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Economists warned that a second wave of job loss could affect developed economies even as governments begin to lift blockades as companies reevaluate their ability to operate in an era of continued social distancing.
Figures released this week showed increasing damage to labor markets as a result of measures to stem the spread of the coronavirus.
In the USA In the US, more than 3.8 million people filed new claims for unemployment benefits, bringing the total of six weeks from the start of the blockades to more than 30 million. In Europe, official unemployment data underestimates the extent of the disruption, but figures provided by national governments in the five largest economies show that more than 35 million workers are paying part of their wages for the state through schemes that allow employers to resign staff and claim cost.
Germany’s Federal Employment Agency said this week that its short-term vacation plan, known as Kurzarbeit, now covered more than 10 million workers, doubled a previous estimate and represented more than a fifth of the workforce. In France, 1 million workers were added last week to an equivalent scheme of chomage partielbringing the total covered to 11.3 million, more than a quarter of the workforce.
Christine Lagarde, president of the European Central Bank, said this week that “conditions in the labor market have deteriorated massively,” while Jay Powell, head of the United States Federal Reserve, said it was “heartbreaking” to see increases in employment in recent years, which had benefited low-income people in minority communities the most, under threat.
The data to be received in the coming week is likely to show that the unemployment rate in the United States has risen, over a two-month span, from a 50-digit minimum to double digits, Powell said, acknowledging that “we will probably It will take some time “to return to a more normal level of unemployment.”
The International Labor Organization, a UN agency, predicted that the immediate drop in working hours in the second quarter of 2020 will be equivalent to the loss of more than 300 million full-time jobs.
Now the big question is how many people will be able to go back to their jobs, or find new ones, once governments begin to reduce blockades and reopen parts of the economy.
Until now, policymakers have focused on supporting businesses to survive a short-term revenue slump, while funding them to keep employees suspended on their payroll. This was intended to help prevent workers from falling into long-term unemployment, while allowing businesses and the economy at large to return to full capacity quickly once restrictions are lifted.
“Even in this scenario, you’re talking about a huge shock,” said Mark Wall, chief European economist at Deutsche Bank, adding that the eurozone’s unemployment rate could double or triple from its pre-pandemic rate of around 7 percent. hundred.
Now, most economists expect the short-term impact of GDP to be greater, and that the recovery will be longer than governments initially expected.
“The recovery will be slow, the adjustment will be long and not without pain for individuals and companies,” said Andrea Garnero, OECD labor market economist. “All public spaces will have to be reorganized and I am not sure we will rush to spend as soon as the closings are lifted.”
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The mobility data of the US states. USA They suggested that with or without mandatory locks, people would not resume normal activity until health problems are resolved, he added.
Companies in the most exposed sectors are beginning to recognize that they will not be able to return to business as usual and face the need for large-scale layoffs.
Boeing, the aircraft maker, said this week it would cut 10 percent of its workforce, while British Airways said it would have to cut 12,000 jobs, and Ryanair, the low-cost airline, said it would cut up to 3,000 jobs.
Meanwhile, employers in Spain are calling for an extension of the country’s wage support scheme and in the UK, hospitality companies are warning that they may not be able to cover the cost of operating with strict social distancing measures, which it underscores the risk of a greater wave of job losses once governments begin to reduce support for licensed staff.
“We are nervous that this” invisible “unemployment [in these partial employment schemes] it will be more visible, “Wall said, adding that over time, business failures would accumulate” and you will get a gradual conversion from partially unemployed to unemployed. “
Florian Hense, an economist at Berenberg, said he expected European governments to extend and expand license plans to contain the damage, but added that he did not yet expect unemployment to begin to decline before the summer of next year.
“The second wave could come in half a year or 12 months, when we finally have more evidence on how many companies have overcome the crisis and how many have not,” he said.
Additional report by Martin Arnold in Frankfurt
