Unemployment Claims Have Skyrocketed
Up 1200% in Wisconsin! And with more layoffs and filings likely to come.
The shutdown of economic activity to prevent the spread of COVID-19 has led to steadily rising unemployment in Wisconsin and the nation. The economic feedback from this wave of unemployment will reverberate throughout the economy.
In the past nine days, 101,364 Wisconsin residents have filed for unemployment. During the same period of time last year there were 7,654 filings for unemployment. So, for the past nine days, unemployment filings are up approximately 1200 percent relative to this nine day period last year.
But before leaders rush to re-open economic activity in hopes of restoring jobs, it should be understood that such action may only prolong damage to the economy, an economist told Urban Milwaukee.
As of January 2020, Wisconsin had an unemployment rate of 3.5 percent. The new unemployment rate, reflecting the wave of layoffs following the shutdown, likely won’t be available until May. Tyler Tichenor, a spokesperson for the Department of Workforce Development, said when the interviews for March data were conducted, the pandemic had not yet caused a massive shutdown of businesses and gatherings in the state.
The state’s restrictive order from Governor Tony Evers effectively shutting down bars, restaurants and hotels has been in place for about a week now. The service and hospitality sector was dealt a devastating blow by this shutdown. A massive round of layoffs have already occurred as a result.
And this is only the beginning. A recent analysis by James Bullard, the President and CEO of the Federal Reserve Bank of St. Louis offered a grim picture of the coming month. Bullard predicted that the U.S. could reach 30 percent unemployment by the beginning of the second quarter, which is April 1.
But that number is an annualized number, as Professor Scott Adams, chair of the economics department at UW-Milwaukee, told Urban Milwaukee. It’s a figure using data from one quarter, extrapolated out to a year, he said. Still, it is a frightening conclusion from Bullard.
Adams also noted this is just the beginning and there is a lot of uncertainty about what will happen going forward. A lot will depend on how long we are contending with the virus as a society. What types of restrictions the government uses to combat the virus in the long term. And how economic stimulus packages are designed.
In normal times, Adams said, economists have a solid understanding of what will happen as the unemployment rate rises. However, these are not normal times, he noted. For example, rising unemployment is not a symptom of a financial crisis, like it has been in the past. It’s due to a necessitated shutdown of economic activity to protect public health.
Still, there are a few things economists like Adams know for certain. That is, rising unemployment produces feedback in the system which in turn produces more unemployment, which will reduce spending and aggregate demand, which will in turn lead to more unemployment, in a vicious cycle.
Adams said that we are all experiencing a “slow motion wave of unemployment.” The initial shock was just that, but firms will continue laying off at different stages as the pandemic unfolds.
Adams predicts a high positive correlation between how badly the pandemic affects public health and how badly it affects the economy. The economy and the pandemic are intertwined at this point. Neither can be adequately addressed on their own.
Because of the epidemic’s unprecedented nature, and the uncertainty of how the government will react, Adams said, “We have to treat this like a natural disaster like we’ve never seen before.”
The general public needs to be able to hunker down and regroup over the next six to 10 weeks while the government and public health officials work at stopping the virus. But people need to be able to pay their bills in the meantime.
That means, “put money in people’s hands quickly and without strings,” Adams said. Once the virus is defeated, fiscal policy could begin to resemble the tools governments have used in past recoveries.
Adams said he thinks the general population should do nothing for six weeks, “no economic activity,” so the public health officials can “kill this thing.”
Adams said this will lead to a “horrible recession” that would affect many people’s lives, but the economic bounce back would be “extremely vigorous.” On a graph, it would look like a V.
“Slow rolling the sanctions, will reduce economic pain, but… the pain will last longer, and we have two or three waves of pain in the future.”
Still, much of this is uncertain, Adams said. A lot is dependent on the decisions governments make in the coming weeks and months.
But this much is clear. The virus needs to be dealt with aggressively not just for health reasons, but to reduce prolonged economic impact.
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