Massive layoffs as a result of government shutdown policies have occurred over the last 13 weeks, smothering economic activity and crushing the labor market, sending the economy into a policy-induced recession. Despite massive government spending and extraordinary monetary policy efforts, the outbreak of COVID-19 and ensuing policy responses brought the longest economic expansion in U.S. history screeching to a sudden end. However, as government restrictions are eased, there are early signs of healing starting to emerge, suggesting the economy may be bottoming and setting the stage for growth.
Initial claims for unemployment insurance totaled 1.51 million for the week ending June 13, marking the thirteenth consecutive week of massive layoffs following the implementation of business and consumer lockdowns intended to fight the COVID-19 pandemic (see chart). However, claims have slowed for the eleventh straight week after registering 6.87 million for the week ending March 28.
The current 13-week total of 45.7 million initial claims is 5.3 times the total 8.7 million job losses that occurred over 25 months versus during the Great Recession (see chart). The current total is also nearly 3 times the 15.4 million peak number of unemployed people for the Great Recession, as measured in the household survey portion of the monthly Employment Situation report (see chart).
The national Employment Situation report for May was released on Friday, June 5 and showed a gain of 2.5 million in nonfarm jobs following a 20.7 million loss in April, as reported in the establishment survey portion of the report. Total unemployed in May was 21.0 million, down from 23.1 million in April (see chart), as reported in the household survey portion of the report.
The unemployment rate fell to 13.3 percent (though the Bureau of Labor Statistics noted that improper responses likely underreported the rate and is likely about 3 points higher, near 16 percent) versus 14.7 percent in April (and nearly 20 percent if corrections were made to the April number). The previous cycle peak in the unemployment rate was 10 percent in October 2009 while the highest unemployment rate since 1950 came in November 1982 at 10.7 percent. Though data collection was much less reliable, the unemployment rate following the Great Depression was estimated to have peaked at about 25 percent in 1933.