David Blanchflower is the Bruce V. Rauner Professor of Economics at Dartmouth College, a research associate at the National Bureau of Economic Research, and a contributing editor for Bloomberg TV. From 2006 to 2009, he was a member of the Bank of England’s Monetary Policy Committee. His most recent book is Not Working: Where Have All the Good Jobs Gone? (2019). (March 2020)
In the crash of 2007–2008, it took nearly two years for the unemployment rate to double from 5 percent in December 2007 to 10 percent in October 2009. This time, the rate has quintupled in eight weeks. The only comparable numbers were in the Great Depression, but even then, the increase took much longer. It is hard to describe what we are seeing in these data as anything other than an unfolding disaster. We know that a long spell of unemployment when you are young creates a permanent scar—reducing earnings for decades and increasing the risk of adverse life events. The young are my greatest worry.
Last week, Goldman Sachs predicted jobless claims could easily hit 2.25 million this week—seen by some as scaremongering but, it turned out, too optimistic. On Thursday, the Bureau of Labor Statistics announced jobless claims of nearly 3.3 million, up from 281,000 the week before. The highest number of new claims in a week previously was 695,000 in 1982. Based on data already seen, it is plausible GDP numbers will drop more than 10 percent in the second quarter of 2020 across many OECD countries, where nearly 1.3 billion people live. Over the last decade or so, the social safety net has been gutted—and now we are paying the price: we have vulnerable communities that simply do not have the resources to withstand such a nasty economic or health shock. This virus changes everything.