Virus triggers wave of layoffs in the USA – record flood of unemployment applications – 03/26/20

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The corona crisis plunges the US job market from the boom into the crisis – with an unprecedented flood of applications for unemployment benefits. Last week, just under 3.3 million Americans made an initial application, the Department of Labor announced on Thursday. Experts interviewed by Reuters had only one million on the slip.

The previous high was reached in 1982 – with 695,000 applications at the time. Experts see the current increase as evidence of a larger wave of layoffs. They fear that many more Americans will soon be on the streets. US Treasury Secretary Steven Mnuchin currently sees the numbers as “not relevant”. He hoped that people would be hired again, he emphasized.

However, many economists remain skeptical: “The unemployment rate will increase massively in the next few months,” predicted Commerzbank economist Bernd Weidensteiner. She would set a post-war record in the middle of the year. Until then, the quota could increase from 3.5 percent to 11.5 percent. With such a gloomy outlook, politics has put together a $ 2 trillion aid package – the largest in US history. It is due to come into effect on Friday. It serves to help families, unemployed and companies in crisis and also provides billions in aid for the health care system.

The task seems daunting: Because the Corona crisis could, in the view of the US currency keeper James Bullard, cost almost 50 million Americans their jobs in the short term. These are in particular jobs with public traffic – activities that come into contact with the public, said the head of the Fed district of St. Louis last.

NOTEBANK CHEF STILL SEE SPACE

According to President Jerome Powell, the central bank remains ready to help the economy in the virus pandemic. The currency keepers are ready to intervene wherever there is a credit crunch, he told NBC. The Fed will continue to act aggressively. Even if the key interest rate is already close to zero and the Fed has put together an extensive crisis package, Powell does not yet see the arsenal emptied. There is “room for maneuver” for further measures, he said.

The US economy may be slipping into recession. But he expects the economy to pick up again in the second half of the year, Powell added. The US economy was in good shape recently: at the end of 2019, it grew by 2.1 percent over the year. In view of the impending economic downturn, the Fed recently decided on a broad-based program to secure the credit flow to households and companies.

However, experts doubt whether it can prevent a wave of bankruptcies. The decommissioning of large parts of the economy and public life to combat the spread of viruses leads to a drop in revenues in many industries.

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