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Unemployment highest since the Great Depression

Employment report understates total job losses
By Masao Suzuki |
May 9, 2020
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San José, CA - On Friday, May 8, the U.S. Department of Labor released their monthly Employment Report for the month of April. The report said that the official unemployment rate soared from 4.4% in March to 14.7% in April, a jump of more than 10% in just one month. This is the highest monthly unemployment rate on records going back to 1948, and the worst since the Great Depression of the 1930s when unemployment peaked at about 25%.

As usual, oppressed nationality workers (African American, Chicano and Latino, and Asian American) were hardest hit. The unemployment rate for Chicanos and Latinos hit a record high of 18.9%, followed by African Americans at 16.7%, and Asian Americans at 14.5%. In contrast, unemployment for white workers stood at 13.4%, still the highest on record. Women were also hit hard, unlike most recessions where more men lose their jobs, as the unemployment rate for women was 15.5%, 2.5% higher than men.

Even though the unemployment rate was the worst in the last 80 years, it still understated the damage to people’s livelihoods. To be unemployed in the government’s count, you have to be out of work AND looking for work. More than 6.4 million people had lost their jobs but were not looking for work. If they had been counted, the unemployment rate would have been 18.8%, not the 14.7% reported.

The official unemployment rate also doesn’t count people who had their hours cut because of a bad economy. There is an alternative rate, labeled “U-6” by the Labor Deportment, that showed that the percentage of workers who are working part-time because full-time jobs aren’t available almost doubled from 3.5% in March to 6.8% in April.

The second part of the employment report was on actual job losses. In April there were more than 20 million jobs lost, probably the greatest one-month total ever. This means that the first two months of today’s recession, March and April, have wiped out all of the job gains since the last recession ended in 2009.

Leisure and hospitality jobs, including restaurants, hotels, and entertainment, were hardest hit, losing 7.7 million jobs, more than a third of the total job loss. The devastation in this sector can be seen in that workers in these industries had less than half the total hours worked in April as compared to March. This fall of more than 51% would include both those who lost their jobs and those whose hours were cut. These industries also are heavy employers of Chicanos, Latinos and women, who had among the highest unemployment rates.

There was almost no industry that was safe from the layoffs. State and local governments cut almost a million jobs - and worse is yet to come and more and more local and state governments are facing big tax revenue losses from the job losses. Even health care cut more than 2 million jobs, despite there being a pandemic.

Both reports actually understate the losses in April and their surveys ended on April 12. In the almost three weeks from that date to the end of April, more than 11 million more claims for unemployment insurance were filed. If these lost jobs are added to unemployment rate, this would push the unemployment rate to about 26%, as bad as the worst of the Great Depression. In addition, many laid-off workers has still not been able to file for unemployment insurance due to run down state systems.

The trillion-dollar questions are first, “When will the economic decline stop?” and second, “What will the recovery look like?” While the weekly rate of new claims for unemployment insurance have declined to a bit more than 3 million, this is more than four times as high as the pre-pandemic record of 695,000 new claims back in October of 1982, during the worst of the 1981-82 recession. When jobs finally began to come back from the last recession in March of 2010, there were fewer than 500,000 new claims being filed, or less than a sixth of the current rate. So while the losses are getting smaller, the bottom is not clearly in site.

Investors on Wall Street are confident that the economy will bounce back quickly, as stocks rose despite the record job losses. The S&P 500, the broadest widely watched index of stock prices, rose more than 1% on Friday. One of the factors boosting stock prices is that many large corporations, such as General Motors and McDonalds, are continuing to pay dividends to their stock owners while laying off workers, slashing hours of work and cutting pay.

But the depression is already real for millions of workers who are having to line up at food banks, delaying paying bills, or even delaying rent or mortgage payments. Others have been unable to file for unemployment, or having filed, have not received any benefits. Millions of people still have not been paid the $1200 promised by the federal government.

A big threat to any recovery is the growing budget crisis of state and local governments, which are already cutting jobs. The state of California is facing a $54 billion deficit for the next two months and the 2020-2021 fiscal year, which is almost one-third of the state’s annual budget. While Democrats in Congress are preparing a bill to aid state and local governments, President Trump and Republican Senators have been attacking this idea. Trump claimed that it would be a “bailout” of Democratic Party-led states while Republican Senator Lindsey Graham said that more aid would come “over my dead body.” It is likely that Trump and the Republican-led Senate could block such needed aid, leading to more cuts in jobs.

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