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Layoffs in April alone could push the unemployment rate to 16 percent, James Knightley, chief international economist at ING, wrote in an analyst note last week. If an additional 10 million Americans file for benefits in May, that would push the unemployment rate to 22 percent — just below the peak of 25 percent in 1933 during the Great Depression.
“It is clear that while the initial wave of job losses were concentrated in retail and hospitality due to the shutdowns, it is spreading to suppliers and to other industries,” Knightley wrote. “Terrible manufacturing surveys point to job losses and the business service sector is certainly not going to be immune.”
Knightley’s estimate comes amid a bleak backdrop: In the six weeks since states implemented strict stay-at-home mandates and directed nonessential businesses to close, more than 30 workers have filed for first-time unemployment benefits, bringing the jobless rate close to 18 percent.
In an election year, a surge in unemployment could lead politicians to pressure states to reopen the economy, according to Knightley.
Several states have started to navigate reopening after President Trump last week unveiled several key measures states should meet before lifting stay-at-home mandates, including a downward trajectory in confirmed cases of COVID-19, the respiratory illness caused by the virus, over a 14-day period. Public health officials have warned that reopening too early could trigger a resurgence in cases and deaths from the virus.
Several Southern states, including Georgia, Tennessee and South Carolina made moves last week to reopen businesses, though it's unclear whether they meet the necessary criteria.
"We would assume jobless claims will fall back sharply here, but if consumers remain reluctant to go shopping or visit a restaurant due to lingering Covid-19 fears, then employment is not going to rebound quickly," Knightley wrote. "As such it would be another signal that a V-shaped recovery for the US economy is highly unlikely."
Reported cases in the U.S., the world’s hardest-hit country, topped 1 million Thursday, with nearly 61,000 deaths caused by the disease, according to data compiled by Johns Hopkins University.