Unemployment could skyrocket to a record high as the coronavirus pandemic puts millions of Americans out of work, according to a study from the Federal Reserve Bank of St. Louis.
As many as 47 million Americans could be subject to layoffs in the second quarter, which added to the amount laid off in February would mean 52.81 million people unemployed.
That would send the unemployment rate to a massive 32% according to the study.
“These are very large numbers by historical standards,” wrote Federal Reserve Bank of St. Louis economist Miguel Faria-e-Castro in a blog post about his “back of the envelope” calculations for the labor market going forward. “But this is a rather unique shock that is unlike any other experienced by the US economy in the last 100 years.”
The US unemployment rate in February was 3.5%.
If it surged to 30% in the second quarter, it would top the highest rate on record of nearly 25% during the Great Depression.
The shocking prediction came as Macy’s announced it will furlough a majority of its 130,000 workers.
The retail giant on today said it is transitioning to an ‘absolute minimum workforce’ needed to maintain basic operations.
It says it will temporarily stop paying tens of thousands of employees who were thrown out of work when the chain closed its stores in response to collapsing sales during the pandemic.
Employees who are enrolled in health benefits will continue to receive coverage with the company covering 100 per cent of the premium.
Macy’s closed all of its stores this month, more than 500, as the coronavirus spread.
To survive, it has suspended its dividend, drawn down its line of credit, frozen hiring and spending, and cancelled orders. Macy’s is now evaluating all financing options.
The retailer said in a statement Monday: ‘[The covid-19] outbreak continues to take a heavy toll on Macy’s business.
‘We have lost the majority of our sales due to the store closures.’
The study came just before weekly US jobless claims data released on Thursday spiked to a record 3.28 million for the week ending March 21.
The weekly report of Americans who had filed for unemployment insurance was one of the first indicators of just how bad the coronavirus pandemic could be.
Faria-e-Castro began his analysis working from a previous Fed report that nearly 67 million Americans work in occupations that are at high risk of layoffs due to social distancing measures, such as those in sales, production, and food services.
Another report also accounted for 27.3 million workers in contact-intensive positions such as barbers, hairstylists, and flight attendants, who may be at risk during the outbreak.