Public Comment

Jerome Powell, who is the Chairman of the Federal Reserve, warns that unemployment could reach the depression level of 25 percent. But like the Bureau of Labor Statistics, he is unaware that many experts on labor force issues claim that unemployment is already at the depression level or very close to 25 percent.  

Incredibly, 52.7 million workers lost their jobs in the last several months. Their benefits, including health insurance, are also gone. These workers make up about one fourth of the American workforce. Moreover, the climb in unemployment continues. In fact, substantial layoffs have become a weekly event. Nationally, 1.4 million workers were laid off last week. This makes the 18th week in a row that more than a million workers applied for unemployment insurance.  

Business too is having a very difficult time. 3600 businesses in the first 6 months of this year have filed for bankruptcy. Although these businesses will not necessarily disappear, retrenching is inevitable to pay off some of their debt. How? By laying off as many employees it can. In short, among the purposes of declaring bankruptcy is to save the company at the expense of jobs. 

The obvious question is why have so many businesses been going bankrupt. The usual explanation is that they have been victimized by the coronavirus. Indeed, the problems that the virus has set in motion, including depriving business of customers, have been enormous.  

However, the virus has not been the only problem. Actually, many businesses that have been in serious trouble were having financial problems long before the coronavirus appeared. Take for example the giant retailer JCPenney. Its sales began to slide in 2016, which is four years before the virus appeared. As a result, the retailer plans to close 180 to 200 stores. Thousands of part-time and full-time workers are being dismissed. And since the company is retrenching, the laid off workers cannot expect to get their jobs back. 

Also, as reported in the NYTimes, an unprecedented number of full-time faculty are losing their jobs at many colleges nationwide. They too are very unlikely to be rehired. About the layoffs, the coronavirus is blamed. Yet the NYTimes report acknowledged that the deepest personnel cuts at the colleges have been at institutions that were in financial distress before the virus appeared..  

In the retail sector over 100,000 companies have gone out of business. Up to 60 percent of small businesses that close never reopen, These closings not only increase unemployment. They also increase the numbers of those who become permanently unemployed. The jobs they lost no longer exist. And the competition between a growing number of jobless workers can be futile. In fact, the Bureau of Labor Statistics acknowledges that about nine million workers are not even counted as unemployed because they have become too discouraged to continue searching for jobs. 

A think tank at the University of Chicago (The Becker Friedman Institute) found that 42 percent of recent layoffs are permanent because their jobs have disappeared. These include permanent cuts made by large as well as small companies. GE for example permanently cut 13,000 aviation jobs. MGM Resorts cut 63,000 jobs. And of course there are many other large layoffs by companies that have declared bankruptcy. 

The New York Times, which has been disturbed by these cuts, recruited a firm to very carefully evaluate how serious the unemployment problem is. According to the research findings, the majority of workers assumed that returning to their former jobs was very unlikely. According to the researchers, millions of jobs have been permanently lost. 

There is also another worrisome issue. Will the abysmal state of the economy become permanent too?