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2020 is a terrible year for the US economy; millions of people have already lost their jobs and as the US economy continues to shrink. The economy is falling at a rate never seen before and this is becoming the most severe economic collapse we have seen in nearly the last 100 years.
The Standard Chartered Bank has calculated that the headline unemployment numbers have been adjusted to report a lower unemployment rate. Their models have shown that the real unemployment numbers are 42 million and this pushes the real unemployment rate to 25.4 percent. This is even higher than the U-6 unemployment rate of 22.8 percent.
When asked how they came up with these numbers, the Standard Chattered chief FX strategist Steve Englander explained that the BLS had published that 23.1 million people were unemployed. In addition to this, we have 8.1 million people who have dropped out of their labor force from April. There are also 7.5 million workers who have been classified as employed but they are not working at the moment for other reasons. BLS has stated that these workers are likely to have been miscalculated and registered as employed when in fact they are unemployed. The number of involuntary part-time work for economic reasons has also gone up by 6.6 million and these people can be treated as half employed thus contributing to approximately 3.3 million unemployed people. Standard Chattered has explained that when all these numbers are put together, we have close to 42 million Americans who are unemployed at the moment. Keeping the civilian labor force at February’s 164.5 million and comparing this to the numbers we have now, it means that the effective unemployment rate is at 25.5 percent. If Englander treated the involuntary part-time workers as fully unemployed, then the unemployment rate would be adjusted to 27.5 percent. This is worse than the great depression where the unemployment rate was hovering at around the 20 percent level. This is a very serious economic meltdown and it is clear that the unemployment numbers will remain in this state in the near future.
As the US economy remains almost totally closed, investors are expecting bad economic data for the mid-March to April as they expect the May economic data to deteriorate but at a slower pace than what we had for April. Investors are being forced to adjust their expectations on the performance of the economy as the monitor the pace at which the economy will reopen because this is the only way the unemployment rate will improve. However, we have had a lot of economic damages and many companies have already filed for bankruptcy. Even if the economy reopens, we will not see a quick but slow recovery in the labor market and the entire economy at large.
As the US economy slows down, many workers will completely lose their jobs because of this crisis. The White House economic advisor Kevin Hassett has warned that the second-quarter GDP is expected to be the biggest negative number since the great depression. Hassett is the former chair of the Council of Economic Advisors and currently, he has been an economic advisor to the Trump administration on economic policies. He has said that next month we will have catastrophic economic numbers as statistics catch up with the reality. This means that the unemployment rate might skyrocket further in the coming months.
Englander has warned that when we look forward, the May unemployment data may be gloomy as well because we do not have any signs of unemployment numbers going down now for many weeks in a row. The economy has been devastated in a big way but very soon we might see a convergence between the reality and the official figures being reported.
For a long time, we have been warning that the US economy is a big bubble that will plunge everyone into an economic nightmare once it bursts. With this outbreak, the biggest economic bubble in history has busted and what we are experiencing now is a total collapse and degradation of our society. The current outbreak has turned out to be a “black swan event” that has lead to the collapse of many economies all over the world. This is not the worst thing that can happen to the American economy, but it has been enough to trigger a total economic disruption that has resulted in one of the worst economic meltdowns in the history of the United States. Millions of Americans have already lost their jobs and at the moment they are suffering. Last Friday we had the worst unemployment report in American history and what is happening cannot even be compared to the great depression.
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