US unemployment is rising at a jarring rate, with data Thursday showing 17 million have lost their jobs since mid-March, as officials scramble to apply a tourniquet to stem the damage from the coronavirus pandemic. The Federal Reserve launched a series of new lending programs Thursday to pump $2.3 trillion into the damaged US economy, but Fed Chair Jerome Powell tried to offer reassurance saying the recovery could be "robust."
The Fed announcement came at the same time the Labor Department report showed 6.6 million more people filed for unemployment benefits last week, following 6.9 million in the prior week, and 3.3 million in the week ended March 21. That is a stunning reversal from historically low unemployment in the world's largest economy, forced to shut down to stop the spread of COVID-19. Analysts expect the malaise to persist for months, with the jobless rate surging into double digits in April.
The weekly data indicate the coronavirus pandemic is set to eclipse job losses from the 2008 financial crisis, and International Monetary Fund chief Kristalina Georgieva warned Thursday that the world faces the worst global emergency since the Great Depression. The 17 million total unemployed in the US "is just over half the nearly 30 million in job losses we expect to result from the spread of the coronavirus, which would be three times the number of job losses that occurred" during the last recession, Oxford Economics said, projecting the unemployment rate reaching 14 percent in April and 16 percent in May.
- Hitting the bottom? -
The US government has mobilized to stem the losses, with the Federal Reserve announcing on Thursday a new $2.3 trillion financing measure aimed at helping businesses, households and state and local governments facing a cash crunch. Included in the measures is the Main Street Lending Program, which may purchase up to $600 billion in loans owed by small- and medium-sized firms "that were in good financial standing before the crisis," the Fed said in a statement.
Another program, the Municipal Liquidity Facility, will offer up to $500 billion in lending to states and municipalities by directly purchasing short-term debt. The Fed also is backstopping the new Paycheck Protection Program launched last week as part of the massive $2.2 trillion rescue package the Congress approved late last month. The central bank will buy up all the loans issued by private banks worth up to the full $349 billion allocated to the program.
Powell acknowledged the US is facing a "truly rare" economic crisis, and unemployment is moving up at an "alarming speed," but the Fed is committed to using its emergency lending powers as long as the crisis lasts. "There is every reason to believe that the economic rebound, when it comes, can be robust," Powell said in a speech. Ian Shepherdson of Pantheon Macroeconomics said there are signs the initial jobless claims will decline in coming weeks.
"Google searches for 'file for unemployment' are now falling consistently on a week-on-week basis, by about one third," he wrote, forecasting a decline in claims next week to 4.5 million -- a number that would have been unthinkable a month ago before shops and businesses were forced to close their doors nationwide.
- More help needed -
IMF chief Kristalina Georgieva said the coronavirus pandemic could cause "the worst economic fallout since the Great Depression," turning global growth negative and requiring a massive governmental response. Even in the best case, the IMF expects only a "partial recovery" next year, assuming the virus fades later in 2020, allowing normal business to resume as the lockdowns imposed to contain its spread are lifted.
In Washington, policymakers already are trying to bolster the $2.2 trillion emergency measures now being implemented. The bill includes direct cash payments to Americans, expanded unemployment insurance and a $350 billion small business loan program, which has had a tumultuous rollout. Banks have been frustrated by a lack of clear guidelines on how the measure works as they face a flood of requests for the cash.
Treasury Secretary Steven Mnuchin wants an additional $250 billion for these loans, but that will need to go through Republicans controlling the Senate and Democrats who lead the House of Representatives. The Small Business Administration told AFP that as of Thursday morning there were more than 454,000 applications totaling nearly $118 billion, but it remained unclear how much had reached the borrowers.