U.S. jobless claims expected to stay in millions for third consecutive week

The COVID-19 pandemic’s rapid spread continues to hammer the U.S. economy, and Thursday’s initial jobless claims data is expected to show another brutal week for the U.S. labor market.

Following two consecutive weeks of jobless claims in the millions, economists expect that 5.25 million Americans filed for unemployment benefits for the week ending April 4, as the coronavirus continues to hammer away at the U.S. economy.

Jobless claims spiked to a record-breaking 6.648 million for the week ending March 28, and the prior week’s figure was revised higher to 3.307 million claims from 3.283 million — bringing the two week total to just under 10 million.

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“The number of workers filing to collect unemployment insurance benefits has broken records in each of the last two weeks, but we suspect there are more to come. The number of workers in industries directly affected by COVID-19 is massive,” JPMorgan economist Jesse Edgerton wrote in a note April 3. “We thus again see more reasons to expect an increase in claims than a decrease.”

Edgerton expects 7 million jobless claims for the week ending April 4, which is one of the highest estimates on Wall Street. Estimates vary widely as with previous weeks; however, almost every single economist believes claims likely were in the millions last week. On the low end of the range, Deutsche Bank and Barclays estimate roughly 4.5 million claims.

Certain states got hit harder than others last week, and with massive backlogs piling up, there’s more pain ahead, according to UBS economist Seth Carpenter.

“In last week’s data, about a third of the rise reflected states where processing had not kept up with initial claims during the first weeks of the crisis (CA and NY especially). We think claims in those states still have further to rise,” Carpenter explained in a note published on April 3.

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For the week ended March 28, California reported the highest number of initial claims at an estimated 879,000 on an unadjusted basis, up from 186,000 the prior week. Pennsylvania had an estimated total of 406,000; New York had 366,000, and Michigan reported 311,000.

States that joined “shelter-on-place” guidelines later are expected to see a large uptick in claims filed. “The states that delayed their restrictions on activity—FL, GA, VA, NC, TX—might seem to pose an upside risk to our claims estimate,” Carpenter said. “However, new claims in NC, at 66 times their normal level over the past year, already have risen more than the national average (32x), as have those in VA (55x) and FL (52x). We do not expect further increases. However, we do estimate spikes in TX and GA.”

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