A record 3.3 million Americans applied for unemployment benefits last week, the government reported Thursday, as restaurants, hotels, barber shops, gyms and other businesses shut down in a nationwide effort to slow the spread of the deadly coronavirus.
This surge in jobless claims was the worst in the nation's history and nearly five times the previous record, set in 1982. Economists say this is just the beginning of a massive spike in unemployment that could result in more than 40 million Americans losing their jobs by mid-April.
There are echoes of the Great Depression in the way the coronavirus has devastated so many businesses and consumers, triggering mass layoffs and threatening to set off a chain reaction of bankruptcies and financial losses for companies large and small. But what sets this downturn apart is how rapidly the virus - and the economic pain - have spread, and it remains a wide-open question whether this will become a long-lasting slump or a short-lived flash recession.
Still, stocks soared Thursday, with the Dow Jones industrial average rising 1,352 points. U.S. stocks capped off the best three-day rally since 1931 amid optimism that the economic carnage will be mitigated by a $2 trillion stimulus bill that is expected to be passed by the House on Friday.
The bill, which would give most Americans checks worth $1,200 or more and provide billions of dollars in low-cost loans to businesses, received unanimous support in the Senate in a vote late Wednesday. Economists say the relief package is expected to provide a lifeline to workers and companies facing devastation, but it won't stop a severe recession nor be adequate to sustain workers if the coronavirus crisis lasts more than a month or two.
"We all think of a recession as having an economic underpinning, but this has not a thing to do with economics. This is literally about trying to stay away from people," said Aparna Mathur, a scholar at the American Enterprise Institute.
Much of the nation has made the gut-wrenching choice to stop about half the economy and encourage most workers to stay home in an effort to save as many lives as possible. Although no official figures exist yet, the unemployment rate has already jumped to at least 5.5 percent, said economist Martha Gimbel of Schmidt Futures, a level not seen since 2015 and up from 3.5 percent in February.
"The most terrifying part about this is this is likely just the beginning of the layoffs," Gimbel said.
LaTonua Bowens lost her job at Olive Garden in Shreveport, Louisiana, a week and a half ago. She got the call from her boss as she was coming out of Target empty-handed after an unsuccessful attempt to find toilet paper and sanitizer. Her boss told her to apply for unemployment insurance because no one knows how long it will last.
Stunned, Bowens drove to the Olive Garden parking lot, where she commiserated with another laid-off cook, who had also come to the restaurant because she couldn't believe the layoffs either. They sat in their cars with their windows rolled down trying to understand how this boom-to-bust happened.
"It's making me go into a depression," Bowens said. "I'm worried if I'm going to still have a job. I've been at my job for 10 years."
Bowens says she drove home and spent hours applying for Louisiana's unemployment aid because the website was so slow. Newly jobless workers across the country said in interviews that it took hours, or days in some cases, to apply last week because websites were so slow or down completely.
When she initially applied, Louisiana was still requiring people seeking jobless aid to prove they were actively searching for work, even in the pandemic. The state has now waived that requirement. Bowens and her husband, a repair man, are both out of work, but they have yet to receive any payments. Bowens just wants her old job back.
"I am not the sitting-at-home-type person," Bowens said. "I am not just a line cook. I do set up. Serving. Bartending. I can be the host or the 'to go' specialist. I have learned every job they have."
The average unemployment benefit check is currently $385 a week, less than half the typical weekly paycheck in the United States. The amount is slated to rise an additional $600 a week once President Donald Trump signs the relief bill into law, a substantial increase meant to tide workers over as they are forced to stay home.
But there is concern whether the money will arrive in time. Some states have waived the week-long waiting period before the first payment goes out, but others have not. Bowen's husband takes nine pills a day for high blood pressure and other conditions. He is rationing them as the couple worry about their finances.
Even in businesses that are considered "essential" and remain open, life has changed dramatically. Scott DeHenau, who runs an industrial packaging company called Pak-Rite in Wixom, Mich., says his firm is open because it does work for the medical and defense industries. But he almost wishes it was closed.
All employees have their temperature tested on the way into the warehouse. DeHenau has had lengthy discussions with each worker about whether they should take the health risk of coming to work. They now run two shifts and mandate that employees stand about 10 feet from each other. Between the shifts, they sanitize the entire facility - doorknobs, surfaces, bathrooms and tools.
Despite all this, business is down 40 percent from where it was this time last year. Customers call and cancel at the last minute. Supplies from Asia have dried up, and sometimes deliveries can't be made from suppliers or to his customers as trucking companies don't have enough healthy drivers or capacity.
"The covid-19 thing has really thrown a wrench in us sideways. We're not one of those companies that has a lot of cash reserves," DeHenau said. "We're day by day here. It's a lot of restless nights."
DeHenau tried to apply for a Small Business Administration loan this week, but the site was so busy he managed to only get a login created before it froze. So far, he's only had to lay off one of his 30 employees, but everyone is bracing for more if the situation doesn't improve soon.
Michigan is one of 21 states that has told all nonessential employees to stay home. DeHenau's business was founded in 1946 by his grandfather, and he doesn't want to let the legacy down.
"The smaller the firm, the more damage this is going to cause," said Joseph Brusuelas, chief economist at RSM, an audit firm that specializes in midsized companies. "What we're hearing from smaller customers is for some of them it is too late."
Brusuelas is also watching the commercial real estate market closely as a good indicator of whether the downturn is turning into something that will be hard to bounce back from. The Cheesecake Factory has stopped paying rent on all its properties across the nation, and many business owners say they might do the same because government aid probably won't arrive in time for April 1 payments.
Another warning sign is companies starting to slash pay. Occidental Petroleum is cutting all U.S. worker salaries by 30 percent, and smaller businesses say they are considering something similar, figuring it is better than layoffs. Wages had been rising steadily in recent years, but these pay reductions are another way this crisis is rapidly changing the economy's trajectory and probably making it harder for people to bounce right back to their previous spending levels, even if they kept their job.
Next week and the following week's unemployment claims numbers are also likely to be telling. While 3.3 million new benefit applications last week was a shocking figure, it represents only a fraction of the number of people whose jobs have been cut in this flash recession so far.
Pam Massey, a hairdresser in Gig Harbor, Washington, hasn't cut anyone's hair since March 13. Her income has disappeared, but she has not been able to apply for her state's unemployment benefits because she is technically self-employed. Gig workers, self-employed and people who have worked only for a few months typically aren't eligible to get jobless aid from the government.
The Senate bill greatly expands who can get benefits to include self-employed workers like Massey, but she has lost half a month of income and has to wait for the House to pass the bill and her state to implement the change.