The U.S. unemployment rate may skyrocket to 32.1% in the second quarter of 2020, according to the Federal Reserve Bank of St. Louis.1 Previously, the highest rate of unemployment in U.S. history was 24.9%, which occurred in 1933 during the Great Depression.2
The figure comes from “back-of-the-envelope” estimates, in which the St. Louis Fed attempted to quantify the financial fallout from social distancing measures imposed during the COVID-19 pandemic. With the economy crippled, and layoffs ensuing, an unprecedented number of Americans have had their livelihoods suspended, which could cause poverty rates to climb while triggering a subsequent mental health crisis.
What is even more shocking is how great the stock market is doing as it has rallied for the fourth successive week in a row, despite record numbers losing their jobs. It makes you think that if everyone loses their job the stock market might double.
This is an egregious example of fatally flawed federal and government policies that will inevitably blow up in their faces. Yes, we are having a stock market rally for now, but nearly every insightful economist I review is predicting a crash far bigger than the Great Depression because of the harm their actions are causing on top of an already inflated bubble.
Fed Predicts 52.8 Million Americans Could Be Unemployed
As a starting point to reach this staggering statistic, the St. Louis Fed used data from the Bureau of Labor Statistics (BLS), which noted an unemployment rate of 3.5% in February 2020, amounting to about 5.76 million unemployed Americans.
They then used BLS data cited by St. Louis Fed regional economist Charles Gascon,3 who classified 808 occupations to estimate how many employees are at high risk of layoff due to social distancing, using criteria such as whether the occupations involve work that can be completed off-site and are considered essential to public health and safety.
Occupations in sales, production, food preparation and services and others were deemed to be at high risk of layoff, potentially affecting 66.8 million people.
Other St. Louis Fed economists — Fernando Leibovici and Ana Maria Santacreu — and research associate Matthew Famiglietti suggested “nonessential occupations that require a high degree of face-to-face and close physical interaction are particularly likely to be hit hard, as consumers reduce their demand for them in pursuit of social distancing.”4
These occupations include barbers, hairstylists, food and beverage serving workers, flight attendants and others, amounting to another 27.3 million workers who may be out of work. To calculate the second quarter 2020 unemployment rate, the economists took the average of these two estimates, which resulted in 47.05 Americans being laid off. They further noted:5
“Summing to the initial number of unemployed in February, this resulted in a total number of unemployed persons of 52.81 million. Given the assumption of a constant labor force, this resulted in an unemployment rate of 32.1%.”
Given that this is a rough estimate, St. Louis Fed economist Miguel Faria-e-Castro suggested that actual second-quarter unemployment rates could be anywhere between 10.5% and 40.6%. For comparison, during the Great Recession, unemployment peaked at 10% in October 2009.6
Unemployment Could Skyrocket From 3.5% to 32%
If you follow the numbers, the unemployment rate went from 3.5% in February 2020 to 4.4% in March — and is predicted to rise to over 32% when the April data are in, which won’t be until the first week of May. The small rise in unemployment cases in March isn’t a useful indicator, since it includes data from early in the month, before the bulk of the layoffs took place.
“April, however, will be the cruelest month,” Vox reported, “capturing the bulk of the layoffs and furloughs undertaken due to coronavirus,” and adding, “you should not be shocked if the April number is in the double digits, at the very least. This is not inevitable, but it is quite plausible. These are truly unprecedented times. Expect unprecedented numbers.”7
In fact, a real-time labor market estimate found the U.S. unemployment rate had already increased to 20.2% as of April 15, 2020.8 Meanwhile, unemployment claims surpassed the 22-million mark in the last month, which, as noted by ZeroHedge, “is over 10 times the prior worst four-week period in the last 50-plus years.” Further, in the last four weeks, “more Americans have filed for unemployment than jobs gained during the last decade since the end of the Great Recession.”9
Will This Bring a Return to Depression-Era Food Rations?
What’s now being termed “The Great Lockdown” may turn out to be worse than the Great Depression. The International Monetary Fund predicted the global economy would contract by 3% in 2020 as economies shut down.10
And Carmen Reinhart, a professor of economics and finance at Harvard’s Kennedy School of Government, told The Associated Press, “We will see higher default rates and business failures. It could be like the 1930s.”11
During the Great Depression, both money and food were in short supply, breadlines were long and soup kitchens became mainstream. The average U.S. family lived by the motto “Use it up, wear it out, make do or do without.”12
Women stretched their food budgets by creating casseroles and churches organized potlucks to share food, while community “thrift gardens” were created for residents to grow their own food.
During World War II, the Emergency Price Control Act was put in place, allowing the government to set price limits and ration food and other commodities, like tires, gasoline and oil, so scarce resources could be evenly distributed and hoarding would be limited. According to History.com:13
“By the spring , Americans were unable to purchase sugar without government-issued food coupons. Vouchers for coffee were introduced in November, and by March of 1943, meat, cheese, fats, canned fish, canned milk and other processed foods were added to the list of rationed provisions.”
Americans were given ration books that contained stamps, and the government set a point system to foods based on availability. History.com continued:14
“[C]ustomers were allowed to use 48 ‘blue points’ to buy canned, bottled or dried foods, and 64 ‘red points’ to buy meat, fish and dairy each month — that is, if the items were in stock at the market.
Due to changes in the supply and demand of various goods, the OPA [Office of Price Administration] periodically adjusted point values, which often further complicated an already complex system that required home cooks to plan well in advance to prepare meals.”
During this time, many Americans also planted “victory gardens” to supply their own fruits and vegetables. Returning to an era of food rations and scarcity may have seemed unthinkable to most Americans in early March 2020 — but is far more believable today. Already, people are waiting in long lines to get into stores, where they’re allowed to purchase only certain allotments of high-demand items like eggs and toilet paper.
The process gets more orderly by the day, with Americans now being instructed to stand at set 6-foot intervals and the purchase of certain items deemed “nonessential” being restricted entirely. If you’ve ever thought about growing your own food, but perhaps haven’t felt motivated to actually do it, now is a perfect time to get started growing your own vegetable garden.
Half a Billion in Poverty, Entire Industries Destroyed
In a dire warning issued by Oxfam, a conglomerate of 19 organizations working to end global poverty, it’s estimated that the COVID-19 crisis could send half a billion more people into poverty.15 The analysis suggests that 6% to 8% of the global population may be forced into poverty by the economic shutdowns being imposed to stop the spread of COVID-19.
In some regions, such as sub-Saharan Africa, the Middle East and North Africa, the fight against poverty could be set back by three decades, and the hardest hit will be “poor people in poor countries who are already struggling to survive” and have no safety nets to bail them out. Oxfam reported:16
“The poorest workers in rich and poor nations are less likely to be in formal employment, enjoy labour protections such as sick pay, or be able to work from home. Globally, just one out of every five unemployed people have access to unemployment benefits.
Two billion people work in the informal sector with no access to sick pay — the majority in poor countries where 90 percent of jobs are informal compared to just 18 percent in rich nations.”
In Bangladesh, for instance, more than 1 million garment workers, most of whom are women, have been laid off without pay because of cancellations of orders from Western clothing brands.
In Africa, meanwhile, it’s estimated that close to half of jobs could disappear. One taxi driver and father told Oxfam he had not received a fare since the lockdown closed the airport and restaurants, stating “this virus will starve us before it makes us sick.”17
Entire industries have also been destroyed. Dairy farmers are being forced to dump milk as demand from restaurants and schools plummets. The dairy industry could lose $5 billion to $10 billion in sales in the next six months, and the seafood industry is also reeling, facing an 85% drop in revenue.18 Declines in consumer spending is also forcing down prices for other farm products, putting farmers at risk.
Tim Gibbons, communications director at the Missouri Rural Crisis Center, told the Columbia Daily Tribune, “It can’t be highlighted enough that it was really bad out here [for farmers] before COVID-19, and COVID has only made it worse. It’s shining a spotlight on the rigidity and lack of resilience for the corporate model of [farm production], which does not pay farmers fairly and is not good for consumers.”19
How Many Will Die From the Mental Health Fallout?
The U.S. was already on the brink of a mental health crisis prior to the COVID-19 pandemic. But the associated stresses, which run the gamut from isolation and anxiety to unemployment and illness, are now threatening to create a mental health emergency among Americans.
Such was the case during the Great Depression, when suicide rates reached an all-time high,20 and again during the Great Recession, when at least 10,000 additional “economic suicides” occurred between 2008 and 2010.21
“Job loss, debt and foreclosure increase risks of suicidal thinking,” researchers wrote in The British Journal of Psychiatry.22 Another study looking at the association between suicide and unemployment in 63 countries between 2000 and 2011, which notably included the 2008 global economic recession, found the relative risk of suicide associated with unemployment was elevated by 20% to 30% during the study period.
Further, 1 in 5 of an estimated 233,000 annual suicides that took place from 2000 to 2011 were linked to unemployment.23 A 2014 Gallup Poll also found, “The longer that Americans are unemployed, the more likely they are to report signs of poor psychological well-being.”24
Depression is another considerable risk. The poll found that about 1 in 5 Americans who were unemployed for a year or more either had or were being treated for depression, which is double the rate of those who were unemployed for five weeks or less. According to Gallup:25
“Gallup finds that unemployed Americans are more than twice as likely as those with full-time jobs to say they currently have or are being treated for depression — 12.4% vs. 5.6%, respectively. However, the depression rate among the long-term unemployed — which the Bureau of Labor Statistics defines as those who have been seeking work for 27 weeks or more — jumps to 18.0%.”
Social isolation and quarantine also take a toll on mental health. A rapid review of the evidence, published in The Lancet in March 2020, looked into the psychological impact of quarantine, finding, not surprisingly, “Most reviewed studies reported negative psychological effects including post-traumatic stress symptoms, confusion, and anger.”26
Out of 2,760 quarantined people, 34% experienced high levels of psychological distress, which could include anxiety or depression. Long-lasting psychological effects are also possible.27
Take Steps to Protect Your Mental Health
Many are talking about hand washing, wearing masks and other steps to protect your physical health during the COVID-19 pandemic. Equally important is tending to your mental health, especially if you’re one of the millions being affected by job losses, unemployment and social distancing.
In the video above, Julie Schiffman demonstrates how to use the Emotional Freedom Techniques (EFT) to relieve anxiety and other challenging emotions brought on by news and uncertainty about this pandemic and/or self-quarantining. Another option is the Neuro-Emotional Technique’s First Aid Stress Tool, or NET FAST,28 which is performed as follows:
- While thinking about an issue that is bothering you, place your right wrist, palm up, into your left hand. Place three fingers of your left hand onto the area of your right wrist where you can feel your pulse.
- Place your open right hand on your forehead. Gently breathe in and out several times while concentrating on feeling the issue that bothers you.
- Switch hands and repeat steps 1 and 2.
As mentioned, now is also an excellent time to dive into organic gardening. Not only can it give you increased food security, but gardening also helps to reduce stress and save money on groceries, both of which will become increasingly important if unemployment levels continue to rise.