Unemployment Rate Surges in the U.S.

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The U.S. now has 22 million people unemployed. This wipes out all the gains over a decade. The level of job loss has not been seen since the Great Depression. Layoffs are mounting in nearly every sector as businesses have been forced to close. Manufacturing production crashed in March, the most since 1946 and new construction showed the biggest decline in nearly 40 years.

The U.S. economists say the U.S. unemployment rate is over 20%. Every state is impacted. In Michigan, 1 million workers or 21% of the work force are out of work. In Pennsylvania, it is 1 in 5 are unemployed, Ohio has 15% unemployed and Hawaii, the worst hit, is now nearly 22%.

The crushing numbers intensify Trump’s push to reopen the economy. Even if it reopened, people are fearful to venture out or go to work, unless there is widespread testing or a vaccine is available. In addition, many Americans have slashed their spending, lowering significantly aggregate domestic demand.

The 22 million jobless figure is probably an understatement as gig workers and temporary employees have not been accounted for.

What about Malaysia?

With the MCO, many businesses cannot operate hence there is retrenchment of workers in several sectors. The highest unemployment rate in Malaysia was 4.5% in 1999, during the Asian Financial Crisis.

MIER suggests 2.4 million Malaysians will lose their jobs, spiking the rate to 15% of work force. Dr Yeah Kim Leng of Sunway University sees the rate rise to 6%. The IMF forecast is 4.9% for 2020, possibly tapering off by 4Q20. BNM, however views the rate to go up to only 4% in 2020, from 3.2% in January 2020.

Whatever the rate, one thing is clear there will be many young Malaysians out of work. The consequences of which are severe on consumption and investment, not counting the social cost. And those with savings, will remain cautious in this environment.

It is the SMEs that provide jobs. Many have shuttered (or will be shuttering) their operations or services. They employ 40% of the workforce. It is here that the Government has to work closely with the associations, guilds or even clans to see how best to stem the downward spiral. Weekly feedback sessions or forums may assist in formulating measures to help the SMEs from closing shop.

Reference:

1.     Heather Long, Stimulus checks and other coronavirus relief hindered by dated technology and rocky government rollout, Washington Post, 17 April 2020

2.     Ranjit Singh, Economists see sharp spike in unemployment due to Covid-19, Focus Malaysia, 15 April 2020