As America nears the all-time high unemployment rate of 20% for May, the numerous bankruptcies indicate that unemployment is worse than most believe. Next week the unemployment numbers for May will be released. Many expect the rate to be over 20%. The problem with the unemployment numbers is that they count workers who qualify for unemployment benefits leaving many informal workers out of the count. This means that the number of unemployed is much higher than the official numbers indicate, even though they are as bad as the numbers were during the Great Depression.
Although economists and politicos alike are concerned about the 20% unemployment rate, rightly so, the reality is that the number don’t tell the whole story.
Neiman Marcus recently filed for bankruptcy. In doing so its 14,000 workers are now out of a job. Pier 1 employees, about 13,000 are also without a job. The almost 15,000 employees at J.Crew are in the same predicament, as well as another 10,000 employees at JC Penney’s.
On Monday, it was announced that Hertz car rental agency has also filed for bankruptcy. Almost 38,000 Hertz employees are also out of a job today as well.
Those are only a few of the bankruptcies recently filed or to be filed in the coming weeks. Almost 20% of the American workforce is in the service industry. The bankruptcies means almost 100,000 jobs have been lost, a fraction of the reality. Forbes lists almost 100 recent bankruptcies for companies having more than 500 employees on their payroll. There is still a question of how many restaurants, both small and chains will return to full operation leaving many service industry workers wondering about their jobs.
The problem is that we are not even halfway through the reopening of the American economy notwithstanding the wishful thinking by some politicians. Workers, for the most part, are still holding to the belief that their jobs are waiting for them once America reopens again.
Unfortunately, they are in for a rude awakening.
Covid-19 has exposed the financial weaknesses in many companies, like Hertz, who were always on the verge of bankruptcy. The pandemic has also given companies the opportunity to re-strategize how they do business. Many of which are rethinking their workforce needs.
June remains the likely pivot point for how we come out of the crisis. Either the economic chaos will remain through the rest of the year or it gets worse. The chance that America can recover in 2020 is now a fleeting idea that would require a miracle to become true.