St. Louis Fed President: "Unemployment Rate Likely to Soar to 20% Range... Worst in History"

Over 20 Million Unemployed Expected Ahead of US Labor Department's April Employment Report
Prolonged COVID-19 Could Push Unemployment Rate to 30%, Over 50 Million Unemployed Projected

James Bullard, President of the Federal Reserve Bank of St. Louis
[Photo by Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] On the eve of the U.S. Department of Labor's April employment statistics announcement, pessimistic forecasts are emerging that the U.S. unemployment rate could soar to the 20% range, comparable to the Great Depression of the 1930s. Concerns are spreading that if the COVID-19 pandemic is not contained early and continues, the unemployment rate could exceed 30%.

James Bullard, President of the Federal Reserve Bank of St. Louis, said in an interview with CNBC on the 6th (local time), "An unemployment rate of 20% is by no means impossible and could be even higher," adding, "We will witness the worst situation in history." Earlier, Kevin Hassett, Senior Economic Advisor to the White House, also stated in an interview with CNN that "the April unemployment rate is likely to be above 16%." The U.S. unemployment rate in March was 4.4%.

According to The New York Times (NYT), MarketWatch surveyed U.S. economic experts who projected an April unemployment rate of over 15% and more than 22 million unemployed. NYT reported that the highest number of unemployed in a single month in U.S. history was in September 1945, right after World War II, when 2 million military personnel were temporarily laid off.

On the same day, before the official announcement from the U.S. Department of Labor, the Automatic Data Processing (ADP) employment report showed that 20.23 million jobs were lost in the U.S. in April. ADP CEO Ahu Yildirmaz said, "This scale of unemployment is unprecedented," adding, "Just the job losses in April alone are already twice the total unemployment during the Great Depression of the 1930s." More than 16 million jobs disappeared in the service sector, which was hit hardest by COVID-19, while the construction and manufacturing sectors lost 2.47 million and 1.67 million jobs respectively.

There are concerns that the official labor department figures to be released on the 8th could be even worse. As the COVID-19 crisis prolongs and worries about the resumption of the U.S.-China trade war grow, pessimistic forecasts suggest that if economic recovery is slow, the worst unemployment rates could occur. A report from the Federal Reserve Bank of Chicago released the previous day warned that when including unpaid furloughed workers not counted in the official U.S. Department of Labor unemployment figures, the actual April unemployment rate could soar from a minimum of 25.1% to a maximum of 34.6%. Earlier, the Federal Reserve Bank of St. Louis also projected in a report that the U.S. unemployment rate could rise to 32.1%, with the number of unemployed reaching up to 52.8 million.

However, optimistic forecasts are also emerging that the unemployment rate will rapidly decline and the impact will be short-term if COVID-19 enters a containment phase from the second quarter and countries begin lifting lockdown measures and normalizing their economies. According to CNBC, Scott Len, a strategist at Wells Fargo Investment Institute, predicted, "The recession caused by the COVID-19 impact is delivering a severe short-term shock, but it will be over within the second quarter of this year." Andrew Hunter, Senior Economist at Capital Economics, also forecasted, "Although many workers were laid off at once due to the short-term economic shock, the unemployment rate will fall below 10% by the end of the year."