Coronavirus: US labor market situation deteriorates dramatically

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Public life in the USA has come to a standstill because of the coronavirus. The economy is in a tailspin. Unemployment is rising dramatically.

As a result of the escalation of the corona pandemic in the USA, initial applications for unemployment benefits have risen sharply. Their number has increased approximately tenfold in the week to March 21, from 282,000 to now about 3.3 million, as the US Department of Labor announced on Thursday.

The initial applications are considered an indicator of the short-term development of the labor market in the world’s largest economy. Analysts had expected a strong increase this week. Last week – at the beginning of the epidemic in the U.S. – initial job applications rose by 70,000 to 281,000.

Dismissals are possible much faster
The rapid spread of the novel coronavirus Sars-CoV-2 has brought public life to a standstill in large parts of the USA. Almost half of the 330 million Americans are now subject to state-imposed exit restrictions.

Many shops are closed, restaurants and hotels remain empty, countless trips have been cancelled. Many employees of closed businesses must therefore apply for unemployment benefits.

Dismissals are usually possible much faster in the USA than in Germany, for example. In the USA, there has also been no regulation like the German short-time working allowance to stabilize the labor market in crisis situations. An economic stimulus package, with which the US Congress intends to pump around USD 2 trillion into the economy, will expand the previously very limited unemployment assistance.

In addition, employers will be able to take leave of absence for up to four months instead of dismissing employees. During this time, the state would pay the salary. However, the legislative package still has to be passed by the House of Representatives this week.

Unemployment benefits to be significantly expanded
The full extent of the economic dislocation of the coronavirus pandemic is still not foreseeable. However, many analysts now fear a dramatic slump in the second quarter and a recession for the year as a whole.

The US Congress has launched a massive stimulus package in the night of Thursday to cushion the economic impact of the epidemic. As part of the package, unemployment benefits will also be significantly expanded.

Some analysts thought that the numbers of initial claims were in fact even more dramatic than those announced on Thursday, as many states have recently been overwhelmed by the flood of initial claims.

The Governor of New York, Andrew Cuomo, for example, admitted over the weekend that the website had repeatedly collapsed due to the high volume of applications. He said that about 700 people worked in the call centers. The state had never experienced such a volume of applications before.

The unemployment rate in February – that is, before the rapid spread of the Sars-CoV-2 virus in the USA – was a low 3.5 percent. This was the lowest level in decades. The figures for March will not be published until next Friday.

Spreading destroys economic prospects

Until the beginning of February, the US economy was still buzzing, the stock market was reporting highs and experts were expecting economic growth of around two percent. President Donald Trump, who is running for re-election in November, praised his successful economic policy.

However, the rapid spread of the coronavirus since the beginning of March ruined the good economic prospects. Meanwhile, Trump promises that the economy will take off again “like a rocket” once the epidemic is over.

According to researchers at Johns Hopkins University, there were about 70,000 confirmed infections with the novel coronavirus in the USA by Thursday morning (local time). More than 1,000 people have died as a result of Covid-19, a disease caused by the virus.

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Mette Frederiksen is a The Washington Newsday correspondent. With her coverage of general science, NASA and the interface between technology and society, Frederiksen has been in the Science Desk's Technology Beat since joining Washington Newsday in 2018.

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