|Staff Reporter |||Mar 31, 2020 08:38 PM EDT|
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The already battered U.S. economy is set to take a massive hit this year should the serious economic slowdown triggered by COVID-19 see more than 47 million Americans lose their jobs -- the largest job losses in history. Also, nearly 67 million Americans work in jobs at a high risk of layoffs due to the demand destruction caused by a coronavirus.
These extremely dire scenarios were made by James Bullard, president of the Federal Reserve Bank of St. Louis, which is part of the U.S. Federal Reserve system. Bullard pointed out the initial unemployment estimates are horrific but the plunge should be short-lived.
Job losses amounting to 47 million will send the U.S. unemployment rate shooting above 32.1%, according to projections by the St. Louis Fed.
The St. Louis Fed estimates the only upside to this horrific scenario is its brevity. Bullard said the jobless number "will be unparalleled, but don't get discouraged. This is a special quarter, and once the virus goes away and if we play our cards right and keep everything intact, then everyone will go back to work and everything will be fine."
The estimates of the worst-case scenario by the St. Louis Fed reflect the extreme vulnerability of at-risk jobs that might ultimately be lost to the government-induced economic freeze (social distancing and lockdowns) aimed at halting the spread of COVID-19.
"These are very large numbers by historical standards, but this is a rather unique shock that is unlike any other experienced by the U.S. economy in the last 100 years," said Miguel Faria-e-Castro, a St. Louis Fed economist, in a recent research paper.
That these mind-numbing job losses might not be far-fetched was proven when a record 3.3 million Americans filed initial jobless claims for the week ended March 21. Another 2.65 million Americans are expected to file initial jobless claims this week, according to economists surveyed by Dow Jones.
The job loss estimates from the St. Louis Fed shows 66.8 million American workers in "occupations with a high risk of layoff." These at-risk occupations are sales, production, food preparation and services. A further 27.3 million Americans are working in "high contact-intensive" jobs such as barbers and stylists and food and beverage service.
The St. Louis Fed ultimately estimate the unemployment figures will bring total U.S. unemployment to 52.8 million, or more than three times worse than the peak of the Great Recession. The 30% unemployment rate this year will be far larger than the Great Depression peak of 24.9%.
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