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Tens of millions of Americans will likely lose their jobs as the coronavirus pandemic sends the U.S. economy into a free fall, causing the unemployment rate to surge to levels not seen since the Great Depression, according to a St. Louis Federal Reserve estimate.
The analysis, posted by St. Louis Fed economist Miguel Faria-e-Castro, projected that unemployment could hit 32 percent in the second quarter as more than 47 million workers are laid off as a result of the pandemic, which has forced swaths of the economy to shut down. That would exceed the 24.9 percent peak during the Great Depression.
“These are very large numbers by historical standards, but this is a rather unique shock that is unlike any other experienced by the U.S. economy in the last 100 years,” Faria-e-Castro wrote in the research paper published last week.
Faria-e-Castro’s projection is even bleaker than the 30 percent unemployment rate predicted by St. Louis Fed President James Bullard earlier in the month. He says he arrived at the figures by combining data in two other blogs by Fed colleagues: One estimates that 66.8 million Americans working in high-risk occupations, such as sales, production, food preparation and service. Other research concluded that 27.3 million workers have “high-contact” jobs, like barber and flight attendant, that require them to interact frequently with other people.
Fario-e-Castro took the average of the two figures to calculate that 47 million workers may lose their jobs. If the number is indeed that high, it would bring the total number of jobless Americans to 52.81 million, he said.
The picture already looks grim: Jobless claims brought the first hard evidence last week that the novel coronavirus is bringing the nation's economy to a grinding halt. The Labor Department said that 3.28 million Americans — a record-shattering number that’s nearly five times the previous high of 695,000 set in 1982 — filed for unemployment benefits last week.
Economists surveyed by Refinitiv expect the economy shed 100,000 jobs in March, the first losses in almost 10 years and bringing to an end a record 113-month-long streak of payroll creation, while unemployment likely ticked up to 3.8 from 3.5 percent, a half-century low. Estimates vary, with the worst-case scenario projecting 4 million job losses in March alone, but economists all agree it’s likely to be ugly.
The Labor Department is slated to release its monthly jobs report on Friday at 8:30 a.m. ET.