Jobless Claims Risk: This IS an Economic Depression
How do you define what is an economic depression?
As noted in the previous article, most economists and laypeople could generally agree upon three necessary symptoms showing up together in order for a downturn, recession, to be listed historically as what is an economic depression level event.
It doesn’t matter the reason.
Now what is true, is that throughout history, some depressions are actually short on a relative basis, especially in comparison to the most-known depression (The Great Depression of the 1930s).
Generally speaking, governmental policy mistakes over time set up the business cycle to be at greater risk of its troughs being of an order of magnitude bad enough to be a depression vs just a recession.
This can take the form of overly-relaxed banking regulation standards, excessive taxation, income inequality, or even inadequate preparation for and lack of timely response to a global pandemic.
Rather than show the raw numbers of initial jobless claims in comparison to years past, we have chosen to share the year-over-year change here, but the raw numbers look just as bad – if not worse.
As can be seen in the image above, the chilling economic shock from the coronavirus deep freeze can not be overstated. Skyrocketing unemployment so early on in a downturn can be a blessing, a curse, or both. A lot depends on how we as a world, as a nation, the U.S. government, corporations, small businesses, consumers, everyone, responds.
These initial jobless claims graphed above do not tell the whole story!
- Gig workers have exploded as a % of workforce over the past few decades and *are not* eligible for unemployment benefits, and as such are not even counted in valid jobless claims.
- Independent Contractors have exploded as a % of workforce over the past few decades and *are not* eligible for unemployment benefits, and as such are not even counted in valid jobless claims.
- Many states reported that their filling systems were repeatedly crashing during the reporting week ending March 21, 2020 and as such, this backlog will be adding to the reports for weeks to come.
- There are more layoffs to come.
In a nutshell, the United States has never before seen soaring joblessness like this outside of the Great Depression and a handful of other prior depressions dating back to our founding.
This is an economic depression level risk event. If the downturn and related high unemployment persists beyond a quarter or two, which seems very possible even if the pandemic should suddenly end by way of cure or some miracle, history will look back at this recession as a horridly bad outlier compared to most garden variety downturns.
And history will also look very negatively upon politicians who fiddled while Rome was burning and did things like played politics to try to game their reelection odds at the cost of human lives.