WASHINGTON (BLOOMBERG, REUTERS) – The number of Americans filing for unemployment benefits surged to a 2½-year high last week, as the coronavirus pandemic forced employers to start laying off workers.
Initial claims for state unemployment benefits jumped 70,000 to a seasonally adjusted 281,000 for the week ended March 14, the highest level since September 2017, the Labor Department said on Thursday (March 19). Data for the prior week was unrevised.
The total topped the median estimate of 220,000 in a Reuters survey and may be poised to surge into the millions next week as much of the economy shuts down to fight the pandemic. Pantheon Macroeconomics chief economist Ian Shepherdson estimates 2 million claims for next week’s report.
“It appears from state numbers that the order of magnitude increase compared to normal is about 10,” he said Thursday.
Elsewhere on Thursday, the Federal Reserve Bank of Philadelphia’s survey of factories showed conditions in the area deteriorated in March by the most on record, indicating the heavy toll on demand from the virus battle extends to more of the nation’s producers.
The Labor Department attributed the jump in jobless claims to the virus outbreak.
“A number of states specifically cited Covid-19 related layoffs, while many states reported increased layoffs in service related industries broadly and in the accommodation and food services industries specifically, as well as in the transportation and warehousing industry, whether Covid-19 was identified directly or not,” it said.
US jobless claims, reported with a one-week lag, are one of the best real-time indicators of labour-market health. The full effect of the job losses likely won’t be evident until the April unemployment data given the majority of reported layoffs occurred after the Labor Department’s reference week. That data is set to be released on May 8.
Potentially millions of Americans likely to lose jobs as the virus halts travel and events. It’s forced restaurants and bars to close and slowed business to a crawl in any still open. As more people stay home, a swath of businesses – from coffee shops to dentist offices – are also laying off workers.
About a dozen states, including New York, California and Illinois, have turned to more drastic measures in an attempt to contain the virus, including closing restaurants and bars to dine-in customers. One estimate says the US restaurant industry is poised to lose 7.4 million jobs.
Marriott International has started furloughs that could hit tens of thousands, and the American Hotel & Lodging Association projects the industry will be forced to shed one million jobs in coming weeks.
The national jobless rate could surge above 8 per cent in the next three months, according to Bloomberg News calculations based on estimates for payroll cuts from the restaurant and lodging industry groups. It stood at a half-century low of 3.5 per cent in February, down from a 26-year peak of 10 per cent just after the last recession.
Greg Brown, finance professor at the University of North Carolina’s Kenan-Flagler Business School and a former Federal Reserve Board researcher, said the jobless rate will rise as high as 9 per cent.
JPMorgan Chase & Co chief US economist Michael Feroli wrote Wednesday that the rate will probably rise to 6.25 per cent by mid-year and ease back to 5.25 per cent by year-end, based on his downgraded forecast calling for the economy to shrink at a 4 per cent annualized pace in the first quarter and 14 per cent in the following three months.
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