U.S. unemployment rate soars to 14.7%, worst since Depression era

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WASHINGTON – The U.S. unemployment rate jumped to 14.7% in April, the highest level since the Great Depression, as many businesses shut down or severely curtailed operations to try and limit the spread of the deadly coronavirus.

The jobless rate was pushed higher because 20.5 million people abruptly lost their jobs, the Labor Department said Friday, wiping out a decade of job gains in a single month. The speed and magnitude of the loss defies comparison. It is roughly double what the nation experienced during the entire 2007-09 crisis.

As the virus’s rapid spread accelerated in March, President Donald Trump and numerous governors took steps to put the economy in deep freeze in an effort to minimize the spread. This led businesses to suddenly shed millions of workers each week. Analysts warn it could take many years to return to the 3.5% unemployment rate the nation experienced in February in part because it’s unclear what a new economy will look like even if scientists make progress on a vaccine, testing, and treatment.

Trump, though, claimed in a Fox News interview Friday that there would be a quick rebound.

“Those jobs will all be back, and they’ll be back very soon,” Trump said.

But Trump’s likely opponent in November’s presidential election, former vice president Joe Biden, said in remarks broadcast by NowThis News that the jobs report illustrated “an economic disaster” that was “made worse” in part by the White House’s slow and uneven response to the crisis earlier this year.

Despite the news about layoffs, the stock market rose Friday with the Dow Jones industrial average up 455 points. Stocks have shot up since early April, largely because of record levels of government aid for businesses and optimism that a cure is near. The lesson from the last recession, however, was Wall Street recovered long before the rest of the country.

“This is pretty scary,” said Lindsey Piegza, chief economist at Stifel. “I’m fearful many of these jobs are not going to come back and we are going to have an unemployment rate well into 2021 of near 10%.”

The stark employment data could create even more urgency for a number of governors who are debating when to re-open parts of their state economies. Many are weighing the health costs and the economic toll, a harrowing choice, analysts say. Some hope that re-opening quickly will get people back to work, but the job losses are so large that it’s unlikely many will be able to return, especially with many businesses operating at partial capacity and parents wrestling with childcare challenges.

The sudden economic contraction has forced millions of Americans to turn to food banks and seek government aid for the first time or stop paying rent and other bills. As they go without paychecks for weeks, some have also lost health insurance and even put their homes up for sale. There’s a growing concern that the damage will be permanent as people fall out of the middle class and young people struggle to ever launch careers.

“The impact on women and youth is particularly shocking and disproportionate,” said Lisa Cook, a professor at Michigan State University and former economic adviser to Obama. “Those who grew up during the Great Depression were hesitant to spend for the rest of their lives.”

Job losses began in the hospitality sector, which shed 7.7 million jobs in April, but other industries were also heavily impacted. Retail lost 2.1 million jobs and manufacturing shed 1.3 million jobs. White-collar and government jobs that typically prove resilient during downturns were also slashed, with firms shedding 2.1 million jobs, and state and local governments losing nearly a million. More state and local government jobs could be slashed in the coming weeks as officials deal with severe budget shortfalls.

There was even 1.4 million layoffs in health care last month, as patients have been putting off dental care, minor surgeries and other things beyond emergency care.

April’s unemployment rate was horrific by any standard, yet economists say it underestimates the extent of the job losses. The Labor Department said the rate would have been about 20% if workers who said they were absent from work for “other reasons” had been classified as unemployed or furloughed. The official figure also excludes the record 6.6 million workers who left the labor force entirely and the 5 million who were forced to cut their hours and work part time last month.

What’s clear so far is that Hispanics, African-Americans, and low-wage workers in restaurants and retail have been the hardest hit by the job crisis. Many of these workers were already living paycheck-to-paycheck and had the least cushion before the pandemic hit.

“Low-wage workers are experiencing their own Great Depression right now,” said Ahu Yildirmaz, co-head of the ADP Research Institute, which focuses on the job and wage trends.

The unemployment rate in April jumped to a record 18.9% for Hispanics, 16.7% for African-Americans and 14.2% for whites.

Women’s unemployment was nearly three points higher than men’s unemployment, another disparity that largely reflects the prevalence of women in hard hit hospitality and retail jobs.

It’s the largest gender-unemployment gap on record – the previous high was set during the Great Recession. That time, it was the men who were hit hardest.

Education has emerged as one of the downturn’s starkest divides. While many highly educated white collar workers have been able to do their jobs from home, low-wage workers don’t have that luxury. The result is workers without any college education are losing their jobs at about four times the rate of their college-graduate peers.

In April, the unemployment rate soared to 21.2% for people with less than a high school degree, surpassing the previous all-time high set in the aftermath of the Great Recession.

While Congress has approved nearly $3 trillion in aid, it’s been slow to arrive for many. Millions are still battling outdated websites and jammed phone lines to try to get unemployment aid and a relief check. Economists are urging Congress to act now to ensure aid does not end this summer when the unemployment rate is still likely to be at historic levels.

“This unemployment rate should be a real kick in the pants — and maybe even the face,” said economist Claudia Sahm, a former Federal Reserve staffer and expert on recessions. “Congress has to stay the course on aid until more people are back at work.”

There’s a growing consensus that the economy is not going to bounce back quickly like Trump wants, even as more businesses re-open this month. Many restaurants, gyms, and other firms are only able to operate at limited capacities, and customers are proving to be slow to return as they are fearful of venturing out. Many businesses also won’t survive. All of this means the economy is going to need far fewer workers for months — or possibly years — to come.

“It’s not like turning a light switch and everything goes back to where it was in February,” said Loretta Mester, president of the Federal Reserve Bank of Cleveland, in an interview. “We depopulated everything quickly. Repopulating it will take a lot longer.”

Mester said the best cure for the economy at this point is likely more virus testing, monitoring and investment in a covid-19 treatment. Without those measures, people are unlikely to go out and spend again even if stores and restaurants re-open.

“There’s still a lot of uncertainty about the second half of the year,” Mester said. “Consumer confidence has been really, really bad since mid-March.”

Many businesses initially did temporary layoffs because executives believed the shutdowns would be short-lived. About 18 million of the unemployed in April said their layoff was temporary, according to the Labor Department data, versus only about 2 million who said their job loss was permanent. But permanent layoffs are expected to escalate as time goes on. The Labor Department surveyed workers in mid-April.

“This is a catastrophe. When things go over a cliff, they usually they don’t recover quickly,” said David Blanchflower, an economics professor at Dartmouth College.

Many of the newly unemployed face strains they didn’t imagine just a few months ago.

Louise Lara was told on March 20 that she was being put on a “temporary layoff” from her job at a spa in a popular Florida panhandle resort town. She was optimistic about returning to work and initially used the time off to take online classes.

But as the weeks have ticked by, reality has set in. Now she thinks she’ll never return. Her company just notified her that her health insurance will terminate at the end of May — in the midst of a pandemic.

Lara has tried repeatedly to file for unemployment benefits in Florida, but six weeks after her first attempt on the outdated website, she has yet to be approved. In desperation, she mailed in a paper application. Florida has only started paying about 25% of the 1.8 million unemployment claims.

“It’s been six weeks since I was furloughed. I presumed Florida would have the unemployed system up and running by now, but it’s not. It’s set up to fail,” Lara said.

Erin Huyler runs a popular child care service in Key West, Florida, that was forced to close in mid-March. She’s not sure when it will be safe to re-open, especially since many of children she watches are the kids of travelers visiting from other states and nations.

Congress approved additional money for the unemployed and expanded the program so gig workers and the self-employed like Huyler could apply. But Huyler is indicative of the experience of millions still waiting for aid to arrive. Over 7,500 people have written in to The Post about how they are still waiting for aid.

Huyler has yet to get the relief check or unemployment money. finally saw a deposit in her bank account for the Small Business Administration “emergency loan” she applied for weeks ago.

“That was helpful, but $1,000 is not a lot of money after seven weeks of unemployment,” Huyler said.