Global report: US unemployment could hit 25%, warns Fed chairman, as Japan enters recession

Unemployment in the United States could peak at 25% as a result of the coronavirus pandemic, according to the chair of the Federal Reserve, amid warnings the June quarter economic figures will be “very, very bad”. The bleak prediction came as Japan slid into its first recession in five years, with forecasts that worse was to come.

In a sober assessment of the economic impact of coronavirus in the US, the Fed chair, Jerome Powell, estimated GDP contraction in the June quarter could be “easily be in the twenties or thirties”, as fallout from the global outbreak worsened.

“So the data we’ll see for this quarter, which ends in June, will be very, very bad,” he said.

Asked about estimates of unemployment reaching 20-25%, Powell said: “I think there’re a range of perspectives. But those numbers sound about right for what the peak may be.”

Powell expected more people to lose their jobs in May and June but, provided businesses could reopen in a “way that doesn’t create further problems with the virus”, unemployment could start to fall over the second half of the year in the US. But he cautioned:“We won’t get back to where we were by the end of the year. That’s unlikely to happen.”

As the bad news broke in the US, Japan marked two quarters of negative GDP growth, entering into a recession for the first time since 2015. The economy shrank in 0.9% to the end of March, off the back of a 1.9% drop at the end of 2019.

Some analysts predicted more grim news ahead, with the full impact of the pandemic still to be measured.

“We expect the worst is yet to come, with the state of emergency in Japan and the severity of the pandemic among Western nations continuing to derail the Japanese economy,” said Naoya Oshikubo, senior economist at SuMi Trust.

Japan has been less affected than most advanced economies by the coronavirus, with just over 16,000 cases and around 750 deaths. But authorities are concerned about a second wave, especially in the economically powerful cities of Tokyo and Osaka, where the state of emergency remains in place, while most other regions have seen restrictions lifted.

In India, which has recorded more than 95,000 infections and 3,000 deaths from the virus, the government extended the lockdown to the end of May, but with significantly reduced restrictions. Markets and standalone shops can reopen from Monday, with social distancing measures, but malls will remain closed.

Inter and intra-state road travel can resume with the agreement of states, but air travel, both domestic and international is still banned. Metro rail services, cinemas and gyms remain closed. Restaurants can open for home delivery, but schools and places of worship will remain closed.

Schools and places of worship remain closed, domestic and international air travel will not be allowed and a 7pm-7am curfew on movement stays in place. The government has also advised people over 65, those with co-morbidities, pregnant women, and children below the age of 10, should stay at home.

States will have the power to determine red, orange and green zones, as well as so-called containment zones, where large outbreaks or clusters happen, and different rules will apply in each zone. The country has been under lockdown since 25 March.

In Italy, St Peter’s Basilica will open for the first time on Monday since the lockdown began. Public masses will resume, and restaurants, bars, cafes, shops and hairdressers, among other businesses, are all expected to reopen.

The Pope will celebrate a private mass on Monday, broadcast by video, but the Duomo in Milan will conduct a general mass at 10.30am local time. The cathedral said it had introduced gadgets worn around the neck that beep softly, flash and vibrate if visitors approach too closely to one another.

Elsewhere in Europe, death tolls dropped in the UK and Spain, offering a glimmer of hope. Britain recorded 170 deaths, and Spain reported 87. Italy also recorded its lowest daily toll since the lockdown began – 145.

South Africa has reported 1,160 new coronavirus infections, the highest daily number since the first case was recorded in March.

“As of today, the total number of confirmed Covid-19 cases in South Africa is 15,515, with 1,160 new cases identified in the last 24 hour cycle of testing,” a statement from the health ministry said.

The Western Cape province, popular with tourists, accounted for nearly 60% of the 15,515 infections nationally. There have been 264 deaths.

The country has been under a lockdown since 27 March, including strict confinement rules and a ban on sales of cigarettes and alcohol.