Economist: Nation in economic conditions not seen since early days of Great Depression

MUNCIE, Ind. – Friday’s jobs report made it clear the United States is in the early stages of the worst economic conditions since the Great Depression, said Michael Hicks, an economist at Ball State University.

“The bulk of job losses fall in sectors which will continue to suffer low demand after shelter in place orders have been loosened,” said Hicks, director of Ball State’s Center for Business and Economic Research. “This strongly suggests that the disease, not government action, is the cause of economic distress. Thus, regardless of state action to relax shelter in place rules, the economy will continue to experience Great Depression levels of stress until COVID-19 vaccinations or treatments are available.

“The good news is that of the 20.6 million workers unemployed over the past month, 18 million reported they were experiencing a temporary layoff. This signals the expectation that they may regain their jobs as conditions improve.”

The April jobs report reported an unemployment rate increase of roughly 10 percent to 14.7 percent. This is the highest national rate since the Great Depression but is beneath the 17 percent rate suggested by data on initial jobless claims over the past two months.

The March adjustment was large, adding more than 170,000 lost jobs to the last report, but still well beneath the 6 percent adjustment suggested by weekly jobless claims.

Hicks said the number of workers facing part-time employment for economic reasons almost doubled, from 5.7 to 10.8 million workers.

This is a stark increase since February, when 4.3 million workers experienced involuntary, part-time work. Voluntary part-time wok dropped significantly, from 20.6 million to 12.3 million, but the cause for this decline is not clear. It could be from job losses, or it could be from workers moving to full-time work, he said.

The composition of job losses occurred as expected, with the biggest increases occurring in leisure and hospitality, and in retail and wholesale trade, Hicks said.

He said it was somewhat unexpected that those workers who are not in the labor force grew substantially, with a year over year gain of 7 million workers. This reversed a multi-year trend.