But nearly half a year later, many of the jobs that were stuck in purgatory are being lost forever. About 33 percent of the employees put on furlough in March were laid off for good by July, according to Gusto, a payroll and benefits firm whose clients include small businesses in all 50 states and D.C. Only 37 percent have been called back to their previous employer.
There were 3.7 million U.S. unemployed who had permanently lost their previous job as of July, according to the Labor Department. That figure doubled from February to June, held steady in July, and is expected to hit between 6.2 million and 8.7 million by late this year, according to a new analysis from economists Gabriel Chodorow-Reich of Harvard University and John Coglianese of the Federal Reserve Board.
The economists’ most pessimistic estimate are uncomfortably close to the 8.6 million permanent unemployed seen after the Great Recession. Permanent unemployment and its cousin, long-term unemployment, are tremendous drags on an economic recovery.
The first workers sidelined in the COVID-19 crisis are now closing in on 26 weeks without work, a significant milestone after which the Labor Department considers them long-term unemployed. The ranks of the long-term unemployed could swell from 1.5 million now to between 4.0 million and 5.8 million by early next year, according to Chodorow-Reich and Coglianese.
The gap between the optimistic and pessimistic scenarios is large, and the path we choose ultimately depends on whether the coronavirus can be contained. Over the past several weeks, lawmakers have been debating how much economic support is needed to limit the economic damage until the public health crisis eases. Republicans and Democrats’ differing views on how to limit the damage caused by long-term unemployment is undermining their ability to come up with a stimulus deal to replace the Cares Act.