One week after blowing past the previous record for unemployment claims, the number of Americans filing for benefits doubled to more than 6 million as more and more states call for people to stay home to stop the spread of the novel coronavirus.
About 3.34 million filed unemployment claims for the week ending March 21, and that number rose to a seasonally adjusted 6.65 million for the week ending March 28, according to the Department of Labor’s latest report.
“People have been tossing around superlatives like ‘catastrophic’ and ‘unprecedented.’ But even those don’t do these numbers justice,” Banyan Hill Publishing economist and economic historian Ted Bauman said. “This is simply one of the most incredible events in economic history. I can’t think of any case where this large a proportion of the population of a country has suddenly been ejected from its economic system.”
The “ejection” from the economy is because more and more people are out of work amid social distancing and stay-at-home orders across the country, closing many nonessential businesses in an attempt to slow the spread of the coronavirus, which causes the disease COVID-19.
The U.S. now has the greatest number of COVID-19 infections in the world with more than 214,000 confirmed cases. Nearly 5,000 have died so far, according to Reuters’ latest tally, and President Donald Trump said this week as many as 100,000 to 240,000 Americans could ultimately die.
“I want every American to be prepared for the hard days that lie ahead. We’re going to go through a very tough two weeks,” Trump said Tuesday.
Expect Unemployment Claims to Keep Rising
About 8.7 million unemployment claims came amid The Great Recession from 2007-2009, and economists expect claims to keep rising further and faster in part due to the historic $2.3 trillion federal coronavirus relief package passed by Congress and signed by Trump on March 27.
Under the Coronavirus Aid, Relief, and Economic Security, or CARES Act, self-employed and gig workers who previously could not file for unemployment now can. They can receive up to an additional $600 a week for four months, which is about $15 an hour for a 40-hour work week.
The federal minimum wage is $7.25 an hour and average unemployment benefits were about $385 a month at the beginning of 2020, meaning some people are better off not working at all, which will only strain the system further.
“Why work when one is better off not working financially and healthwise?” Loyola Marymount university business economics professor Sung Won Sohn told Reuters.
Recession or Depression Watch?
Bauman, Editor of The Bauman Letter, which aims to help defend against various threats to your privacy and wealth, said the U.S. is already in a recession and the only question now concerns how bad it will get.
“First-quarter GDP numbers haven’t been published yet, and the formal definition of a recession requires two consecutive quarters of declines. But we are obviously in a recession,” Bauman explained. “The key question is whether we are headed for a depression. A depression would be characterized by many quarters of GDP decline and stagnation, deflation in prices, widespread joblessness and cutbacks on investment across the economy.
“The current stimulus legislation is designed to avoid that by allowing businesses to maintain cash flow so they can pay their workers and suppliers. The idea is to keep the economy in ‘suspended animation’ until the virus threat recedes and the economy can resume.”
However, with unemployment claims exploding in unprecedented numbers, it’s clear that isn’t working, Bauman said, particularly regarding the aforementioned gig workers.
“I haven’t seen detailed analysis of jobless claims yet, but I suspect most claimants were working in the so-called ‘gig economy’ or in low-wage retail occupations. The U.S. economy has been transformed over the last decade into one where almost all new job growth occurs in unstable occupations,” he explained. “Companies like Uber, Instacart, Grubhub and other ‘disruptors’ have created a business model where the company itself consists of its executives and its technical team, whereas the great majority of people who work for them are considered contractors rather than employees.
“The retail sector has been similarly transformed. In this economy, workers are treated as a disposable commodity, not as human beings, which is why we’re seeing such rapid increases in joblessness.”
Editor’s note: Be sure to check out Ted Bauman’s book, “Pay ‘0’ Taxes,” to take on the tax man — and win.