Narrator: If you watch President Trump's
daily briefings, you might think everything
will immediately go back to normal
when social distancing is no longer necessary.
President Trump: And you will see our economy skyrocket.
Narrator: But Congress' own budget office
thinks things will be pretty bleak for much longer.
At the beginning of April, the CBO released
a report that predicts 9% unemployment
at the end of 2021.
This past March, it was 4.4%,
with 7.1 million people out of work.
So that 9% at the end of 2021
would mean about 15 million people
could still be out of work.
That's the same amount as the peak
of the Great Recession in 2009.
We've already seen 22 million people file
for unemployment in this four-week period,
and that number is likely to climb higher
as more and more Americans continue
to be told to stay inside.
In its projection, CBO assumed the U.S.
would have 12% unemployment
for the second quarter of this year.
It also factored in major physical distancing measures
continuing for the next three months
and some form of physical distancing
continuing through the end of the year.
The model believes that job and business losses
will held for much longer than that.
We're gonna take a look at the unemployment rate
of a few past recessions and pandemics
to show just how long the U.S. recovery might take
and why the CBO is likely right.
Unemployment is not a perfect metric,
but it does give a good understanding
of how the workforce is faring
and the economy overall.
Let's start with the Great Recession,
the most recent economic disaster,
still pretty fresh in people's minds.
Watch how long it takes, about 18 months,
to go from 5% to 10% unemployment.
It peaks in October 2009 and hovers there
for another six months or so,
then takes more than six years to get
back under 5%, which is still slightly
above what economists consider
the high end for full employment.
And if you look at the chart,
you can see the last time it was under 5%
was February 2008, so it took a full eight years
to get back under that 5%.
This was a complete unraveling
of the U.S. financial industry,
not a global pandemic,
so let's add one of those.
We're going to go with the 1957 influenza pandemic.
It matches the severity of the COVID-19 coronavirus
with an estimated 1.1 million people dying around the world.
Now, this was a new flu virus,
but thanks to monitoring and early preparation,
the U.S. modified an existing flu vaccine
and was ready when it hit.
However, despite the implementation
of some physical distancing measures,
the flu still killed 70,000 Americans,
though it is believed it would've killed
many more if not for the vaccine.
Keep in mind, this was more than 60 years ago,
and the overall economy looked
much different than it does now.
We'll start with August of 1957,
when unemployment was 4.1%.
It hits a peak of 7 1/2% in July of the following year,
dances with 5% right here in June of 1959
but doesn't steadily fall below 5% until 1965.
In fact, we don't see 4.1% until November of that year,
more than eight years after our initial reading.
So there are a lot of other factors
that contributed to the unemployment
around this time, but what's notable is
that there is barely a recovery from our 1957
recession before there's another one
during 1960 and 61, which, you can see,
takes a few years to recover from.
It's an important lesson to note:
recession recoveries can be very short
and followed by another recession.
Now, let's look at a disease that we
didn't have a vaccine for, the 1918 pandemic.
It's the most severe pandemic in recent history,
killing about 50 million people around the world
and 675,000 in the U.S.
This was pre monthly unemployment data,
but we do have annual numbers provided
by the U.S. Census Bureau
1.4% in 1918, 1.4% in 1919,
but then we hit 5.2 in 1920,
11.7 in 1921, 6.7 in 1922
and, finally, in 1923 we're back down to 2.4%.
Now, there was a lot more going on here
than just the pandemic.
Troops returning from World War I created
a huge surge in the labor force,
the fed raised interest rates,
and President Woodrow Wilson was slow
to respond to the economic downturn.
But, again, we hit a period of high unemployment
that took a couple years to come back down from.
Let's quickly add one more line to our chart,
the Great Depression.
It's the one we all learn about in history class,
so let's start in 1929 at 3.2%.
Watch it peak in 1933 at 25.2%
and, finally, nine years later in 1942,
it drops under the 5% line at 4.7%.
Now, this wasn't a pandemic,
nor is it very recent,
but it does have the highest rate
of unemployment at 25%.
We don't know what the exact level
of unemployment is right now,
but, again, in the four weeks
leading up to April 9th, about 22 million people
filed for unemployment.
And in that same time, more states continued
to issue stay-at-home guidance for their residents.
Former Fed Chair Janet Yellen says
we might already be at 13% and climbing higher.
James Bullard, the president
of the St. Louis Federal Reserve,
recently told Bloomberg he predicts
unemployment to hit 30% in the second quarter,
which we're in right now.
Looking at this graph, it's tough to imagine
13% unemployment shooting down to under 5%
in the span of a few weeks.
It's even harder to imagine when starting at 30%.
Now, Washington has attempted to soften
the blow of what's going on,
but not everyone is getting helped.
Tipped workers and gig workers may not qualify.
The extra $600 program is set to last only four months.
Secretary of Labor Eugene Scalia
is being criticized for attempting
to limit some of the new relief programs.
And we're now seeing mile-long lines for food banks.
The coronavirus isn't going anywhere,
and with an approved vaccine at least a year away,
it's likely physical distancing measures are staying put.
And even if those measures are relaxed soon,
it's unlikely that every job will be immediately available.
Denmark was fast to implement safety measures,
and as a result, had relatively few cases.
The country is considering easing some
of the restrictions, but the prime minister
has cautioned against opening up too quickly,
saying, "If we open Denmark too quickly again,
"we risk that infections rise too sharply
"and then we have to close down again."
China has been dealing with an outbreak since January.
It reopened a few movie theaters in late March
and closed them four days later.
It's slowly starting to get manufacturing
back up and running, but factories have
had to implement social distancing measures,
monitor workers for possible infection
and even have groups of employees who work
together also live and travel together,
which doesn't sound feasible here in the U.S.
Those limited approaches make sense.
While Trump originally wanted to lift
social distancing guidelines on Easter,
he has now pushed that back to the end of April.
However, a new report predicts a summer spike
in COVID-19 cases if the U.S. physical distancing
guidelines are completely lifted in early May.
The U.S. still doesn't have widespread testing
or containment measures for what comes
after shelter in place.
Will people wanna risk going out to eat
at crowded restaurants, pack into Wrigley
to catch a Cubs game, get on a crowded flight
for vacation, even hop on a packed train
to commute to work?
Probably not.
And when you multiply that across entire industries,
restaurants, travel, hospitality, events,
that's millions of employees who won't be going
back to work until this is more under control.
And that's going to pose big problems
in getting the economy to take off like a rocket.