We’ll Be Lucky If Unemployment Stops at 20 Percent

Another Thursday, another wild number of layoffs in America. 

Initial claims for unemployment insurance rose 5.2 million last week, taking the four-week total to 22 million. Such numbers beg for context—and I have some. 

The largest comparable four-week filing number was 2.7 million, back in the early '80s. That was 12 percent of the number of people asking for help in the last four weeks.

Or compare the 22 million layoffs over the past month to the 9 million jobs lost in the whole of what we used to call the Great Recession that followed the bursting of the housing bubble. The unemployment rate then peaked at 10 percent. We’ll be lucky if we peak at twice that rate in this downturn.

As it happens, 22 million is also roughly the same number of jobs that were added during Bill Clinton’s eight years in office during the boom years of the mid and late '90s. In other words, one of the most bountiful periods of recent American history—at least when it comes to employment—has been undone in a matter of a few weeks (true, the labor force was smaller then, but you get the point).

But we need an even broader context to wrap our heads around numbers of this magnitude. Obviously, they mean real hardship for the millions of laid off workers without paid leave or much in the way of savings to fall back on. (In fact, savings rates are zero or negative for families in the bottom half of the income scale.) From a policy context, the federal government must act as quickly as possible to offset as much of this hardship as it can, through sending relief checks to households and, most importantly for the laid off population, unemployment compensation.

The claims numbers imply state unemployment offices are processing record numbers of claims, but we know they’re having great difficulty drinking from the firehose of demand for benefits. (A scene last week in Hialeah, Florida, of a packed line for paper claims forms was the stuff of nightmares in this viral moment.) The CARES Act—the $2.2 trillion stimulus passed a few weeks ago—smartly offered these benefits to a new group of workers, never-before covered: gig workers, independent contractors, and the self-employed. It also very significantly added a $600 per week plus-up for all comers. 

But both new additions, especially the former, are facing implementation challenges. The feds need to quickly allocate new resources to the state systems to clear this logjam.

What do 22 million layoffs mean for the future of the economy? At one level, such numbers should create great pressure to reopen, and will only add fuel to the fire under President Trump and Republican governors who desperately want to do so, epidemiology be damned. After all, these cascading layoffs are no mystery. They’re not the result of bursting credit bubbles, shady finance, or some global commodity shock, like the oil-driven downturns of decades past. They’re the result of switching the economy off to fight the virus.

The problem, of course, is that we can’t safely flip the switch back on. That’s a point large majorities agreed with, according to a recent poll which, as reported by Politico, found that 81 percent of voters said Americans “should continue to social distance for as long as is needed to curb the spread of coronavirus, even if it means continued damage to the economy.” 

The dispositive fact here is that humans are naturally risk-averse, and we’re even more so given an invisible enemy. But this insight also points the way forward: testing for the virus makes the invisible visible.

Even as we post numbers like this morning’s, with aggressive testing, contact tracing of the infected, and yes, re-quarantining in places where flare ups occur, the economy can, as Gov. Andrew Cuomo puts it, go from red to green through yellow.

To be clear, we’ll likely be parked at yellow for a long time—not a few weeks, but more like a year. But yellow’s not only much better than red, it’s also the only way we can begin to whittle away at our risk aversion and feel safe about restarting our lives.

Exactly what this looks like is hard to describe because we’ve never done it before. Abstractly, I can tell you that it’s some moving average of commerce and distancing. Factories operating in scaled-down shifts, while testing workers for fevers as they show up. Restaurants with tables far apart. Colleges with rolling groups of students coming in conditional on testing results. Sports on TV but with few or disbursed crowds in the stands.

And it will be two steps forward, one step back, as we’re seeing in other countries that are in the process of re-opening. We won’t be done with quarantines until there’s a vaccine, but again, if we’re lucky and smart—that is, lots of testing and tracing—those quarantines will be geographically specific, not nationwide.

That’s how to wrap your head around these layoff numbers. They’re terrible, no question, but by helping the people embodied in these statistics in the near-term, and plotting a course to gradually, slowly restart the economy in the longer run, we can start to chip away at the damage and begin down the path toward the new normal. Whatever that may be.