Both small and large businesses have to fire employees or send them on unpaid leave.
Millions of Americans are losing their jobs due to the suspension of both large and small companies amidst the Coronavirus pandemic.
A week ago, nearly 3.3 million Americans applied for unemployment benefits. This figure is expected to grow rapidly in the coming weeks: according to preliminary forecasts, about 40 million people will remain unemployed by mid-April.
Before the pandemic hit the United States, there were 5.8 million unemployed – 3.5 percent of the labor force – totaling 164.6 million. This figure has changed little in the previous six months, which is a key indicator of a healthy economy.
The world’s largest economy is now suffering heavy losses due to the coronavirus, which President Donald Trump has called “a terrible disaster”.
On Tuesday, Goldman Sachs Group investment bank published a forecast that the decline in the U.S. economy in the second quarter will be even steeper than previously thought: 34 percent instead of 24 percent.
According to Goldman Sachs economists, the unemployment rate in the U.S. will reach 15 percent by mid-year, i.e. 25 million people will be unemployed. Earlier it was projected that unemployment would reach 9 percent.
The head of the Federal Reserve Bank of St. Louis, James Bullard, believes that unemployment may reach 30 percent in the second quarter, and GDP will decline by 50 percent.
It is estimated that 1,900,000 shops have closed in the country, representing about 50 percent of all retail outlets. On Monday alone, major retailers Masu’s, Kohl’s and Gap announced that they were firing a total of 29,000 employees.
The John F. Kennedy Center for the Performing Arts in Washington DC has sent 96 musicians from the National Symphony Orchestra on unpaid leave, although Congress last week agreed to provide $25 million to help this cultural facility, where all concerts have now been canceled.
Some employers initially intended to continue paying their employees’ salaries, but in many cases that decision had to be abandoned because it was unclear when the pandemic might end.
The consulting company Mckinsey & Company estimates that about a quarter of American households already live from paycheck to paycheck, and 40 percent of Americans can not cover the unexpected cost of $400 without borrowing.
The $2 trillion economic aid package, approved by Congress and signed by Trump last week, provides for the expansion of unemployment benefits. States usually pay the unemployed only a small part of their usual wages, but according to the anti-crisis plan, they will be paid an additional $600 per week over the next four months.
Goldman Sachs economists forecast a recovery in the third quarter and a 19 percent increase in GDP.
“Our estimates suggest that just over half of the short-term losses will be compensated by the end of the year,” the experts say.
Leaders in many states across the country have instructed residents not to leave their homes in the coming weeks, except in cases of acute need: to buy food or medicine, to seek medical care or to exercise alone or with family members.
These orders force many nonessential facilities to stop working, although the interpretation of “first necessity” varies from state to state.