COVID-19 has been ravaging the U.S. economy since cases started multiplying about three months ago. Since mid-March, unemployment levels have been through the roof, with Americans filing more than 2 million jobless claims per week.
Thankfully, weekly unemployment claims dipped a bit for the week ended May 30, finally coming in below the 2 million mark -- but the numbers still aren't great. In April, the unemployment rate reached a record 14.7%, the highest it's been since the Great Depression. And once all of May's numbers come in, analysts predict an unemployment rate of close to 20%.
Will unemployment improve now that restrictions are being lifted?
Throughout the country, states are slowly but surely attempting to lift restrictions -- a move that will not only give Americans some sense of normalcy but serve to kick-start local economies. With this happening, we could find that weekly jobless claims manage to decline steadily as more and more businesses reopen their doors and bring back laid-off or furloughed staff.
Still, we cannot and should not expect an overnight recovery -- not even close. Certain industries, like travel, entertainment, and event planning, are apt to feel the effects of COVID-19 well into 2021, and while different states are moving at different paces, many are still many steps away from letting restaurants -- another hard-hit industry -- serve at capacity.
And let's not forget that while Americans might be itching to leave their houses, many are struggling financially right now and don't have much money to pump back into the economy as businesses start opening their doors. There's talk of a follow-up stimulus payment that could give Americans more spending power, but so far, lawmakers have yet to vote on an official secondary relief package; while Democrats are pushing for a more generous stimulus than the initial payments that went out, Republicans are pushing back. But even if that money comes through, many families will have no choice but to spend it on essentials like rent and medication, which won't help the countless small businesses that are hoping to see an uptick in revenue as restrictions ease.
Furthermore, we can't discount the possibility of a second wave of COVID-19 infections as social distancing measures grow increasingly relaxed. If there's a second large-scale shutdown, it could drive weekly jobless claims right back up again. So we should process this week's somewhat positive news with extremely cautious optimism. It could very well be that unemployment levels will steadily drop week over week, but we can't discount the possibility of slow progress or a very major setback that spurs an even worse recession than any of us are prepared for.