The sky-high unemployment figures due to coronavirus aren't temporary as more than 16 million jobs are likely to be permanently erased.
At the end of March Treasury Secretary Steve Mnuchin said the unprecedented spike in unemployment claims across America “isn’t relevant.”
But with jobless claims rocketing toward 17 million in just three weeks, many are wondering how many of those people are going to have a job at the end of the coronavirus crisis. It’s likely that most of them will remain out of a job for the long term.
The record-high jobless claims that have been coming in the past few weeks may not be temporary. In fact, they’re probably not temporary even in the best case scenario.
That’s because even the rosiest of projections don’t see a coronavirus vaccine becoming available for at least a year. That’s going to demolish some industries and leave millions of Americans without a job for the foreseeable future.
In the aftermath of 9/11, U.S. airlines cut a fifth of their workforce due to waning demand and the financial cost of grounding their fleets. Today, most airlines have been out of operation for weeks. Their planes will probably remain on the ground for a few more weeks.
Roger Dow, CEO of the U.S. Travel Association, believes coronavirus will be far more detrimental to the travel industry than 9/11 was.
The impact on travel is six or seven times greater than the 9/11 attacks
Airlines support roughly 10 million U.S. jobs. Using airlines’ behavior following 9/11 as a guide, you’re looking at 2-3 million people out of work.
Hotels face a sharp drop in occupancy despite easing lockdown measures as consumers are likely to remain cautious about spending. Large gatherings like conferences and events won’t be happening as the world tries to avoid a second wave of coronavirus. Hotels, along with airlines, will shoulder the brunt of this new behavior.
In mid-March, Mr. Dow estimated that between 10% and 15% of American hotels will go out of business without a financial lifeline from the government. The government did toss a life-ring to hotels in the CARES Act, but to take advantage of it hotels have to re-hire their employees by the end of June.
That’s a pipe-dream according to American Hotel & Lodging Association (AHLA) CEO Chip Rogers, who says the industry won’t be back on its feet for some time:
We don’t expect the industry to be back by June 30
Even if hotels remain in business, a drop in occupancy rates means they won’t be able to afford to keep their entire staff. According to data from the AHLA, if normal hotel occupancy rates drop by 30%, 3.9 million jobs could be lost.
The coronavirus pandemic has also hit the service industry, particularly restaurants, hard. Many believe that a huge percentage of the unemployment figures we’re seeing right now are restaurant staff. That may be true, but their job status doesn’t appear to be temporary.
According to the National Restaurant Association (NRA), roughly 110,000 restaurants are expected to go out of business over the next month.
NRA data showed that 3% of the industry had already closed down permanently and a further 11% is planning to do so by the end of April.
Considering the U.S. restaurant industry employs roughly 13.5 million people, a 14% reduction in the workforce would translate to 1.9 million permanently lost jobs—and that’s just in April. As restaurant industry analyst and adviser Roger Lipton put it—we’re on the verge of a “restaurant apocalypse.”
Restaurants aren’t the only industry facing an apocalypse. Retailers are also expected to be hit hard by coronavirus as the sector was already struggling against a shift toward e-commerce.
Manny Chirico, CEO of PVH Corp, says many retailers simply don’t have the financial fortitude to withstand the sudden drop-off in traffic. He believes somewhere between 20% and 25% of U.S. retailers will go out of business over the next two years.
Considering the retail industry is responsible for 42 million U.S. jobs, that’s a whopping 8.4 million positions that could evaporate from the labor market.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.
This article was edited by Sam Bourgi.