Unemployment Could Reach Levels Similar to the Great Depression
Many states in the United States are beginning to reopen their economies gradually. Businesses are starting to resume operations, albeit with strict social distancing and hygiene measures in place. More people are stepping out, wearing face masks. However, despite these efforts, the impacts of months of lockdown are already being felt. According to forecasts by Goldman Sachs, the situation might worsen before it gets better.
Currently, around 30 million Americans have filed for unemployment since the start of the pandemic, experiencing either reduced working hours or complete job loss. This surge has raised the unemployment rate to a concerning 15%. Goldman Sachs predicts that if this trend continues, we could witness unemployment rates soaring up to 25% this year, a figure not seen since the Great Depression of 1929. When factoring in individuals finding only part-time work and those avoiding work due to health concerns, more than a third of working-age adults could be without jobs.
Goldman Sachs economists remarked, “[P]rolonged weakness could cause severe scarring effects such as permanent layoffs and business closures that delay the recovery.”
Although there might be a slight improvement in the latter part of 2020 as businesses reopen, Goldman Sachs anticipates that the unemployment rate will likely remain no lower than 10%, similar to the peak of the 2009 recession. A return to the pre-pandemic economic conditions of the U.S. may take several years.
During a webcast for the Peterson Institute of International Economics, Federal Reserve Chairman Jerome Powell highlighted the magnitude of the current economic downturn, stating, “The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II.” Powell also mentioned that almost 40% of lower-income households faced at least one job loss in March. He added, “This reversal of economic fortune has caused a level of pain that is hard to capture in words, as lives are upended amid great uncertainty about the future.”
