About 19.8 million American workers could be laid off or furloughed by July because of the economic impact of the coronavirus pandemic, according to a new analysis from Economic Policy Institute (EPI).
The report from the D.C.-based, nonprofit and nonpartisan think tank based the projections on a Goldman Sachs forecast from March 30 that estimated a 9% contraction of the U.S. economy in the first quarter followed by a 34% contraction of U.S. GDP in the second quarter.
“The situation is so fluid, there’s so much uncertainty right now about how long this is going to last,” EPI Senior Economic Analyst Dave Cooper, one of the two authors of the study, told Yahoo Finance. “The job losses we’re likely to see are probably shocking and I don’t think really anyone has a great sense of how damaging they’re going to be.”
In their latest note, Goldman analysts explained that “the anecdotal evidence and the sky-high jobless claims numbers show an even bigger output and (especially) labor market collapse than we had anticipated. This not only means deeper negatives in the very near term but also raises the specter of more adverse second-round effects on income and spending a bit further down the road.”
A GDP drop of that magnitude would translate to a loss of 19.8 million jobs by July, “bringing employment across the country into the mid-teens,” the report stated. Those jobs would represent 15.4% of all private sector employment in the U.S. and a 15.6% unemployment rate, according to EPI.
Bank of America analysts made a similar assessment, stating: “This degree of weakening in the economy should translate to a significant amount of job cuts which will happen over the next two months. We think that between 16 and 20 million jobs could be lost, sending the unemployment rate to a peak of 15.6%.”
Nearly 10 million Americans filed for initial jobless claims in recent weeks. Prior to the coronavirus-induced economic shock, the previous record was 695,000 claims filed the week that ended October 2, 1982.
“Importantly, these latest estimates account for the recently enacted CARES ACT and assume a fourth coronavirus-related federal relief bill that will ramp up state aid—a particularly effective form of stimulus,” the EPI authors stated. “In other words, Congress must pass additional stimulus measures—especially aid to state and local governments—just to keep the losses where we are predicting them to be today.”
A ‘unique shock’
A recent report by the St. Louis Fed also affirmed that jobs involving food preparation, serving and retail are likely to be hit the hardest by then coronavirus.
The layoffs affect a wide swath of Americans, according to a Yahoo Finance analysis of data from the Bureau of Labor Statistics’ data on occupations (as seen in the graphic below).
Nevada hit exceptionally hard
The EPI authors also noted that Nevada is likely to be the state hardest hit by the coronavirus outbreak, based on job losses in percentage terms.
Alaska, Hawaii, Mississippi and Delaware follow closely behind.
Nevada is also likely to have the highest unemployment rate at 19.7% by July, with more than one in six workers projected to lose their job, EPI found.
“So much of the workforce there is in retail, leisure and hospitality,” Cooper noted. “Because the social distancing measures are having a disproportionate impact on face-to-face interactions on businesses and industries that rely on people being able to be around each other, like leisure and hospitality and retail.”
Aarthi is a reporter for Yahoo Finance. Follow her on Twitter @aarthiswami.