What started as the worst-case scenario for U.S. unemployment is quickly becoming reality. Some economists now see the jobless rate surging to 20% as soon as this month -- and there’s no guarantee it would stop there.

About 5.5 million people are estimated to have filed for unemployment last week, in data due out Thursday. That would push the four-week total above 22 million, roughly one-in-eight of the workforce -- essentially wiping out all the job gains since the last recession.

And jobless claims are expected to stay in the millions for several more weeks, as the impact of the coronavirus cascades through the economy. It all adds up to a worse recession than initially thought, and probably a more difficult recovery once the pandemic subsides.

Many people have been struggling for weeks to file for unemployment benefits via overwhelmed and outdated websites. And while the government has rushed to help by authorizing trillions in stimulus, delays in getting the money to households and businesses -- as well as a possible shortage of program funds -- could push the jobless rate higher or keep it elevated for longer.

“We don’t have the administrative systems to get $2.2 trillion into the economy in three weeks,” said Claudia Sahm, director of macroeconomic policy at the Washington Center for Equitable Growth. “What we have right now is a race between the virus wreaking havoc on the economy, and the relief trying to get out.”

If initial jobless claims don’t begin leveling off, a 30% unemployment rate moves from “the realm of possibility” to “the most likely forecast,” said Sahm, a former Federal Reserve economist.

That would be triple the 10% seen in the wake of the global financial crisis and even above the roughly 25% seen during the Great Depression, though the methodology for that figure was different. The median estimate of economists in a Bloomberg survey earlier this month was for a second-quarter jobless rate of 12.6%.

The official unemployment rate only includes those actively looking for a job. That means that the 1.76 million increase in Americans outside the labor force in March -- the largest jump in seven decades of data covering people not actively looking for work -- isn’t reflected in the jobless rate. And those figures cover early March, before the vast majority of coronavirus-related layoffs.

Historically, jobless claims also understate the number of people out of work. In 2018, only 26% of unemployed people who had worked in the last 12 months actually applied for benefit payments, according to the Bureau of Labor Statistics.
Uptake is likely to be higher now, however, given the unique circumstances of Covid-19.

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