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Largest economic decline since the Great Depression

New claims for Unemployment Insurance now total 27 million over the last 5 weeks
By Masao Suzuki |
April 24, 2020
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Largest economic decline since the Great Depression

San José, CA - More than 4 million more Americans filed for Unemployment Insurance, or UI, benefits last week according to the latest Labor Department report on Thursday, April 23. This brings the total number of new claims over the last five weeks to 27 million.

While the number of new claims did drop by a million new claims from the week before, it was still the highest number on record aside from the previous two weeks. Adding last week’s jobless workers to the unemployment rate brings it to more than 20%, closing in on the Great Depression record of 25% unemployment. There are still many laid-off workers who have not been able to apply for Unemployment Insurance benefits, and layoffs are spreading. Just in the last week, mines, factories, colleges, libraries, hospitals and transportation companies announced more job cuts and closings - all of which won’t be counted until next week’s report.

Other economic reports showed the pain spreading throughout the capitalist world. The IHS Market Purchasing Managers Index, or PMI, for April saw record declines in the United States, the eurozone, and Japan. These indexes of business activities have a break-even level of 50: more than 50 is an expansion, less is a contraction. In Japan the index fell to 27.8 in April, to 27.4 in the United States, and a stunning 13.5 in the eurozone, less than half the level following the 2008 financial crisis.

This contraction in the United States would reflect a 30% annual rate of decline in Gross Domestic Product for the second three months of the year, April, May and June. One of the big four U.S. banks made an even more dire forecast of a 35% rate of decline in Japan, 40% in the United States and 45% in the eurozone. Declines of this size are like squeezing a year of contraction during the worst decline of the Great Depression from 1930 to 1932 into a three-month period.

The COVID-19 pandemic is also beginning to disrupt food supplies in the United States as more and more meat-packing plants have to shut down because of infections among their workers spreading to nearby communities. Farmers are having to plow their crops under and dump their milk as they lose buyers and workers. There is a major outbreak of the coronavirus at an Amazon warehouse near New York City.

The growing production problems caused by the pandemic shows that the “economy vs. health” argument is a fundamentally false one. What is hurting the economy is the pandemic, and capitalism’s inability to deal with it - unless and until the virus is contained, more pain will come to the economy, to workers and their families, and to communities as workplace-centered outbreaks grow.

Along with stories of big corporations taking advantage of the federal relief program that was supposed to be for small businesses, others are taking advantage of the pandemic to boost their profits at the expense of working people. The country’s largest egg producer is being investigated for price gouging, leading to rising prices for eggs.

Last but not least, more and more local and state governments are warning of budget cuts and layoffs as their tax revenues fall. There was supposed to be aid for them in the latest relief bill, but Republican opposition in the Senate gutted that aid, now limited to more small businesses and hospitals. Republican Senate leader McConnell even said that states should be allowed to go bankrupt, allowing them to slash pensions and break union contracts. This is another assault on public sector workers, and could lead to drastically reduced education and other services across the country.