Jobs are being destroyed around the world as coronavirus pandemic pushes one economy after another into recession

The world’s workers are reeling from the initial shock of the coronavirus recession, with job losses and welfare claims around the globe already running into the millions this week. As the International Labour Organisation warns of almost 25 million lay-offs if the virus isn’t controlled, the cuts from Austria to the US reflect the deepest peacetime recession since the 1930s as economies are frozen to beat the pandemic.

“We see unemployment rates in the US and Europe getting up well up into the teens,” Peter Hooper, global head of economic research at Deutsche Bank, told Bloomberg Television. “Given the pain that we see near-term in the US and Europe, this is unprecedented since the Great Depression, in terms of magnitudes.”

Rising unemployment will intensify pressure on governments and central banks to speed delivery of programmes to either compensate workers who are made redundant, or try to persuade employers to hoard staff until the virus fades. Failure would risk an even deeper recession or weak recovery that would require policymakers to consider yet more stimulus on top of that already deployed.

At JPMorgan Chase, economists predict their measure of unemployment in developed markets will jump by 2.7 percentage points by the middle of this year, having started this year around its lowest in four decades. While there will be some healing as economies recover, they still predict elevated unemployment of 4.6 per cent in the US and 8.3 per cent in the euro area by the end of 2021.

The shock to labour markets also marks a stress test for different social models. The US’s more flexible culture means more will lose their jobs than in the euro area or Japan, where there is a greater onus on retaining staff during a shock.

A first glimpse of the US devastation was apparent in its monthly labour report on Friday, showing employment fell last month for the first time in a decade. Payrolls slumped by more than 700,000, seven times as much as economists had forecast. Those figures are all the more worrying because they cover only the start of the labour-market damage in early March, before the biggest rounds of lay-offs and closures.

A greater hit is coming therefore, not least since the number of Americans applying for unemployment benefits soared to a record 6.65 million last week, more than twice the record set in the prior week. The 9.96 million combined claims of those two weeks is equivalent to the total in the first six and half months of the 2007-2009 recession.