The investment bank predicts in a new report that unemployment, which jumped to nearly 15% in April, could rise to 25% this year. This would be equivalent to the maximum unemployment rate during the Great Depression. More than a third of American workers could be unemployed, including those who are too discouraged to look for work and those who can only find part-time work.
” [P]Prolonged weakness could lead to serious after-effects such as permanent layoffs and business closings that delay recovery, “said economists at Goldman Sachs.
Although the financial giant expects economic growth to resume in the second half of 2020 as business picks up, it predicts that unemployment will remain at 10% by the end of the year, equaling the peak reached in 2009 during the Great Recession. “A return to the pre-virus rate is likely in years,” analysts wrote.
The sobering analysis comes from recent economic signals,, put a heavy blow on American growth in relief. Manufacturing output fell 25% in the first quarter, driven by an almost complete shutdown of auto plants, Goldman said. Construction spending fell 35%. Consumer spending – which accounts for more than two-thirds of economic activity – fell 20% across a wide range of categories.
“The job gains of the past decade have been wiped out”
Other data highlights the extent of the damage, even as the federal government struggles to provide billions of dollars in economic relief.
A study in April by the University of Illinois, the University of Chicago, the Harvard Business School and the National Bureau of Economic Research found that up to 100,000 small businesses may have closed permanently. Three-quarters of the companies were “financially fragile,” with only enough money to survive for two months, the researchers found. The economic fallout from the coronavirus “seems far more extreme than the economic effects of the 1918 flu epidemic,” they wrote.
Meanwhile, 3% of restaurants had closed permanently in April, according to a survey by the National Restaurant Association. Across the country, this would mean the disappearance of 20,000 food establishments, said an NRA spokesperson.
“The magnitude and speed of this downturn is unprecedented in modern times, far worse than any recession since World War II,” Reserve Chairman Jerome Powell said on Wednesday in a webcast for the. “The job gains of the past decade have already been wiped out. “
Nearly 40% of low-income households working in February had lost a job in March, noted Powell. “This reversal of economic fortunes has caused a level of pain that is difficult to grasp with words, as lives are turned upside down with great uncertainty about the future. “
This story has been corrected to note that approximately 20,000 restaurants were permanently closed at the end of April.