The world’s leading economy, the United States, is beginning to feel the terrible consequences of the spread of the coronavirus pandemic. The crisis will affect tens of millions of Americans – statistics already show signs of mass unemployment. What is happening to American jobs and what are the consequences?
Some time ago, the phrase “economic crisis in the United States” could be found on overseas alarmist sites that talk about the end of the world, the Illuminati conspiracy and at the same time selling survival kits. However, on Thursday evening, Bank of America officially trumpeted the onset of the economic and financial crisis in the United States to the whole world.
According to the forecast of leading analysts of one of the largest investment banks in the United States, due to the spread of COVID-19 coronavirus infection, the American economy plunged into recession. At the same time, there will be a quarterly drop in GDP, a General contraction of the economy, a drop in consumer demand and – one of the most painful topics of domestic policy – a sharp jump in unemployment. “The US is expecting a terrible second quarter, and the country could lose up to one million jobs in March,” Kevin Hassett, a former trump economic adviser, said on CNN on Tuesday.
A month ago, on February 20, 49% of Americans (according to Rasmussen Reports) shared the view that since the election of President Donald Trump in November 2016, the national economy has felt good, while only 24% of survey participants saw a deterioration. But on March 18, the Gallup Institute recorded a sharp (by 19 points) drop in the index of economic confidence of Americans: from +41 in February to +22 in March.
The economic confidence index is based on Americans ‘ assessment of current economic conditions and their perceptions of whether the national economy is improving or getting worse. The index has a theoretical maximum of +100 and a theoretical minimum of -100, so the current index of +22 indicates that Americans are still inclined to assess the state of the economy positively (the survey was conducted before the latest news from the labor market). However, Gallup employees have not recorded such a sharp drop since the beginning of the recession in February 2001.
In dealing with the aftermath of the 2008 financial crisis, the Obama administration focused on unemployment rates. Perhaps this is also why, by the end of the second term of the 44th us President in the White House, unemployment fell below the psychological mark of 5% and amounted to 4.6%. This was achieved, among other things, by some manipulations with state statistics. Official unemployment figures were published according to the U-3 scheme, which did not take into account people who stopped receiving unemployment benefits (they are paid in different States for different periods), while they did not find a job, but we’re already removed from the number of unemployed. Independent economists prefer the U-6 scheme, which takes into account the” structural ” unemployed Americans who have long been ineligible for benefits but did not get a job, as well as the part-time population that continues to look for work. Based on the U-6 data, economists got a figure of 9.3% or even slightly higher.
Donald Trump actively tackled unemployment and a year ago brought it, according to official data, to a fantastic figure for the market economy of 3.6%. This became the most powerful argument in the election campaign of the current President, and trump never tired of reminding about his success in this area from the stage in literally every speech. But it seems that after the events of this week, Trump will have to forget about it.
Suddenly out of work, Americans brought down government websites that register those who want to receive unemployment benefits. Users reported problems with disabled sites from all over the United States, from Oregon to the district of Columbia. On Tuesday, New Jersey Governor Phil Murphy said at a news conference that the state had a “record number of applications for unemployment benefits” on Monday, which led to the collapse of the system. According to Bloomberg, the seriousness of the events helps to understand the historical context: the last time such an influx of people wishing to receive benefits was recorded in 2005 during hurricane Katrina and with the beginning of the” great recession ” in 2007.
According to the hundred-page plan of the Federal government, announced by Trump at the end of last week, the coronavirus pandemic in the United States can last up to 18 months due to several waves of COVID-19 spread, which can lead to a shortage of many goods and serious problems for the national health. In this regard, experts have already proposed the so-called social distancing in its most extreme manifestation, which implies both staying mostly at home and minimizing close contact with people.
Service sector employees were among the first to experience social distancing: shops, bars, restaurants, and hotels voluntarily close for an indefinite period or change their work schedules, reducing staff. According to the OpenTable resource, the number of seats in American restaurants and the number of visitors has already decreased by 48% compared to the same period last year and decreased by more than 20% since March 10.
The national restaurant Association of the United States has asked the government and Congress for help, claiming that over the next three months, the industry will face a $ 225 billion reduction in revenue and lose between five and seven million jobs. The full economic impact, according to the Association, will be $ 675 billion, because every dollar spent by Americans in restaurants creates an additional two dollars in other sectors of the economy. Similar requests for tax incentives, subsidies, and grants were made to the government by American airlines, travel and hotel associations.
Meanwhile, only in Ohio, where an emergency was declared last Sunday due to 67 confirmed cases of coronavirus and all bars and restaurants were closed, there was a 592% increase in the number of residents applying for benefits in the state during the week. The situation is similar in other States. For example, in Connecticut, ten times as many people applied for benefits in a week as seven days earlier. On Thursday, it became known that Simon Property Group, the largest owner of shopping centers in the country, is closing all 209 shopping facilities due to an outbreak of coronavirus. On Wednesday, Walmart announced that it was cutting store hours for the second time in a week for the same reason.
But it’s not just the service sector that is suffering: us manufacturing and automotive industries are having problems. During the week, the big three automakers – Ford, General Motors and Fiat Chrysler – suspended production “in the interest of protecting workers from a coronavirus outbreak.” According to estimates by the Associated Press, 150,000 people will be forced to go on an unplanned vacation.
It is curious that the favorite of all America, Elon Musk, has not yet stopped the California plant for the production of electric cars, and its workers who are ill, unable to work or frightened by the coronavirus, as Business Insider reports, can sit at home. But only on account of their paid vacation, moreover, they can “borrow” up to 80 hours on account of future paid vacations. The left-liberal American press may not forgive such a blatant violation of ideals.
On Tuesday, us Treasury Secretary Steven Mnuchin warned senators that the coronavirus pandemic could increase unemployment in the US to 20%, which with a workforce of 160 million people means a sudden jump of 33 million unemployed at once.
According to some sources, during the great depression, in 1933, unemployment was 25%. According to the Brookings Institution (Washington), more than 50 million Americans between the ages of 18 and 64 are considered low-paid and low-skilled workers, have insurmountable debts and limited savings, which is why they are most vulnerable to job losses.
Meanwhile, a joint survey by NPR, PBS NewsHour and Marist from March 13-14 showed that COVID-19 is already hitting the wallets of Americans: one in five families in the US has faced the dismissal or reduction of working hours of someone from their members. It is interesting that humanitarian organizations have also suffered in their own way: they cannot distribute food to those in need, as there is a catastrophic shortage of volunteers, who have never been in short supply before.
In these conditions, following Bank of America, Goldman Sachs and Morgan Stanley economists also recognize the beginning of a recession. “Today, we assume that GDP in the second quarter will fall by 10% year-on-year after falling by 2% in the first quarter,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. It allows for the loss of 10 million jobs over the next two to three quarters.
It is not known whether the financial stimulus package proposed by the Trump administration will help the American unemployed, but it is already clear that the American economy and labor market may undergo significant changes.
“To stop the coronavirus, we need to radically change almost everything we do: how we work, play sports, communicate, shop, monitor our health, teach our children, take care of family members,” publicist Gideon Litchfield says in an article for the journal of the Massachusetts Institute of technology. – We all want things to get back to normal faster. But most of us probably haven’t realized yet – but we will soon – that in a few weeks, or even a few months, the situation won’t be back to normal. Some familiar things will never be the same.”