More than 38 million Americans have filed for unemployment over the last nine weeks. This is a huge increase when compared with what we call now the Great Financial Crisis (GFC) of 2008-2009. In the week ending May 16, the seasonally adjusted initial claims fell to almost two-and-a-half million, decreasing 250,000 from the previous week’s revised number.
The Labor Market is Taking a Big Hit
The good news is that the initial claims for unemployment fell. However, the big question now is will these jobs return once the economy opens up once again?
Policy makers talk about a “new reality” and the “new normal” after lifting lockdown restrictions. Effectively, it means that planes will fly with a reduced number of passengers, restaurants can open at limited capacity, and further restrictions along those lines.
For businesses, big and small, the implications are that they won’t need the same number of employees as output declines together with demand.
The report also showed that continuing claims reached 25 million people, another number showing the impact of the situation. More than 1 in 5 American workers have filed for unemployment in the last nine weeks, with some states like Georgia, Kentucky, or Hawaii leading the unemployment race. Claims here represent between 35%-40% of state employment level.
One may argue that the economy is reshaping due to the coronavirus pandemic, and new businesses will emerge. Also, the state will become a bigger employer than it has ever been before. Both may be true.
However, as the developed world soon steps into the third month of the pandemic, job openings have dropped as well. According to Glassdoor, almost 3 in 10 US jobs have disappeared since the start of March, while job openings declined 29% from early March to mid-May.
The good news is that the decline is decelerating as states relax restrictions and establishments reopen. Demand for workers in security, food services, and even retail has begun to pick up on a weekly basis.
That said, the worst is far from over. An interesting way of finding out if and when the job market recovers, is to have a look at the Internet searches for the “unemployment benefits” or “file for unemployment.” If there’s a fading interest, it signals improvements sooner rather than later.
Last week, Americans’ search interest for the term “file for unemployment” was similar to the week before.