In early March, most economists expected the U.S. to take only a mild knock from the coronavirus. But in a sign of the pandemic's scale and speed, many of those same experts are now warning that growth could fall by double-digits. The Federal Reserve of St. Louis estimates the nation's jobless rate could hit a staggering 32% within months.
That would far exceed the high-water mark for unemployment during the Great Depression, when it reached 25% in 1933, four years after the stock market collapsed.
Now, the country's gross domestic product — the monetary value of all goods and services — could fall as much as 40% on an annual basis, according to Capital Economics.
The swiftness of the current downturn is breathtaking, with the St. Louis Fed estimating that more than 47 million workers could be out of work by the end of June — almost 1 in 3 employees.
Just last month the jobless rate stood at 3.5%, the lowest rate in 50 years, and employers in February had. The robust labor report only burnished an extended jobs boom that President Donald Trump often touted as proof his economic policies were working.
How times change. "Unemployment is suddenly rising explosively," according to a report by the Jerome Levy Forecasting Center assessing the economic toll of the coronavirus. "Shuttering a sizable part of the economy is so devastating and financially destabilizing that, if not successful fairly quickly, it may become unsustainable."
A key measure of the damage will come Thursday when the Labor Department releases data showing how many U.S. workers applied for unemployment benefits in the week between March 15 and March 21. Forecasters say jobless claims could top 3 million — that would quadruple the previous record in 1982, when the U.S. was recovering from a steep recession.
While there's no hard-and-fast rule about what constitutes a depression, it's generally considered to be an economic downturn that's both deep and long-lasting. The Great Depression actually included two downturns — one that spanned 43 months and a subsequent dip lasting 13 months.
By contrast, recessions are defined as at least two consecutive quarters — or six months — of shrinking economic growth.
While the St. Louis Fed's labor market projection may be among the most dire, all economists now predict massive job cuts as businesses in the travel, hospitality, retail, entertainment and other sectors effectively snap shut.
Economic paralysis amid the focus on "social distancing" and lockdowns in a growing number of states could vaporize up to 14 million lost jobs by this summer, warns the Economic Policy Institute, while noting that the fluid nature of the public health crisis means such projections are in flux.
"Expectations of how many jobs will ultimately be lost are rapidly evolving, with new forecasts from different macroeconomic analysts being released on an almost daily basis," noted Julia Wolfe, a state economist at EPI, and David Cooper, senior economic analyst at the left-leaning think tank. Even with the , they added, "Many people will still need to remain out of work, potentially for months, in order to stop the virus's spread."
The impact may vary by state, with the EPI projecting that Hawaii and Nevada could suffer the steepest job losses due to their reliance on tourism.
Cities that depend on tourists are also suffering, such as New Orleans, where restaurant owner and caterer Keisha Henry said she lost $10,000 in revenue last week after three big functions were canceled. Henry said she had to lay off several employees.
"I wish I could just keep them on and pay them, but being a small business I don't have enough capital to pay for the employees when we are not putting out a product," she said.
As many as 15,000 stores across the U.S.because of the pandemic crisis, topping the previous high for retail industry closures set last year, when more than 9,500 stores shut their doors, according to Coresight Research.
V, U, L? Or something else?
While million of Americans are likely to lose their jobs in the coming months, what's less clear is when and how the economy will regain its footing.
Some economists expect a "V" recovery — a sharp decline followed by a rapid recovery. Others say the country could be facing a "U"-shaped rebound, where economic output stabilizes at the bottom but takes longer to improve. Finally, some experts think the country could be in for an "L"-shaped economy — a steep, prolonged period of stagnation.
"This isn't a temporary situation," said Yelena Shulyatyeva, senior U.S. economist at Bloomberg, in a conference call this week hosted by the National Association for Business Economics. "We think the second quarter will be the worst ... things will supposedly get better in the second half, but a lot depends on the policy makers."
To be sure, there are stark differences between the U.S. during the early 1930s and today.
For one, we have a social safety net that didn't exist in the early 1930s, such as Social Security, which began in 1935, or food stamps, which emerged in the 1960s.
Banks also aren't collapsing, and the Federal Reserve is moving fast to shore up the financial system, noted Ken Simonson, chief economist at the Associated General Contractors of America, in the NABE call.
Yet while Fed said Monday it willas necessary to support the economy and the stimulus package is moving forward, that might not be enough to stop the bleeding , the Levy Forecast said.
"Washington will have to be inventive to prevent a tsunami of business failures, which would not only represent individual tragedies but also inhibit the economy's recovery," the firm said.
With reporting by the Associated Press.