stock market.
That pullback in spending means lost incomes for others, which could lead to further rounds of job losses in sectors that aren’t directly impacted by the virus. A separate but related issue is that with states and cities seeing sales tax revenue plummet, they are going to need to start cutting jobs and services too. Congress has taken some limited action to help states with added coronavirus-related and health care expenses, but it’s nothing close to filling the budgetary gap that’s going to hit the public sector.
Policymakers currently seem to be assuming that the economy is kind of like a light switch that they’ll be able to turn back on when the virus is under control. But that’s not really an idea the world has a lot of practical experience with, and it’s far from obvious that it will work in practice.
All we really know is that the country is currently experiencing an unprecedented economic downturn and nobody can say when it will end. Staving off a prolonged spell of mass unemployment is going to require wartime-style mobilization efforts involving both enormous levels of government spending and a fully cooperative central bank.