Submitted by Taps Coogan on the 4th of May 2020 to The Sounding Line.

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According to data from the BLS, 26.5% of people on unemployment in March were temporarily laid-off (furloughed), the highest level since at least 1967.

Of the 1.3 million person increase in unemployment in March, roughly 77% were temporary layoffs with the rest being permanent job loses, new entrants to the labor markets, etc… The BLS defines layoffs as people who expect to return to work within six months or who have otherwise been provided with a specific recall date.

Of note, the ratio of temporary layoffs to the unemployment level actually fell during the Global Financial Crisis as people were permanently let go faster than they were furloughed. The opposite is occurring today and the opposite has occurred during most other post-war recessions. Part of what made the Global Financial Crisis so much more severe than other post-war recessions was that the job losses overwhelmingly represented permanent firings, not furloughs. It was a self-perpetuating economic crisis without a clear terminus and when jobs were lost, they were lost for good.

While the economic toll of the current shutdowns may take on a life of its own, the exogenous driving force of the economic contraction, the speed and magnitude of the monetary and fiscal stimulus, and the nature of the increase in the unemployment rate suggest that the extremely prevalent comparisons to the Global Financial Crisis and the Great Depression deserve a bit more scrutiny.

Most of the increase in unemployment is going to come in the April data, for which we do not yet know the ratio of temporary layoffs. Hopefully, a similarly high percentage of job losses will be temporary.

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