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Why is unemployment still so high?

Mitchell Hartman Jun 19, 2020
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A closed job placement office in New York. Unemployment remains at record highs despite parts of the economy reopening. Stephanie Keith/Getty Images
COVID-19

Why is unemployment still so high?

Mitchell Hartman Jun 19, 2020
Heard on:
A closed job placement office in New York. Unemployment remains at record highs despite parts of the economy reopening. Stephanie Keith/Getty Images
HTML EMBED:
COPY

New initial unemployment claims hovered around 1.5 million yet again last week. The number of people who filed new claims fell slightly in the second week of June, by 58,000. But the total number of newly laid-off people filing claims was still over 2 million, which is staggeringly high, and has been staggeringly high for about three months now.  

All told, more than 30 million people are now on unemployment — including regular state and federal pandemic unemployment — about 1 in 5 of those who had a job before the pandemic.

Economists have been hoping to see the number of unemployed people come down as the economy starts to reopen and some workers get called back. But new layoffs are offsetting that, meaning we may be getting closer to a permanent, persistent high-unemployment problem. 

James Gamboa is 46, a bartender by trade. He was furloughed back in March at the hotel where he worked in Miami.

“I am still on a temporarily laid-off basis,” Gamboa said. “But at least I haven’t been officially let go.”

So he’s in limbo. Like about 15 million other Americans who consider their layoff temporary. 

Only, what if they’re not temporary?

“We’re at a very perilous moment,” said Bernie Baumohl, chief global economist at the Economic Outlook Group. He said with the pandemic still raging, no vaccine and consumers staying home, companies may reopen but have few customers.

“If it turns out there is no justification for them to bring back workers, more of those employees that have been put on furlough may end up being permanently laid off,” Baumohl said.

The payment processor Kronos, a Marketplace underwriter, tracks how many people are working in real time. Dave Gilbertson, vice president of strategy and operations at Kronos, said early in the pandemic, hours fell nearly 40%. That has turned around.

“Half of the people that had been not working are kind of working again,” Gilbertson said. “But we’re still at historic lows in terms of the amount that we still have to claw back.”

Meaning, unemployment — including $600 a week in federal pandemic benefits — will be crucial to keeping families afloat, said Jay Shambaugh, director at the Hamilton Project. And unless Congress extends them, those federal benefits will run out on July 31.

“If that expires, the average person out there on unemployment, instead of getting $1,000 a week will suddenly be getting $400,” Shambaugh said. He estimates jobless benefits are putting more than $100 billion a month into unemployed workers’ pockets right now. 

COVID-19 Economy FAQs

What do vaccines mean for economic recovery?

COVID-19 is not going anywhere anytime soon, according to expert witnesses who testified at a recent hearing held by the Joint Economic Committee. Put simply, we can’t eradicate the virus because it infects other species, and there will also be folks who choose not to get the vaccine or don’t mount an immune response, according to Dr. Céline Gounder at NYU School of Medicine & Bellevue Hospital. “That means we can’t only rely on vaccination,” Gounder said. She said the four phases of recovering from the pandemic are ending the emergency, relaxing mitigation measures, getting to herd immunity and having long-term control.

Can businesses deny you entry if you don’t have a vaccine passport?

As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.

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.

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