More and more people are being laid off. How far might unemployment go?
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We’re starting to hear about people getting laid off from jobs at movie theaters, restaurants, bars, stores and other businesses as people stay home because of the threat of COVID-19.
We’ll get a glimpse of where things may be headed Thursday when the weekly unemployment claims data is next reported.
Up until three days ago, Dennis Mendoza worked in sales at a small family-owned store in Florida, Tampa Bay Ponds and Rocks. Business was good until people stopped coming because of COVID-19.
“Business had gotten so slow and I was the last one hired, so the first one let go,” Mendoza said.
He just filed for unemployment but doesn’t currently get any government assistance and he and his fiancée don’t have a financial cushion.
“I mean, I have, like, $100 in my bank account, and that’s about it,” Mendoza said. “I’ve been trying to apply for new jobs, but nobody’s hiring right now with everything going on.”
We don’t know exactly how high unemployment might go in this situation. During the Great Recession, it hit 10%.
Erica Groshen, a labor economist at Cornell, explained what that means: “At 10% unemployment, everybody knows somebody who has lost a job or who has finished school recently and is not able to find a job,” Groshen said.
At that level of unemployment, it takes longer for the economy to bounce back.
“Because there are going to be people out of work, they’re going to have depressed incomes and they’re going to be much more frugal with whatever spending they’re able to do,” said Seth Carpenter, chief U.S. economist at UBS.
COVID-19 Economy FAQs
What do I need to know about tax season this year?
Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.
How long will it be until the economy is back to normal?
It feels like things are getting better, more and more people getting vaccinated, more businesses opening, but we’re not entirely out of the woods. To illustrate: two recent pieces of news from the Centers for Disease Control. Item 1: The CDC is extending its tenant eviction moratorium to June 30. Item 2: The cruise industry didn’t get what it wanted — restrictions on sailing from U.S. ports will stay in place until November. Very different issues with different stakes, but both point to the fact that the CDC thinks we still have a ways to go before the pandemic is over, according to Dr. Philip Landrigan, who used to work at the CDC and now teaches at Boston College.
How are those COVID relief payments affecting consumers?
Payments started going out within days of President Joe Biden signing the American Rescue Plan, and that’s been a big shot in the arm for consumers, said John Leer at Morning Consult, which polls Americans every day. “Consumer confidence is really on a tear. They are growing more confident at a faster rate than they have following the prior two stimulus packages.” Leer said this time around the checks are bigger and they’re getting out faster. Now, rising confidence is likely to spark more consumer spending. But Lisa Rowan at Forbes Advisor said it’s not clear how much or how fast.
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