CNBC: Coronavirus Job Losses Could Total 47 Million, Unemployment Rate May Hit 32%, Fed Estimates

Article by Jeff Cox in CNBC financial

Millions of Americans already have lost their jobs due to the coronavirus crisis and the worst of the damage is yet to come, according to a Federal Reserve estimate.

Economists at the Fed’s St. Louis district project total employment reductions of 47 million, which would translate to a 32.1% unemployment rate, according to a recent analysis of how bad things could get.

The projections are even worse than St. Louis Fed President James Bullard’s much-publicized estimate of 30%. They reflect the high nature of at-risk jobs that ultimately could be lost to a government-induced economic freeze aimed at halting the coronavirus spread. 

“These are very large numbers by historical standards, but this is a rather unique shock that is unlike any other experienced by the U.S. economy in the last 100 years,” St. Louis Fed economist Miquel Faria-e-Castro wrote in a research paper posted last week.

There are a couple of important caveats to what Faria-e-Castro calls “back-of-the-envelope” calculations: They don’t account for workers who may drop out of the labor force, thus bringing down the headline unemployment rate, and they do not estimate the impact of recently passed government stimulus, which will extend unemployment benefits and subsidize companies for not cutting staff and extending unemployment benefits.

However, the jobless picture already looks bleak.

The paper then took an average of those workers and estimated a loss of just over 47 million positions. That would bring the U.S. unemployment rolls to 52.8 million, or more than three times worse than the peak of the Great Recession. The 30% unemployment rate would top the Great Depression peak of 24.9%.

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