On April 2nd we released a set of scenarios with estimates of how high the unemployment rate may go in 2020 due to the pandemic induced recession.
As our chart below (click to enlarge) shows, already the current estimated unemployment rate (18%) has likely reached our optimistic case (18%).
Last week's unemployment claims came in at 5.2 million, which brings the total unemployment claims over the past 4 weeks to 22 million.
22 million is a bit over 13% of working Americans. Adding them to the 6+ million who were unemployed prior to the pandemic means about 17%-18% are likely currently unemployed.
This is a low estimate because some people who lose their jobs choose not to apply for unemployment and others have been unable to because state unemployment systems are overloaded.
Given many more will be laid off before hiring rebounds, our optimistic case is off the table.
Our base case (22% unemployment) is still in play but at this point, we wouldn't be surprised if it too turned out to be low.
Our unemployment forecast was one of the higher ones when we released it on April 2nd. And just 2 weeks later it appears it may be a bit low.
Others are also quickly raising their unemployment forecasts. JP Morgan, for example, bumped its unemployment forecast for April to 20% last week. They also lowered their Q2 GDP forecast from -25% to -40%. Their earlier forecasts came out 2 weeks ago.
Since we're in uncharted economic waters, it's not surprising that quick, major forecast revisions are happening. Due to a lack of historical precedents and data, the truth is everyone is just guessing at this point.
As we pointed out in our article on our forecast scenarios, the official unemployment rate may not reflect the actual unemployment rate during the pandemic.
Quartz's New research suggests the US unemployment rate is about to become useless goes into detail on why this will likely be the case.
