The number of people in the United States filing for unemployment benefits in the three weeks ending April 4 has blown past 16 million, with weekly new claims topping six million for the second consecutive week, as tough measures to control the novel coronavirus outbreak grind entire sectors of the economy to a halt.
Thursday’s weekly jobless claims report from the US Department of Labor – the most timely data on the economy’s health – strengthens economists’ predictions that job losses in the US could reach 20 million in April and the widely held conviction that the economy is in a deep recession.
Initial claims for state unemployment benefits hit 6.6 million for the week ending April 4, the Department of Labor reported, while data for the prior week was revised to show that 219,000 more applications were received than previously reported, raising the tally for that period to 6.86 million.
All told, more than 15 million people have filed claims for jobless benefits since the week ending March 21.
“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.”
With more than 95 percent 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 US has the highest number of confirmed COVID-19 cases in the world.
The Federal Reserve on Thursday rolled out $2.3 trillion in loans to bolster state and local governments and small and mid-sized businesses in its latest move to keep the economy intact.
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 an 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 an hour for a 40-hour workweek. The government-mandated minimum wage is about $7.25 an hour.
“The new $600 Federal payment alone still exceeds average earnings in leisure and hospitality by almost 50 percent,” said Andrew Hunter, a senior US 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 effect on gross domestic product.
The unemployment rate rose 0.9 percentage point, the largest single-month change since January 1975, to 4.4 percent in March. The government said the rate could have been 5.4 percent if it were not for a misclassification error during the survey of households.
Most economists believe the US economy entered recession in March.
The National Bureau of Economic Research, the private research institute regarded as the arbiter of US recessions, does not define a recession as two consecutive quarters of decline in real gross domestic product (GDP), 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.