US unemployment could surge to worst level since 1940s: Fed vice chairman
The US unemployment rate could surge to the worst level since the 1940s as the economy is on track to have a sharp contraction in the second quarter caused by the COVID-19 pandemic, US Federal Reserve Vice Chairman Richard Clarida said on Tuesday.
"We're living through the most severe contraction in activity and surge in unemployment that we've seen in our lifetimes," Clarida said in an interview with CNBC.
"The unemployment rate is going to surge to numbers that again we have not seen probably since the 1940s," he said, adding around 30 million Americans have filed for unemployment claims in the last six weeks.
"So, this is not a typical recession. It's going to be a very, very sharp contraction, certainly in the second quarter," Clarida said, noting it's going to take some time for the labor market to fully recover from this shock.
While the course of the US economy is going to depend upon the course of the virus and the mitigation efforts, Clarida said he believes that recovery could begin in the second half of the year.
"There is enormous uncertainty right now, and I'm an economist, not an epidemiologist," he said. "I think we have to be appropriately humble as we're navigating this period."
US real gross domestic product in the first quarter contracted at an annual rate of 4.8 percent amid COVID-19 fallout, the biggest quarterly decline since the 2008 financial crisis, the Commerce Department reported last week.
Economists at the Federal Reserve Bank of Chicago said on Tuesday that the true unemployment rate could rise to between 25.1 percent and 34.6 percent in April, citing a new measure of labor market underutilization that is tailored to the COVID-19 crisis.
"The official unemployment rate does not capture all workers facing adverse employment conditions," Chicago Fed economists Jason Faberman and Aastha Rajan wrote in a blog.
"The evidence suggests that employment losses are likely in the tens of millions, but many individuals are finding it hard to actively look or be available for work and therefore be classified as unemployed," they wrote.