Less than half of working Americans will have a paycheck in May as devastating coronavirus layoffs persist, economist says
- Recent job losses due to the
coronavirus pandemiccould mean that less than half of working-age Americans will be earning a wage in May, James Knightley, chief international economist at ING, wrote in a Thursday note.
- Job losses have already contributed to slumps in consumer spending, seen in retail and housing sales reports. Given that consumption makes up roughly 70% of US gross domestic product, the impact on the
economywill be severe.
- In an election year, the widespread
unemploymentwill likely mean that the call for politicians to reopen the economy will grow, irrespective of health advice, according to Knightley.
- But reopening too soon lessens the chance that the US will see a swift recovery, he said.
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The millions of Americans who have lost their jobs in recent weeks due to the
Losses in the month of April alone could push the
The estimate comes amid a huge spike in unemployment claims driven by the coronavirus pandemic. In the last five weeks, 26 million Americans have filed for unemployment insurance, a staggering, record-breaking number that's quickly dwarfed job losses seen in the Great Recession.The impact of job losses to the broader economy could be devastating, as consumer spending makes up roughly 70% of US gross domestic product, which is slated to fall as much as 40% in the second quarter. There are already signs that consumers are spending less as the coronavirus pandemic continues and job losses increase — retail sales have slumped, consumer sentiment has plummeted, and home sales have also fallen in the last month.
Given estimates for how much US GDP could slump in the second quarter, EPI projects that the net decline in employment — which includes how many workers were hired and how many quit jobs — could reach 30 million by the end of June.
In an election year, widespread unemployment likely means that calls for politicians to reopen the economy will grow, irrespective of health advice, according to Knightley.But reopening the economy too soon could lower the chances that a V-shaped recovery, or a swift rebound back to pre-coronavirus levels, is possible. Over the next few weeks, Knightley will be watching what happens in states that are reopening parts of their economy as soon as this weekend, he said.
"We would assume jobless claims will fall back sharply here, but if consumers remain reluctant to go shopping or visit a restaurant due to lingering Covid-19 fears, then employment is not going to rebound quickly," said Knightley. "It would be another signal that a V-shaped recovery for the US economy is highly unlikely."Read the original article on Business Insider
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