Covid-19 pandemic causes record-high unemployment rate: US Fed

Since February, employers have shed nearly 20 million jobs from payrolls, reversing almost 10 years of job gains, the Fed said, noting that the unemployment rate jumped to a post-World War II high of 14.7 percent in April and then moved down to a still very elevated 13.3 percent in May. (Pixabay photo)

WASHINGTON – US Federal Reserve said Friday that the coronavirus disease 2019 (Covid-19) and the measures taken to protect public health have induced a sharp decline in US economic activity and the severe economic repercussions have been “especially visible” in the labor market.

In its Monetary Policy Report submitted to the Congress, the central bank said the pandemic has led to a surge in job losses, “with the unemployment rate, which had been at a 50-year low, soaring to a postwar record high.”

Since February, employers have shed nearly 20 million jobs from payrolls, reversing almost 10 years of job gains, the Fed said, noting that the unemployment rate jumped to a post-World War II high of 14.7 percent in April and then moved down to a still very elevated 13.3 percent in May.

In a virtual press conference Wednesday, Fed Chairman Jerome Powell pointed out this figure “likely understates the extent of unemployment,” as was stressed by the Bureau of Labor Statistics.

“Accounting for the unusually large number of workers who reported themselves as employed but absent from their jobs would raise the unemployment rate by about 3 percentage points,” Powell said.

The central bank chief voiced his concern that millions of Americans could be permanently unemployed from this crisis, adding that the US economy will likely need more fiscal and monetary support for a long time.

The Fed also noted in the report that the most severe job losses have been sustained by those with lower earnings and by the socioeconomic groups that are “disproportionately” represented among low-wage jobs.

The number of initial jobless claims in the United States totaled 1.54 million last week as reopening efforts continued across the nation, the Labor Department reported Thursday.

With the latest numbers, over 44 million initial jobless claims have been filed over the past 12 weeks as the Covid-19-induced recession sent ripples through the US labor market, indicating the mounting economic fallout of the outbreak.

The Fed on Wednesday kept its benchmark interest rate unchanged at the record-low level of near-zero and projected interest rates to remain at the current level through at least 2022.

It projected that the US economy will shrink by 6.5 percent in 2020, followed by a 5-percent gain next year.

According to the central bank’s economic projection, the unemployment rate could fall to 9.3 percent in the fourth quarter of this year, before reaching 6.5 percent by the end of next year.