In the past several weeks, we’ve heard some staggering unemployment numbers. First, 3.2 million Americans applied for benefits during the first week after the shelter-in-place directives. With a working population that’s about 167 million, that added two percent to the unemployment rate. A week later, 6.6 million additional Americans applied for unemployment benefits, bringing total unemployment due to COVID-19 restrictions and the resulting economic downturn to about 5.9%. Add that to the 5.8 million Americans that were unemployed as of January 2020, and we are looking at an unemployment rate reaching about 9.3% as of April. As we continue to work to decrease the spread of COVID-19, we will likely see these numbers increase. In fact, that is already happening. Shortly after the first draft of this article was completed, the Wall Street Journal reported that jobless claims totaled 26 million as of April 24, 2020.
Why does unemployment matter? The unemployment rate in the U.S. is considered a major economic indicator – assessing the overall labor market. The concept is simple – individuals lose their jobs, they have less money to spend, the demand for services and products declines, business sales drop, and other employees are laid off. It has a ripple effect on the U.S economy.
How does the current unemployment rate compare historically in the U.S. you might ask?
- In the years after the Great Depression (1929-1940), the unemployment rate ranged between 8.7% all the way to a high of 24.9%.
- From that time to 1980, unemployment stayed below 10%.
- During the recession of 1981-1982, unemployment hit 10.8%.
- During the Great Recession, unemployment reached a high of 9.9% in December 2009.
How does current employment in the U.S. compare to other global economies?
- European countries reported unemployment rates from as low as 2.9% (Switzerland) to 32% (Bosnia and Herzegovina) in March 2020. Most European countries reported rates around 3.5%.
- Asian countries reported unemployment rates between 2-5%, with China being the highest at 5.9%.
- Middle Eastern countries such as Iran, Afghanistan, Yemen, and Georgia reported much higher rates in the 10-24% range.
- Africa’s developing countries reported unemployment rates between 15-30%, while the developed countries were in the 2-5% range.
- Australia reported an unemployment rate of 5.2% as of March 2020.
- South America’s developing countries, like Ecuador and Costa Rica, had unemployment rates between 7-12%. Mexico’s rate came in at 3.6% as of March 2020. Argentina and Venezuela had unemployment rates of 8.9% and 6.4%, respectively.
Countries with unemployment rates above 10% were most likely in economic distress before the discovery of COVID-19 and related economic downturn. April 2020 unemployment tallies for almost all of these countries are expected to show significant increases.
Sources: *Bureau of Labor Statistics, www.tradingeconomics.com
Any opinions are those of Jennifer Adams and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notices.