CHARLOTTE – U.S. unemployment could jump as high as 20 percent in May, warned UNC Charlotte economist Dr. John Connaughton, in the wake of the coronavirus outbreak.
And that’s on the conservative side.
Factor in the some 8 million people currently enrolled in the government’s Paycheck Protection Program (PPP) — who would otherwise be counted as unemployed — the rate is closer to 25 percent, he said.
The drop is shocking, but even more so when considering that it comes on the heels of the longest economic expansion on record – a period of growth that started in 2010 and continued through this February, until the onset of the pandemic.
“Bottom line is, we’ve taken the biggest hit that the economy has seen since the Great Depression of the 1930s,” said Connaughton, who presented quarterly Barings/UNC Charlotte Economic Forecast by webinar on Thursday.
“This dwarfs the great recession of 2007-2009, and it’s going to be really interesting to see what happens going forward.”
From February-April, the U.S. recorded roughly 21.4 million job losses – almost half of which were in leisure and hospitality services.
Meanwhile, the government on Thursday said an estimated 2.1 million Americans applied for unemployment benefits last week despite the gradual reopening of businesses around the country. It brings the running total since the coronavirus shutdowns took hold in mid-March to about 41 million.
NC versus the nation
Closer to home, North Carolina is faring slightly better than the nation as a whole – with May unemployment expected to peak at around 17 percent. However, the actual rate without PPP is closer to 22 percent, Connaughton said.
Inflation-adjusted real GSP is expected to decrease by 4.4 percent over the 2019 level, according to the report.
Twelve of North Carolina’s 15 economic sectors are expected to experience output decreases during 2020, with the hospitality and leisure services sector seeing the largest decline, at 34.8 percent.
Other sectors projected to decrease: construction, -8.8 percent, durable goods manufacturing, -7.0 percent, wholesale trade, -6.1 percent and educational and health services, -5.5 percent.
Only the agriculture and mining sector is expected to experience growth in 2020.
By December, seasonally adjusted nonagricultural employment in North Carolina is expected to decrease by 6.5 percent over the employment level in December 2019, a loss of 300,000 net jobs during the year.
“Going forward, the one takeaway from this 10-year expansion is that the North Carolina growth rate over the period has trailed the U.S. 10-year average growth rate of 2.3 percent,” Connaughton said.
“This is a consideration as we emerge from the COVID-19 shutdown. So, the big question is whether the North Carolina recovery will again be weaker than the U.S. recovery. This year and 2021 will be very interesting and very uncertain years.”