CHAPEL HILL – The U.S. unemployment rate could quadruple to 11.5 percent – a spike triggered by small business layoffs during the COVID-19 crisis.

That’s the projection from the UNC Kenan Institute today after conducting a survey of 726 small businesses between March 19-20.

This roughly corresponds to the same window over which the recent jobless claims figures were tallied. Experts then extrapolated from those responses to national level data from the U.S. Census on small business employment to estimate how many layoffs may have happened, but are not yet fully reflected in the data.

The projection is far lower than an estimate from the Federal Reserve.

“Economists at the Fed’s St. Louis district project total employment reductions of 47 million, which would translate to a 32.1 percent unemployment rate, according to a recent analysis of how bad things could get,” CNBC reported Monday.

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However, it is higher than earlier projections of around five to seven percent made by Kenan Institute Executive Director Professor Greg Brown  in a press briefing call less than two weeks ago.

Kenan Institute Research director and UNC Kenan-Flagler Business School Professor Christian Lundblad

“To be clear, this is a possible worst case scenario for small business employment to highlight where we see significant vulnerabilities,” Kenan Institute Research director and UNC Kenan-Flagler Business School Professor Christian Lundblad told WRAL TechWire via email.

“The survey responses do not incorporate the effects of the stimulus package nor do we know how many displaced small business employees will be able to shift into some large firms (like Amazon/Costco) that may be hiring.”

On Friday, President Donald Trump signed into law a historic $2 trillion stimulus package to deal with the economic disruption caused by the coronavirus. It included roughly $350 billion for small business loans.

Lundblad called it “an important start,” but said more will be required on this front.

He also raised questions about the rollout, and how quickly the government could get checks into the hands of small firms.

“Secretary [Steven] Mnuchin has claimed they can get this out within the next week, but early anecdotal evidence is that there are reports of some confusion, crashing web pages, and the like,” he said, referring to the US Treasury secretary. “Speed here is critical so that firms do not feel compelled to layoff additional workers — if successful, this can significantly mitigate the risks of the worst case articulated above.”

However, it may take some time to get the full scope of the situation.

“In some sense, the first spike is here already — the initial jobless claims figure was an early testament to this — other official statistics will be significantly lagging.  This week, we will again look to see another very large jobless claims figures on Thursday, but Friday’s unemployment figure will not incorporate much of this yet given the way in which it is calculated.”

He said the next 30, 60, and 90 days will be critical windows for small firms to survive important payments in the face of limited to zero revenues, cash reserves, and access to fresh capital.

“The government support here will be critical to help to minimize the consequences of these business vulnerability and keep hourly workers stuck at home attached to their jobs – and $350 billion will be just the beginning of what is necessary,” Lundblad said.

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