Bank of America has come out with a frightening prediction—by next week, three million people will have filed for unemployment benefits due to the economic effects precipitated by the coronavirus.
The coronavirus outbreak has substantially changed the business landscape. Cities have been shut down. Workers are told to stay home and self-quarantine themselves. This has rapidly escalated from a health crisis to a stock market crash to a free-falling job market.
Sectors, such as airlines, travel, hospitality, restaurants, retail, sports and entertainment and cruise lines have all been severely impacted. Consequently, large amounts of people will be downsized or their hours drastically cut.
Michelle Meyer, chief economist for Bank of America Merrill Lynch, said in a note, “Our forecast is based on a compilation of news reports which show roughly 270k applications have been filed over 19 states through Wednesday.” She added, “Extrapolating from these numbers, initial jobless claims will easily be in the millions, showing the immense economic disruption the COVID-19 outbreak is having on the U.S. economy.”
Investment bank Goldman Sachs predicted about 2.4 million people will file claims. In its analysis, Goldman estimates huge decreases in revenue for at least six major areas. The bank foresees 30% to 95% drops in revenue for casino gambling, sports and entertainment, hotels, transportation, restaurants and retail goods. With the loss in revenue, job cuts will quickly follow.
The United States Department of Labor reported 281,000 new claims for unemployment insurance last week. This represents a 33% increase in initial unemployment benefit filings, as approximately 70,000 more people applied compared to the prior week. To put this into context, for the last 100-plus months, the U.S. economy had uninterrupted growth in employment. We were hitting record-high employment numbers almost each and every month. Now, it’s uncomfortably clear that the winning streak is over.
According to outplacement agency Challenger Gray & Christmas, we may see up to 4 million hospitality workers lose their jobs by summertime. The Economic Policy Institute estimates—similar to Bank of America— that as many as 3 million workers could be downsized. It’s anticipated that 4.6 million workers will lose their jobs, according to the Travel Industry Association alone.
A number of states have reported that they’ve received an overwhelming amount of calls regarding how to file for claims and other related questions. New York’s online system briefly crashed due to the excessive volume.
“States are just not in a position to respond to this,” said Michele Evermore, a senior policy analyst at the National Employment Law Project. “They’re at historically low levels of funding and they’re moving into a state…