Record-high unemployment is likely to linger long after the first wave of coronavirus has passed, according to a new survey.
On Friday, we are due to find out the total number of unemployed people in the U.S. so far in 2020. Data out so far indicate a whopping 30 million Americans, or 19% of the labor force, have filed jobless claims.
But shocking unemployment data have been largely disregarded by investors who say the dismal numbers are just a product of lockdowns. Once restrictions ease, people will go back to work.
That’s somewhat true, but it leaves out one critical factor: Not everyone will go back to work because many of those job losses are permanent. That sentiment is true for several industries, from airlines to retailers. Still, new data show America’s small businesses are about to deal a crippling blow to both the labor force and GDP.
The Society of Human Resource Management conducted a survey of U.S. small business owners across several industries between April 15-21. More than half of respondents indicated their companies would go out of business by October.
That’s a big deal for the U.S. economy. If that projection were to come true, 16 million businesses would be wiped out. According to the most recent data, small businesses contributed $5.9 trillion to U.S. GDP. Real estate, rental and leasing, and wholesale and retail trade were the largest contributors.
Omitting the fact that rental and retail are likely to be some of the hardest-hit sectors, we could be looking at $3 trillion worth of GDP evaporating entirely in the wake of coronavirus. That’s roughly 14% of the U.S. economy.
The unemployment figures are even more concerning. Small businesses employ 59.9 million Americans or 47% of the overall workforce. If half of those jobs are lost because their employer goes under, that’s 29.5 million lost jobs–roughly 19% of the labor force.
But let’s say that prediction is pessimistic. Government assistance might save some of those firms and, in turn, their employees. But even in an absolute best-case scenario, there’s still a lot of pain in store.
The survey also found that one-third of small businesses expect their layoffs to be permanent. Data from the Kenan Institute found that as of March 30, 19.7 million workers had already been laid off. Now consider that over the past month, those figures likely increased.
But imagining a best-case scenario in which no more job losses occurred among small businesses throughout April, 12.5% of the workforce won’t have a job despite the reopening. Put another way, roughly a third of those who’ve lost their jobs due to the pandemic will remain out of work.
Even assuming impossibly optimistic job losses among U.S. small businesses, the picture is grim. There’s no way to sugarcoat the economic struggles that are coming. Persisting high unemployment figures will be disastrous for consumer spending, and that’s going to cause even more pain for U.S. firms that depend on confident consumers to survive.
It’s time to take a realistic look at what the future looks like for the U.S. economy. This scenario, which doesn’t even account for unemployment and lost GDP from big business, paints a worrying picture that’s been largely overlooked. What’s more, it assumes there’s no further disruption from coronavirus.