Another Week for Record Unemployment Claims
The Labor Department yesterday reported a record 6.648 million Americans filed initial unemployment insurance claims last week, smashing the previous record set the previous week.
For the week ending March 28, the advance figure for seasonally adjusted initial claims represented an increase of 3.341 million from the previous week’s revised level. This marks the highest level of seasonally adjusted initial claims in the history of the seasonally adjusted series. The previous week’s level was revised up by 24,000 from 3.283 million. The four-week moving average jumped to 2.612 million, an increase of 1.61 million from the previous week’s revised average.
Mark Vitner, Senior Economist with Wells Fargo Securities, Charlotte, N.C., said the soaring unemployment claims point to a “big hit” to gross domestic product.
“The bulk of jobless claims related to lockdowns, shutdowns and stay-at-home orders occurred during the past two weeks, with restaurants, bars and hotels leading the way,” Vitner said. “The shutdown of most motor vehicle assembly plants also contributed to the surge, as did layoffs at retailers and across a variety of household and business services firms.”
Vitner said weekly jobless claims provide the most current data point on the damage the coronavirus outbreak has wrought on the economy.
“As dramatic as the past two weeks’ increase has been, we doubt we are anywhere near the peak,” Vitner said. “Numerous states report they are still having a difficult time processing the flood of claims. For example, New York reported that it received more than 7.8 million calls inquiring about unemployment benefits during the week ended March 28, compared to around 50,000 calls in a usual week. Given the magnitude of that increase, the fact that there were ‘only’ 366K claims officially reported in New York State suggests that when the processing logjam clears, there will be a much larger surge.”
Vitner said precise estimates are “impossible” at this stage. “But the unprecedented magnitude is clear, and shows no sign of letting up,” he said. “Layoffs are continuing nationwide, and the broadening of benefits to include more self-employed workers means that a larger proportion of the workforce will be eligible for benefits. The abrupt halt to economic activity that occurred, as more than three-quarters of the U.S. population fell under stay-at-home orders, means that a great deal of the rise in jobless claims is likely to be compressed into a relatively short period of time, with initial claims likely peaking in April.”
Vitner added the 9.9 million initial unemployment claims over the past two weeks would push the unemployment rate up to 9.0% if the labor force remained at its average for the past 12 months. “The rise and duration of continuing claims will provide us with an indication about how large the hit to real GDP growth will be,” he said. “What that hit will be is yet to be determined, but it will be massive on an annualized basis.”
Doug Duncan, Chief Economist with Fannie Mae, Washington, D.C., agreed, noting a few caveats make this week’s data difficult to interpret precisely. “On one hand, UI eligibility rules have been relaxed recently, increasing the number of people who are able to apply,” he said. “On the other hand, many states reported a significant backlog of UI applications due to a lack of processing capacity, indicating that this week’s release may understate the true extent of layoffs. The recently enacted stimulus bill should help mitigate some of the negative shock to the labor market; however, any such impact from the stimulus bill is not yet reflected in the claims data.”
On Wednesday, the ADP National Employment Report said private-sector employment decreased by 27,000 from February to March, on a seasonally adjusted basis. The Labor Department issues its monthly employment report this morning.
“We expect these past two weeks of claims data to have only a modest direct effect,” Duncan said. “We still expect tomorrow’s jobs report to reflect significant labor market disruption.”
