Labor descent: US unemployment rose above 14% for the first time since 1940

In April, the US unemployment rate has more than tripled - from 4.4% to 14.7%. On Friday, May 8, the Ministry of Labor of the country reported.

According to the department, in the month of work in the United States lost 20.5 million people. Moreover, since the end of March, the number of applications for unemployment benefits in the country has grown by 33.2 million.

Note that the last time unemployment in the United States reached 14.7% in October 1940. Such data are provided by the Federal Reserve Bank of St. Louis.

The main reason for the record high jump in unemployment in almost 80 years, experts call the consequences of the COVID-19 pandemic. To date, the United States remains the leader in the number of coronavirus infected. At the same time, the introduced quarantine restrictions provoked a massive reduction in trade and passenger traffic, as well as the closure of companies and industries.

The forced shutdown of a number of small and large enterprises caused a wave of layoffs. Most notably, employment declined in the restaurant and hotel business (by 7.7 million people), in education and healthcare (by 2.5 million), in the field of professional and business services (by 2.1 million), in retail trade (by 2.1 million), industry (1.3 million) and the public sector (980 thousand).

“The main blow of the viral factor was in the service sector and consumer demand. In turn, for the US economy, it is consumer demand that is the main driver of growth. Against the backdrop of the pandemic and the implementation of strict quarantine measures, we see a significant decline in consumption; most households are switching to saving patterns of behavior. Accordingly, most American companies, including those in the service sector, are losing their customers and are experiencing critical pressure on their business, ”said Anton Pokatovich, BCS Prime Analyst, RT.

Moreover, the current situation in the US employment sector is aggravated by the peculiarities of the country's labor legislation. This point of view in an interview with RT was expressed by the analyst of Finam Group Alexey Korenev. According to him, workers in the country are practically not protected from dismissals.

“Unlike Europe in the United States, a slightly different system of social support. For example, there are no paid leave, and leave due to childbirth lasts only a few days. In which case, employers very quickly dismiss employees, and when they return to activity again, they recruit staff again. Therefore, losing a job in the USA is a common thing, however, how to find it, ”Korenev explained.

According to RT, the head of the laboratory of the Institute of Applied Economic Research, RANEPA Alexander Abramov, more than a third of employees in the United States work without a labor contract on a part-time basis. According to the expert, this part of the labor market has suffered the most.

Debt burden

Note that the increase in the number of unemployed is accompanied by an increase in the debt burden on the population. According to the Federal Reserve Bank of New York, in the I quarter of 2020, total household debt increased by $ 155 billion and reached a record $ 14.3 trillion. Moreover, as expected, in the near future the indicator will continue to grow. 

“Now a full-blown insolvency crisis may arise due to quarantine, and the US Federal Reserve will have to urgently redeem bad debts not only of companies, but also of the population. If quarantine lasts until mid-summer, then 30% of American families will begin to have difficulty paying mortgages, and this is fraught with both increasing insolvency in general and falling consumer activity, ”Gennady Nikolaev, an expert at the Academy of Financial and Investment Management, told RT.

To help the economy and the population, the US authorities have already agreed on a package of support measures in excess of $ 2 trillion. In particular, it is about paying benefits and promoting business. At the same time, the approved measures significantly increase the burden on the country's budget.

“High unemployment means huge budget expenditures, social insurance fund expenses. Unemployed people will need not only financial assistance, but also in some cases professional retraining, ”Abramov explained.

As the experts of the budget management of the US Congress calculated, in 2020 the expenses of the US treasury may exceed revenues by $ 3.7 trillion, or 18% of GDP. The last time a similar value could be observed during the Second World War.

According to experts, in order to cover the budget deficit, the States will have to further increase the public debt, which at the moment has already reached the highest level in history - $ 25.06 trillion. Relevant data leads the US Treasury.

In general, according to Anton Pokatovich, in the near future, the unemployment rate in the United States may further increase. However, the further dynamics of the labor market will largely depend on the situation with coronavirus and the duration of quarantine measures. Meanwhile, experts believe that a record increase in unemployment along with a budget deficit and an increase in the debt burden on the economy may weaken the position of Donald Trump ahead of the election.

“The increase in unemployment, of course, will increase the level of discontent among Americans and distrust of the current president. To some extent, unemployment will affect Trump’s electoral rating, but Americans will also be worried about the authorities in the fight against the pandemic, ”concluded Alexander Abramov.