Why Congress' own economists predict 15 million unemployed in 2021

• President Donald Trump has said the economy will take off like a rocket when the COVID-19 pandemic and social distancing ends.
• The Congressional Budget Office predicts the unemployment rate will still be at 9% at the end of 2021.
• Historically, high unemployment rates during recessions and pandemics have taken a long time to come back down to full employment levels.
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Following is a transcript of the video.

Narrator: If you watch President Trump's daily briefings, you might think everything will immediately go back to normal when social distancing is no longer necessary.

President Trump: And you will see our economy skyrocket.

Narrator: But Congress' own budget office thinks things will be pretty bleak for much longer. At the beginning of April, the CBO released a report that predicts 9% unemployment at the end of 2021. This past March, it was 4.4%, with 7.1 million people out of work. So that 9% at the end of 2021 would mean about 15 million people could still be out of work. That's the same amount as the peak of the Great Recession in 2009. We've already seen 22 million people file for unemployment in this four-week period, and that number is likely to climb higher as more and more Americans continue to be told to stay inside. In its projection, CBO assumed the U.S. would have 12% unemployment for the second quarter of this year. It also factored in major physical distancing measures continuing for the next three months and some form of physical distancing continuing through the end of the year. The model believes that job and business losses will held for much longer than that. We're gonna take a look at the unemployment rate of a few past recessions and pandemics to show just how long the U.S. recovery might take and why the CBO is likely right. Unemployment is not a perfect metric, but it does give a good understanding of how the workforce is faring and the economy overall.

Let's start with the Great Recession, the most recent economic disaster, still pretty fresh in people's minds. Watch how long it takes, about 18 months, to go from 5% to 10% unemployment. It peaks in October 2009 and hovers there for another six months or so, then takes more than six years to get back under 5%, which is still slightly above what economists consider the high end for full employment. And if you look at the chart, you can see the last time it was under 5% was February 2008, so it took a full eight years to get back under that 5%. This was a complete unraveling of the U.S. financial industry, not a global pandemic, so let's add one of those.

We're going to go with the 1957 influenza pandemic. It matches the severity of the COVID-19 coronavirus with an estimated 1.1 million people dying around the world. Now, this was a new flu virus, but thanks to monitoring and early preparation, the U.S. modified an existing flu vaccine and was ready when it hit. However, despite the implementation of some physical distancing measures, the flu still killed 70,000 Americans, though it is believed it would've killed many more if not for the vaccine. Keep in mind, this was more than 60 years ago, and the overall economy looked much different than it does now. We'll start with August of 1957, when unemployment was 4.1%. It hits a peak of 7 1/2% in July of the following year, dances with 5% right here in June of 1959 but doesn't steadily fall below 5% until 1965. In fact, we don't see 4.1% until November of that year, more than eight years after our initial reading. So there are a lot of other factors that contributed to the unemployment around this time, but what's notable is that there is barely a recovery from our 1957 recession before there's another one during 1960 and 61, which, you can see, takes a few years to recover from. It's an important lesson to note: recession recoveries can be very short and followed by another recession.

Now, let's look at a disease that we didn't have a vaccine for, the 1918 pandemic. It's the most severe pandemic in recent history, killing about 50 million people around the world and 675,000 in the U.S. This was pre monthly unemployment data, but we do have annual numbers provided by the U.S. Census Bureau 1.4% in 1918, 1.4% in 1919, but then we hit 5.2 in 1920, 11.7 in 1921, 6.7 in 1922 and, finally, in 1923 we're back down to 2.4%. Now, there was a lot more going on here than just the pandemic. Troops returning from World War I created a huge surge in the labor force, the fed raised interest rates, and President Woodrow Wilson was slow to respond to the economic downturn. But, again, we hit a period of high unemployment that took a couple years to come back down from.

Let's quickly add one more line to our chart, the Great Depression. It's the one we all learn about in history class, so let's start in 1929 at 3.2%. Watch it peak in 1933 at 25.2% and, finally, nine years later in 1942, it drops under the 5% line at 4.7%. Now, this wasn't a pandemic, nor is it very recent, but it does have the highest rate of unemployment at 25%.

We don't know what the exact level of unemployment is right now, but, again, in the four weeks leading up to April 9th, about 22 million people filed for unemployment. And in that same time, more states continued to issue stay-at-home guidance for their residents. Former Fed Chair Janet Yellen says we might already be at 13% and climbing higher. James Bullard, the president of the St. Louis Federal Reserve, recently told Bloomberg he predicts unemployment to hit 30% in the second quarter, which we're in right now. Looking at this graph, it's tough to imagine 13% unemployment shooting down to under 5% in the span of a few weeks. It's even harder to imagine when starting at 30%. Now, Washington has attempted to soften the blow of what's going on, but not everyone is getting helped. Tipped workers and gig workers may not qualify. The extra $600 program is set to last only four months. Secretary of Labor Eugene Scalia is being criticized for attempting to limit some of the new relief programs. And we're now seeing mile-long lines for food banks. The coronavirus isn't going anywhere, and with an approved vaccine at least a year away, it's likely physical distancing measures are staying put. And even if those measures are relaxed soon, it's unlikely that every job will be immediately available.

Denmark was fast to implement safety measures, and as a result, had relatively few cases. The country is considering easing some of the restrictions, but the prime minister has cautioned against opening up too quickly, saying, "If we open Denmark too quickly again, "we risk that infections rise too sharply "and then we have to close down again."

China has been dealing with an outbreak since January. It reopened a few movie theaters in late March and closed them four days later. It's slowly starting to get manufacturing back up and running, but factories have had to implement social distancing measures, monitor workers for possible infection and even have groups of employees who work together also live and travel together, which doesn't sound feasible here in the U.S. Those limited approaches make sense.

While Trump originally wanted to lift social distancing guidelines on Easter, he has now pushed that back to the end of April. However, a new report predicts a summer spike in COVID-19 cases if the U.S. physical distancing guidelines are completely lifted in early May. The U.S. still doesn't have widespread testing or containment measures for what comes after shelter in place. Will people wanna risk going out to eat at crowded restaurants, pack into Wrigley to catch a Cubs game, get on a crowded flight for vacation, even hop on a packed train to commute to work? Probably not. And when you multiply that across entire industries, restaurants, travel, hospitality, events, that's millions of employees who won't be going back to work until this is more under control. And that's going to pose big problems in getting the economy to take off like a rocket.

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