In March, during the very beginning of the coronavirus, the economy started shutting down. Economists, however, believed that the increasing unemployment rate was temporary.
They were hoping that once the pandemic is over, businesses would reopen and people would be called back to their jobs. The economy has partially recovered now, far better than it was predicted.
However, several businesses are still closed and many have gone bankrupt as well. In February this year, 1.28 million people were reported to be ‘permanent job losers’. This number has increased largely since then, surging to 3.41 million in September. As of now, the number has increased even more and currently stands at 3.75 million.
The number of people who were ‘temporarily laid off’ has decreased. It was at its peak in April at 18.06 million but has dropped to 4.64 million in September.
Chief US Economist from Morgan Stanley explained that the spike in ‘permanent job losers’ was the largest two-month increase in permanent unemployment since 2009.
She also added that this trend needs to be observed very carefully because although jobs are growing and unemployment is decreasing, permanent job losses can result in a slower rate of re-employment and longer unemployment durations.
The economists of Deutsche Bank are advising that the numbers for permanent job losses should be adjusted to include people who have been temporarily unemployed for an abnormally long time. It’s important to consider these numbers to predict the long-term effects of the pandemic because temporary job losses are likely to be permanent.
Moreover, they explain that if temporary layoffs for 27 weeks or more are included, the number of ‘permanent job losers’ rises to a million more. In addition to this, if the weeks are decreased to 15 weeks or more, the number spikes to 7 million.
On top of that, an economist from Pantheon Macroeconomics reports that the cumulative increase in payroll is currently 11.4 million which is only a little over the peak of 22.2 million that was witnessed due to the pandemic.
He also adds that because of the resurgence of the coronavirus, the reopening of businesses is being delayed or slowed down again hence the rate of improvement is also slowing.