Mind-Boggling U.S. Unemployment Numbers Will Deplete $2 Trillion Stimulus Fund

The Senate has passed a $2 trillion stimulus package, but it might not be enough to support the millions of new unemployed Americans as a result of coronavirus.
Posted in: MarketsOp-ed
Published:
March 26, 2020 1:56 PM UTC
  • The Senate has passed a $2 trillion stimulus package.
  • Estimates show that millions of Americans will file unemployment claims due to business shutdowns because of COVID-19.
  • After bailouts and corporate loans, less than half of the relief fund will be distributed to the American people.

Americans are cheering after the Senate passed a $2 trillion stimulus package. The hotly debated economic relief plan provides a one-time payment to Americans on top of increased unemployment benefits.

On the topic of unemployment, Americans are likely in for a shock. Surging unemployment figures will make $2 trillion look like chump change.

Tens of Million of Americans Will Seek Unemployment Benefits

The report on initial jobless claims is in. Nearly 3.3 million Americans sought unemployment benefits last week.  That’s the worst figure in recent history. In California alone, 1 million residents have filed for unemployment.

Jobless claims shatter the record reported in early 1980s. | Source: Twitter

Estimates from a Federal Reserve blog post reveal that unemployment will meteorically rise by over ten times by the end of the second-quarter. A back-of-the envelope calculation reveals that unemployment claims may surge to a mind-boggling 52.81 million.

The projection is echoed by James Bullard, chief executive of the Federal Reserve Bank of St. Louis. He said that unemployment could hit 30% during the second-quarter of 2020.

To give you some context, unemployment hit an apex of 25% during the Great Depression.

Unemployed Americans to Quickly Drain the $2 Trillion Stimulus Package

The relief bill is meant to prop up a U.S. economy that’s reeling from the impact of the novel coronavirus.

CNBC reported that over $1 trillion of the $2 trillion relief fund will go to bailouts, loans and healthcare services, among others. The rest will go towards direct payments to individuals and unemployment insurance.

The direct payments of $1,200 for 256 million American adults amount to $307.2 billion. On top of that, 72 million American children will receive $500, which means another $36 billion.

Meanwhile, unemployed Americans will receive an additional $600 per week for up to 16 weeks. If 52.81 million Americans collect unemployment claims for four months, that translates to $31.6 billion per week or $507 billion in total.

To sum up:

  • $1.058 trillion for bailouts, loans, and healthcare
  • $343 billion for direct payments
  • $507 billion for unemployment benefits

My napkin calculation amounts to a total of $1.908 trillion. In other words, the U.S. government has a wiggle room of less than $100 billion from the $2 trillion relief plan.

From where I’m sitting, a $2 trillion stimulus package doesn’t look like much.

Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.

Sam Bourgi edited this article for CCN.com. If you see a breach of our Code of Ethics or Rights and Duties of the Editor or find a factual, spelling, or grammar error, please contact us.

Last modified: March 26, 2020 1:58 PM UTC

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Kiril Nikolaev @kirilnikk123

Kiril is a CFA Charterholder and financial professional with 6+ years of experience in financial writing, analysis and product ownership. He has a bachelor's degree with a specialty in finance and lives in Canada. Kiril’s current focus is on finance and cryptocurrencies. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. He owns Bitcoin, Ethereum, and other cryptocurrencies. He holds investment positions in the coins but does not engage in short-term or day-trading. kirilnikk123@gmail.com