NEW YORK • New York City, hit hard by Covid-19, is mired in the worst economic calamity since the financial crisis of the 1970s, when it nearly went bankrupt.

The city is staggering towards reopening, with some workers back at their desks or behind cash registers, and on Monday it began a new phase, allowing personal care services like nail salons and some outdoor recreation activities to resume. Even so, the city's unemployment rate is hovering near 20 per cent, a figure not seen since the Great Depression.

What was intended as a "pause" has dragged on so long that for many workers, furloughs are turning into permanent job losses. The sudden shutdown of the city nearly four months ago threw nearly one million residents out of work and threatened the survival of many of their employers. The layoffs continued last month as some employers gave up hope of a quick recovery or ran out of the federal aid they were using to maintain their payrolls.

Mr Kelvin Rolling, 48, was among those affected. A taxi dispatcher at Kennedy International Airport, Mr Rolling said he thought he was one of the lucky ones who would hold on to his job. But then last month he was laid off on short notice.

With the city trying to kick-start its economy and in the midst of a phased reopening, Mr Rolling said, "it seems like you would be calling people back, not laying people off".

The pandemic set off an immediate and sweeping reversal of fortune that the city has never before endured, economists said.

Most past financial crises were "like a prolonged illness", said Mr Frank Braconi, a former chief economist for the city comptroller's office. "This was like a heart attack."

Entire industries - restaurants, hotels, theatres and galleries - went from operating at full throttle to being practically shuttered.

Economists said they feared that the fallout would soon spread to other sectors. Wall Street, a main driver of the city's economy, appears somewhat insulated for now because the markets have rebounded and several of the biggest banks have pledged not to lay off workers during the pandemic.

But many businesses, including restaurants and hotels, are expected to close for good. The picture has grown even grimmer since officials delayed indefinitely the reopening of indoor dining.

While the national jobless rate fell to 11.1 per cent last month, New York City's rate hit 18.3 per cent in May, the highest in the 44 years that such data has been collected.

The highest the city's unemployment rate reached following the financial collapse in 2008 was about 10 per cent. For a decade after that, the city steadily added jobs, reaching a record low unemployment rate of 3.4 per cent in February.

The setback has been quick and steep. Officially, about 670,000 city residents were out of work in May. But the real number is higher because many unemployed people, like unauthorised workers, do not fit the government's official definition of unemployed. Even with the curbs on business operations easing, workers are still getting bad news from their employers.

When Ms Veronica Carrero, 37, an executive assistant for a travel and entertainment firm in Manhattan, was invited to a virtual staff meeting last month, she hoped to hear that the furlough that had left her collecting unemployment benefits for the first time was ending.

Instead, she was told that it would last at least three more months.

If the additional US$600 (S$838) in weekly benefits she has been collecting from the federal government expires at the end of the month as scheduled, she may have to start looking for another job.

The losses have been particularly significant among people of colour: About one in four of the city's Asian, Black and Hispanic workers was unemployed last month, compared with about one of every nine white workers, the city comptroller's office said.

"New York City... is facing a sluggish recovery with double-digit unemployment," Mr James Parrott, the director of economic and fiscal policies at the Centre for New York City Affairs, said.

Residents of the city have filed nearly 1.4 million new claims for unemployment benefits in 15 weeks.

And the flood of claims is not abating: In the week that ended June 27, the number of new claims filed rose in Brooklyn, while falling only slightly in the city's other boroughs.

The state was so ill-prepared to have to pay out so much so fast that it quickly exhausted its unemployment insurance trust fund and had to borrow from the federal government. That debt is US$3.4 billion and rising - more than any other state has had to borrow.

NYTIMES