- A record number of people in the US filed claims for unemployment insurance last week amid the coronavirus pandemic.
- US weekly jobless claims for the week ending March 21 were 3,283,000, the Labour Department reported Thursday.
- Economists will be watching the reports to see how bad the situation in the US really is as the coronavirus outbreak triggers a widespread economic shutdown.
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The number of people who filed claims for unemployment insurance in the US last week surged to an all-time high as the coronavirus pandemic spurred layoffs across the country.
US weekly jobless claims for the week ending March 21 totaled 3,283,000, the Labour Department reported Thursday, exceeding the consensus analyst forecast of 1.5 million. That was up from 281,000 in the previous week, which already marked a two-year high.
The latest number is by far the largest on record for a single week, exceeding the record of nearly 700,000 newly filed jobless claims set in 1982.
“Record is not even the right word here,” Martha Gimbel, an economist at Schmidt Futures, told Business Insider in an interview. “These numbers are literally incredible.”
For context, Gimbel pointed out that for the week ending March 7, the total number of people on unemployment insurance in the US was 1.7 million, meaning more people filed for it last week than were in the program.
The unprecedented number of unemployment claims shows the exceptional damage the coronavirus pandemic is inflicting on the US economy. As the country races to curb its spread, states have gone into lockdown – sending workers home, encouraging social distancing, and closing schools, restaurants, and factories.
The shock those measures has created has never been seen before, and there’s uncertainty about when they will end.
“We don’t really have a good example of a case where global services activity has come to more or less a screeching halt,” Michael Gapen, the chief US economist at Barclays, told Business Insider.
Stimulus efforts have been widespread. In the past week, the Federal Reserve and the White House have moved to prop up the US economy amid the coronavirus outbreak.
The Fed unexpectedly slashed interest rates to near zero and this week launched unlimited bond-buying and several facilities to smooth markets and aid local governments and businesses.
The Trump administration has pushed forward on a $US2 trillion fiscal stimulus package to lend relief to US households and companies and expand social services such as unemployment insurance to keep the economy afloat until the public-health crisis subsides.
On Wednesday, the Senate passed the Coronavirus Aid, Relief, and Economic Security Act – or the CARES Act – which now will go to the House for a vote.
A one-off report, or the first in a series?
These efforts could mean that future reports aren’t as severe as the one seen today, Gapen said.
“Hopefully bad labour reports are limited to one or two and then recover after that,” he said. “It’s not a good sign but reflective of kind of the simultaneous collapse we’re seeing in services.”
Other economists were unsure that claims would slow from this week’s report.
“We’ll need to see a few weeks in a row to get some idea of the pattern, the composition, and the pace of acceleration or deceleration,” Seth Carpenter, the chief US economist at UBS, told Business Insider.
The “uncertainty here is so huge” that it’s difficult to predict a timeline, Carpenter said. He added that for some states’ initial-unemployment-insurance offices, “there’s probably a literal limit in terms of bandwidth of how much they can process,” which could push claims to be reported next week.
It’s also possible that jobless claims could go up once the government’s stimulus bill passes, depending on the details about boosting unemployment insurance, said Joe Song, the US economist at Bank of America.
“That could definitely keep claims elevated for some time,” he told Business Insider.
A US recession and U-shaped recovery
Many weeks of elevated unemployment claims would show a huge hit to the US economy, which economists now agree is either already in a recession or will fall into one because of the coronavirus pandemic.
The fallout from the outbreak has been incredibly swift. The global financial crisis in 2008 and 2009 “was actually a slower deterioration than what we’re seeing now,” Carpenter said, adding that “this is the US economy turning almost on a dime.”
Economists do not expect any recovery to be as quick – most are expecting it to have a gradual, U-shaped trajectory.
“It’s going to be some time until people start to return to normalcy,” Song said.
He said he thinks there will be a shortfall in confidence for consumers and businesses, meaning it would be unlikely that economic activity comes roaring back in the second half of 2020.
Widespread unemployment could hold back the recovery as well. If jobless claims persist, the unemployment rate could surge multiple percentage points from its recent lows of less than 4%. Economists at Morgan Stanley have predicted that it could spike to 12.8%.
That means that even on the other side of a recession, there would be “millions of Americans without jobs who will have lost income for at least a while who are going to be scarred and extraordinarily cautious,” Carpenter said.
He added that even when they do reenter the workforce, they might not prioritise discretionary spending such as shopping and going to restaurants; they may instead focus on paying down debt and boosting savings in the event of another downturn in the economy.
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