Initiatives by government, private businesses and a host of organizations to slow the spread of the coronavirus is expected to create a recession as mass layoffs cause unemployment to exceed 10.5% nationally and 10% in Indiana within 45 days, according to a report from Ball State University.
Indiana’s jobless rate was 3.1% in January, but Ball State economists expect the within 90 days unemployment will rise to 14.6% nationally and 14.5% Indiana.
The co-authors of “What Will the Next Three Months Look Like? Simulating the Impact of Social Distancing on GDP and Employment” by Ball State’s Center for Business and Economic Research said the picture could be worse.
“These are likely very conservative estimates, yet it argues that job losses in March, April, May, and June may be the four largest in U.S. history, topping the 1.9 million jobs lost in the weeks following V-J Day in September 1945,” said Michael Hicks, director of Ball State’s CBER. “This level of job losses does not consider the effect of school closures on labor supply by households (and) this study does not assess the impact of supply chain disruptions on manufacturing, nor does it include the extreme shock to household wealth caused by stock market declines.”
Ball State’s analysis finds the effect of a 45-day social distancing will reduce GDP significantly—down 0.5 nationally and 0.4 in Indiana — and cause job losses of nearly 121,000 in Indiana, and 10.6 million nationally. After 90 days of social distancing, researchers anticipate 241,000 workers to be unemployed in Indiana, and 21 million unemployed nationally. GDP will fall 0.9 nationally and 0.7 in Indiana.
“Moreover, this estimate extends only 90 days and does not include much broader impacts of longer social distancing,” Hicks said. “We urgently need state policies to speed resources to displaced workers, and we need policies such as workshare and relief from job search, job tenure, and earnings requirements.”
Hicks said beyond stabilization efforts, state and federal governments should prepare for longer duration impacts.
“Schools across much of the nation are unprepared for lengthy closures,” he said. “Efforts to expand broadband connectivity and fund technological options for schools should be part of a broader stimulus bill.”