Daily Management Review

UK Economists Say US And UK Unemployment Could Be Worse Than The Great Depression


UK Economists Say US And UK Unemployment Could Be Worse Than The Great Depression
According to a former official of the Bank of England (BoE), the impact of the coronavirus pandemic on the economies of the United States and Britain will result in a level of unemployment that could surpass the levels reached during the Great Depression of the 1930s within just a few months. 
Unemployment was rising at the fastest rate in living memory, said David Blanchflower, professor of economics at Dartmouth College in the US and a member of the interest rate-setting monetary policy committee of the BoE during the 2008 financial crisis, while forecasting on the level of job losses across the world.
Based on the analysis of the job market figures of the US, Blanchflower said in an article in the Guardian, that the unemployment levels in the UK could reach as much as 6 million people, around 21 per cent of the entire workforce, quite fast. According to forecasts for the joblessness in the United States, it could reach as high as 52.8 million or about 32 per cent of the total workforce of the country.
“There has never been such a concentrated business collapse. The government has tried to respond but it has no idea of the scale of the problem it is going to have to deal with. We make some back-of-the-envelope calculations and they are scary,” he said.
The speed of shutting down of economic activities because of the coronavirus pandemic and the related sudden growth in unemployment were apparently at least 10 time faster than that was seen during the recession that was caused by the financial crisis of 2008, noted Blanchflower, who made the predictions along with David Bell, an economist at the University of Stirling.
The blow to the economy could be cushioned to an extent by the government support in Britain for companies to furlough workers, but the unemployment will continue to rise, said the economists. While predicting a rapid rise in joblessness, the economists also cautioned about the uncertainty of the length of time that the impact of the coronavirus pandemic would last and the rate at which unemployment will rise. The unemployment levels reached 24.9 per cent in the United States and 15.4 per cent in the UK over several years during the Great Depression according to historic records.
The plunge in the economic activities in the UK as well as in the eurozone has been the lowest since record keeping of the closely watched surveys gas been initiated about two decades ago. The US too is starting to see a steep rise in the unemployment.
The collapse of the private sector economy in the UK and the eurozone in et month of March was witnessed at the fastest pace since records began in the late 1990s, shows the shapshots of the latest reports of the purchasing managers indices (PMI), which are based on surveys of business activity.
According to March data, more than 701,000 jobs were lost in the US economy, which was much more than the average expectation of economists at 100,000 jobs. Compared to 3.5 per cent in February, the rate of unemployment increased to by 4.4 per cent in the country.  Joblessness in the US is already on track to reach more than 10 million, suggests the initial unemployment insurance figures, which come in advance of official figures.