Shutdown drives California unemployment to Great Recession levels in barely a month

It took the coronavirus pandemic less than a month to triple California’s unemployment rolls and plunge the state’s economy into a tailspin comparable to the Great Recession.

Gov. Gavin Newsom, in his daily update on the fight against COVID-19 on Tuesday, said “well over 1.6 million Californians” have filed for unemployment. A record 150,000 Californians filed claims Monday alone, he said.

A spokeswoman for the Employment Development Department, Loree Levy, said Newsom’s statement reflected an estimate of new unemployment claims. More exact numbers will be released Thursday.

The figures illustrate the remarkable swiftness of the economic impact of the pandemic, which prompted Newsom to issue a statewide “stay at home” order that has shuttered much of the economy since March 19.

Along with 759,000 already counted as unemployed by EDD before the pandemic struck, an additional 1.6 million people on unemployment would represent a tripling of the number of Californians out of work.

It would put the state’s unemployment rate at roughly 12 percent. That would be similar to the peak unemployment rate California experienced in 2010, about a year after the recession officially ended.

A job loss of 1.6 million in barely a month would also match the total number of jobs one prominent think tank, the Economic Policy Institute, predicted would be lost by summer.

Newsom’s order closed bars and most retailers. Much of California’s tourism and entertainment industry had already started shutting down before Newsom acted, from Disneyland to the Tahoe-area ski resorts.

“We’re going to have to do more to meet this moment for employers and employees … and get this economy back, and growing as it was just a few months ago,” Newsom said. The official unemployment rate for February, which predates the effects of the coronavirus, was a record low 3.9 percent.

Some economists have predicted a quick rebound once the public health crisis fades. But Sung Won Sohn, a business economist at Loyola Marymount University, said he’s less optimistic.

Logistically, it will be hard for some shuttered businesses to reopen right away, Sohn said. In addition, consumers might not be psychologically ready to return to crowded restaurants or other venues and spend.

“We’ve been shellshocked and we’re going to be much more careful about spending money in the future,” he said. “We’re getting used to staying home and not spending money.”

This story was originally published April 1, 2020 at 5:00 AM with the headline "Shutdown drives California unemployment to Great Recession levels in barely a month."