Tag: unemployment insurance

10.1 Million Americans Are Still Unemployed As Rate Ticks Down To 6.3%

The United States added just 49,000 jobs in January, according to data released by the Labor Department Friday—less than half the 100,000 added jobs economists were expecting as the pandemic continues to force layoffs in industries such as retail and hospitality despite gains in white-collar jobs.

The unemployment rate ticked down to 6.3% in January, from 6.7% in December; the metric hit a record high of 14.7% in April.

There are now 10.1 million unemployed people in the United States, compared to 10.7 million in December, the government said; job gains in professional and business services and education helped offset losses in industries including retail, healthcare, transportation, warehousing and hospitality.

Despite the decrease in unemployment, the number of permanent job losers increased to about 3.5 million in January, from 3.3 million in December—about three times prepandemic levels.

Another grim sign of a still-reeling job market, 400,000 Americans left the labor force last month, pushing the labor force participation rate slightly down to about 61.4%.

Of the 7 million people in America who want a job but are not actively seeking employment, about 4.7 million were prevented from looking for work due to the pandemic, the Labor Department said.

January’s report continues to show stark differences in unemployment by race, with minority groups such as Black Americans and Hispanics facing above-average unemployment rates of 9.2% and 8.6%, respectively.

Crucial Quote

“After contracting in December, the labor market returned to growth in January, as some economic lockdowns eased, which allowed more businesses to stay open,” James McDonald, the CEO of Los Angeles-based Hercules Investments said Friday. “While it’s encouraging to see the economy added jobs in January, we are still far away from pre-Covid-19 employment levels.” Overall, there are still 10 million less jobs than there were before the pandemic.

Big Number

17.8 million. That’s how many people were still receiving some form of government unemployment benefit last week—shockingly high compared to the 2.1 million total claims filed in the comparable week in 2020, according to weekly data released Thursday. That’s higher than the number of unemployed Americans, due to a startling number of people who’ve dropped out of the labor force because they’re no longer looking for work.

 

Key Background

The Congressional Budget Office said Monday that it does not expect employment will reach prepandemic levels until 2024–echoing similar estimates from economists predicting that the labor market recovery will severely lag the broader economic recovery in the years to come. Dallas Federal Reserve President Robert S. Kaplan said Thursday that the next two to three months will remain challenging for the economy even though widespread vaccination efforts should help curb some of the downside economic risks of increased Covid-19 infections. 

Tangent

After an all-night session, the Senate narrowly approved a budget resolution Friday morning that will allow Democrats to move forward on President Joe Biden’s lofty $1.9 trillion stimulus proposal without any Republican backing. It’s likely the package will need to be trimmed down to satisfy some of the more conservative Democrats, but experts, including Vital Knowledge Media Founder Adam Crisafulli, still estimate the resulting bill could total as much as $1.7 trillion and hit President Biden’s desk before the current enhanced federal unemployment benefits expire on March 14. Biden’s plan extends the enhanced benefits of $400 per week through September.

Further Reading

Senate Approves Budget Resolution Paving The Way For Biden’s $1.9 Trillion Stimulus Plan (Forbes)

Another 779,000 Americans Filed For Unemployment Last Week (Forbes) Follow me on Twitter. Send me a secure tip. 

Jonathan Ponciano

Jonathan Ponciano

I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at jponciano@forbes.com.

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NBC News 5.13M subscribers NBC News’ Steve Patterson shares the stories of Kanisha Mayweather, Stacy Davis and Victor Patterson — three of the millions of unemployed Americans who have faced the pandemic with faith and perseverance since March.» Subscribe to NBC News: http://nbcnews.to/SubscribeToNBC​ » Watch more NBC video: http://bit.ly/MoreNBCNews​ NBC News is a leading source of global news and information. Here you will find clips from NBC Nightly News, Meet The Press, and original digital videos. Subscribe to our channel for news stories, technology, politics, health, entertainment, science, business, and exclusive NBC investigations. Connect with NBC News Online! Visit NBCNews.Com: http://nbcnews.to/ReadNBC​ Find NBC News on Facebook: http://nbcnews.to/LikeNBC​ Follow NBC News on Twitter: http://nbcnews.to/FollowNBC​ Follow NBC News on Instagram: http://nbcnews.to/InstaNBC​ Unemployed Americans Still Struggling During pandemic: ‘I Do A Lot Of Praying’ | NBC Nightly News

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Over 30 Million Americans Are Jobless

In less than two months, we have gone from an unemployment rate of 3.5%, a 50-year low to probably over 20%, the worst level since the Great Depression. Today’s Unemployment Insurance filings were 3.2 million, higher than economists’ consensus expectations. The number of jobs created since the Great Recession that ended in 2009 have been wiped out.

In the seven weeks, since states instituted stay-at-home requirements due to the COVID-19 pandemic over 33 million Americans have filed for unemployment benefits. As I have written in the last few weeks, those numbers understate the severity of the crisis, because there are still millions of Americans who have not been able to file for unemployment benefits, due to overwhelmed resources at departments of labor around the country.

I expect unemployment to continue rising in the energy sector where the default rate is significantly above the average for all companies in America. As I wrote in mid-April, high yield energy bonds are now at a record $217 billion of outstanding volume. This sector was already being adversely affected even before the 2019 crisis. According to Eric Rosenthal Senior Director – Leveraged Finance at Fitch Ratings, the “energy default rate stands at 9.9% following Whiting Petroleum Corp. WLL ’s bankruptcy.

Fitch projects the 2020 sector default rate to reach 17% by year end, closing in on the record 19.7% mark set in January 2017.” He went on to state that “Several names on our Top Bonds of Concern could be imminent defaults including Ultra Resources Corp., Vine Oil and Gas LP and Jonah Energy Inc. along with Chesapeake Energy Corp. CHK , California Resources Corp., Denbury Resources Inc. DNR , Unit Corp., Bruin E&P Partners LP and Chaparral Energy Inc.” These default rates are much higher than for the average default rate for all junk bonds. And until industry and travel start up again, it is hard to envision when the energy sector will recover. Energy companies are the majority of new companies added to Fitch’s April list of bonds of concern.

Today In: Banking & Insurance

After energy, the next sectors that are the most vulnerable to a rise in default and hence laying off workers are retail and leisure and entertainment.

More unemployment will be coming not only from the private sector, but also from municipalities as their financial stress increases. In a report released this week by Moody’s Investors Service, ‘Outlook changes to negative as coronavirus intensifies severity and length of recession’ analyst Natalie Claes, wrote that Moody’s “outlook for US local governments is changing to negative from stable as our expectation of the duration and intensity of the coronavirus impact on the economic downturn grows in severity. The slow recovery will impair revenue and pressure operating reserves.

The sector will face challenges for the remainder of 2020 and continuing into 2021 as the economy recovers, because trends in local governments’ primary revenue source, property taxes, lag changes in economic activity.” Additionally, she pointed out that “Sales and income tax revenue, a significant source of revenue for some local governments, is already declining sharply given a rise in unemployment, reduced consumer spending, and income tax filing extensions. Property tax revenue will not take as great a hit until 2021 because assessments are set before the collection year, but a rise in delinquencies will start to weigh on revenue this year.” Unfortunately, this means that the next tsunami of unemployment will be amongst municipal employees such as police, firefighters, and teachers.

Even if we are lucky enough to start an economic recovery this year, it is very unlikely that all workers will be able to regain their jobs. Many employers are likely to be very cautious about ramping up their businesses, especially if there is uncertainty about COVID-19 returning again later in the year. Unfortunately, we have many more weeks of millions continue to file for unemployment benefits.

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Mayra Rodriguez Valladares

Mayra Rodriguez Valladares

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Source: Over 30 Million Americans Are Jobless

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Coronavirus, CARES And PPP Will Explode The Federal Deficit And Debt

The $2 trillion CARES Act and the just signed $484 billion coronavirus relief package, along with the economic impact of COVID-19, will drive the Federal deficit and debt to new heights. The 26 million people who have filed for unemployment insurance claims the past five weeks are creating a “Greater Recession” and driving an unprecedented level of Federal spending.

The Committee for a Responsible Federal Budget or CRFB, a nonpartisan organization, analyzes the Federal budget to “educate the public on issues with significant fiscal policy impact.” Maya MacGuineas, the CRFB’s President, said, “Like the record levels of borrowing undertaken during World War II, a large share of today’s massive deficits are both inevitable and necessary in light of the current pandemic crisis. Combating this public health crisis and preventing the economy from falling into a depression will require a tremendous amount of resources – and if ever there were a time to borrow those resources from the future, it is now.”

She added, “But just as World War II was followed by years of fiscal responsibility to restore debt to historic levels, it will be important after the crisis and recovery to ensure that debt and deficits return to more sustainable levels.” While that is a worthwhile objective, it is hard to see how that will be achieved under the current political environment.

Deficit could hit $4.3 trillion and over 20% of GDP

The Federal deficit was on track to be over $1 trillion without any additional spending for the coronavirus this fiscal year. Now with the $2 trillion CARES Act, the $484 billion relief package and $134 billion for the Families First Act, the CRFB also estimates that, “nearly $600 billion in additional deficit spending as a result of feedback effects from lower economic output, slower inflation, higher unemployment, and lower interest rates” will occur.

The CRFB’s analysis included, “These projections almost certainly underestimate deficits, since they assume no further legislation is enacted to address the crisis and that policymakers stick to current law when it comes to other tax and spending policies.” The CRFB estimate was $3.85 trillion without the $484 billion relief bill. All of this cumulates in what could be a $4.3 trillion deficit this fiscal year ending in September.

What could also be of particular concern is that the CRFB also assumes, “the economy experiences a strong recovery in 2021 and fully returns to its pre-crisis trajectory by 2025.”

The Congressional Budget Office published an estimate on Friday that the deficit could be $3.7 trillion in fiscal 2020, which includes the $484 billion bill. Keep in mind that the largest previous deficit was $1.4 trillion during the Great Recession.

A $4.3 trillion budget deficit translates to 20.8% of the country’s GDP. This would be more than double the largest amount during the Great Recession and only be beaten by a few years during World War II.

Debt to hit 100% of GDP and surpass the highest ever recorded

Before the outbreak, the U.S. Federal debt was at 81% of GDP. Unfortunately, an additional $2.5 trillion plus in additional spending along with the economic impact of the coronavirus, will drive the amount of debt to over 100% of GDP by the end of the year. Note that the graph below from the CRFB did not take into account the $484 billion or 2% of GDP impact that was just signed by President Trump.

Sometime during 2020 the CRFB estimates that the Federal debt held by the public will cross $21 billion plus and equal the size of the economy, and that during 2021 it will match and then surpass the 107% threshold that occurred during World War II.

Chuck Jones

Chuck Jones

I provide independent research of technology companies and was previously one of two analysts that determined the technology holdings for Atlantic Trust (Invesco’s high net worth group), a firm with $15 billion under management. Before joining Atlantic Trust I was the Internet Security Software analyst for Smith Barney (where I authored the most comprehensive industry report “Internet Security Software: The Ultimate Internet Infrastructure”) and an Enterprise Server Hardware analyst at Salomon Brothers. Prior to becoming an equity analyst, I spent 16 years at IBM in a variety of sales and manufacturing positions. I have a B.S. in Industrial Engineering from Stanford University and a Postgraduate Diploma in Economics from the University of Sussex, England

Source: Coronavirus, CARES And PPP Will Explode The Federal Deficit And Debt

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