The COVID-19 pandemic is wreaking havoc on the U.S. economy, and data released Thursday morning is expected to reflect the severe damage being done to the labor market.
The number of Americans filing for unemployment is expected to skyrocket to a record-breaking 1.5 million for the week ended March 21, according to economists polled by Bloomberg. The previous record was 695,000 claims filed the week ended October 2, 1982. Initial jobless claims for the week ended March 14 jumped by 70,000 claims to 281,000 and was the largest single-week increase since the Great Recession.
“In previous deep recessions, most notably in 2008 and 1980, initial claims during the worst four weeks of the recession would total 2 [million], Nomura economist Lewis Alexander wrote in a note to clients March 22. “That is consistent with the shock from COVID-19 compressing a significant deterioration in the labor market into a much shorter period relative to previous contractions.”
[See Also: Unemployment claims are going through the roof: Connecticut governor]
Uncertainty is high, and so is the range of estimates for Thursday’s report is unusually wide. Economists at Citi estimate claims will explode to 4 million. Meanwhile, UBS economists estimate the tally will come in at 860,000.
Alexander noted that the sudden spike in weekly initial jobless claims will likely not persist for long at these elevated levels; however, it implies that non-farm payroll job losses could be heavily front loaded relative to previous recessions which means the unemployment rate could rise even more rapidly.
Recent indications from individual states point to initial jobless claims in the millions.
“Early state reports this week indicate initial claims for the week ended March 21 will rocket well over one million next week—and possibly as high as three million,” Wells Fargo wrote in a note March 20. “That would surpass anything we saw during the financial crisis and could be upwards of three times the all-time high in claims set back in 1982. This will shock even the most bearish forecasters. As economic activity is grinding to a halt, the U.S. economy is quickly catapulting into a recession.”
Connecticut is expected to see approximately 80,000 claims last week, according to data compiled by Morgan Stanley.
“The [unemployment claims] are going through the roof,” Connecticut Gov. Ned Lamont in an interview with Yahoo Finance. “The computer system has reached its threshold a couple of times right now.”
In addition, many states waived requirements that recently laid off workers must wait one week before filing a claim. States that are likely to see the largest increases in weekly jobless claims include California, Pennsylvania, New York, Florida and Ohio.
The rapid spread of the coronavirus has led to massive business disruptions in the U.S. over the past several weeks. A growing number of cities across the country have ordered residents to “shelter in place,” and non-essential businesses such as sit-down restaurants and retail stores have been forced to shut their doors. As a result, the pace of layoffs has been swift.
While the government agreed to a $2 trillion fiscal stimulus package early Wednesday morning, many believe it may be too late to prevent the damage done to the U.S. labor market. Google searches for “unemployment benefits” have surged over the past month in the U.S. The upward trend began March 11 before peaking on March 20. President Donald Trump declared the COVID-19 outbreak a national emergency on March 13.
There are currently more than 438,000 confirmed cases of coronavirus worldwide and 19,674 confirmed deaths as of Wednesday afternoon, according to Johns Hopkins.
Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.
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