- COVID-19 continues to afflict the American economy, as unemployment benefit applications continue to rise in unprecedented numbers.
- The number of Americans seeking unemployment benefits, has exceeded 15 million in just 3 weeks.
- The data confirms economists' expectations that America could lose up to 20 million jobs due to a COVID-19 recession.
- The Federal Reserve has rolled out a $2.3 trillion package to bolster local governments and small and mid-sized businesses, but some fear this won't be enough.
The number of Americans seeking unemployment benefits in the last three weeks has blown past 15 million, with weekly new claims topping 6 million for the second straight time last week amid tough measures to control the novel coronavirus outbreak that have abruptly ground the country to halt.
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The most timely data on the economy’s health, strengthens economists’ expectations of job losses of up to 20 million in April and their conviction that the economy is in deep recession. The government recently reported that the economy purged 701,000 jobs in March. That was the most job losses since the Great Recession and ended the longest employment boom in U.S. history that started in late 2010.
“In its first month alone, the coronavirus crisis is poised to exceed any comparison to the Great Recession,” said Daniel Zhao, senior economist at Glassdoor. “The new normal for unemployment insurance claims will be the canary in the coal mine for how long effects of the crisis will linger for the millions of newly unemployed Americans.”
Initial claims for state unemployment benefits slipped 261,000 to a seasonally adjusted 6.606 million for the week ended April 4, the government said. Data for the prior week was revised to show 219,000 more applications were received than previously reported, taking the tally for that period to 6.867 million. All told, more than 15 million people have filed claims for jobless benefits since the week ending March 21.
Economists polled by Reuters had forecast claims slipping to 5.250 million in the latest week, though estimates in the survey were as high as 9.295 million.
The Labor Department said the coronavirus “continues to impact the number of initial claims.”
The Federal Reserve on Thursday rolled out a broad, $2.3 trillion effort to bolster local governments and small and mid-sized businesses in its latest move to keep the economy intact.
The dollar was little changed, while U.S. Treasury prices were trading higher. U.S. stock index futures reversed losses on the Fed’s latest stimulus measures.
With more than 95% of Americans under “stay-at-home” or “shelter-in-place” orders, reports continue to mount of state employment offices being overwhelmed by a deluge of applications. As such, the moderation in claims last week is probably temporary.
The breadth of businesses shuttered because of the stringent measures to curb the spread of COVID-19, the disease caused by the coronavirus, has expanded from bars, restaurants and other social gathering venues to transportation and factories. The United States has the highest number of confirmed COVID-19 cases in the world.
Businesses are also encouraging their lowest paid hourly workers to apply for unemployment benefits to take advantage of an extra $600 per week for up to four months. This enhancement is part of a historic $2.3 trillion rescue package and is on top of existing jobless benefits, which averaged $385 per person per month in January.
It is equivalent to $15 per hour for a 40-hour workweek. The government-mandated minimum wage is about $7.25 per hour.
“The new $600 Federal payment alone still exceeds average earnings in leisure and hospitality by almost 50%,” said Andrew Hunter, a senior U.S. economist at Capital Economics.
“This may in turn be part of the reason why jobless claims have soared so rapidly in recent weeks. Workers may be more accepting of temporary furloughs if they stand to lose little income, and several major retailers have cited the new provisions when announcing layoffs.”
Thursday’s claims report also showed the number of people continuing to receive benefits after an initial week of aid shot up 4.396 million to a record 7.455 million in the week ending March 28, obliterating the previous all-time high of 6.635 million set in May 2009.
The so-called continuing claims data is reported with a one-week lag and is viewed as a better gauge of unemployment and its impact on gross domestic product.
The unemployment rate rose 0.9 percentage point, the largest single-month change since January 1975, to 4.4% in March. The government said the rate could have been 5.4% if it were not for a misclassification error during the survey of households.
The economy is believed to have contracted sharply in the first quarter, with even an historic decline in GDP being forecast for the second quarter. Economists say the economy entered recession in March.
The National Bureau of Economic Research, the private research institute regarded as the arbiter of U.S. recessions, does not define a recession as two consecutive quarters of decline in real gross domestic product, as is the rule of thumb in many countries. Instead, it looks for a drop in activity, spread across the economy and lasting more than a few months.