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Business

U.S. braces for record surge in jobless claims amid coronavirus fallout

WASHINGTON (Reuters) – The number of Americans filing claims for unemployment benefits likely raced to as high as a record 4 million last week as strict measures to contain the coronavirus pandemic ground the country to a sudden halt, unleashing a wave of layoffs.

The weekly jobless claims report from the Labor Department on Thursday is set to offer the clearest evidence yet of the coronavirus’ devastating impact on the economy, which has forced the Federal Reserve to take extraordinary steps and set the U.S. Congress racing to assemble a record $2 trillion stimulus package.

Economists say the economy is already in recession and the jobless claims report would offer proof of that.

The weekly claims figures are the most timely labor market indicator. The report on Thursday is set to grab attention on both Wall Street and Main Street after the Trump administration requested that states stop giving daily snapshots of applications for jobless aid.

According to a Reuters survey of economists, initial claims for state unemployment benefits probably surged to a seasonally adjusted 1 million for the week ended March 21, which would far eclipse the previous record of 695,000 set in 1982. Estimates in the survey were as high as 4 million, which would dwarf the 281,000 applications received during the week ended March 14.

“Containment efforts in response to the coronavirus resulted in a very sudden and very dramatic change over just a few days,” said Stephen Gallagher, U.S. chief economist at Societe Generale in New York. “Layoffs were part of that change and applicants appear to have flooded state unemployment insurance offices within a very short time-span.”

(GRAPHIC: Unemployment benefits claims to surge – here)

There were reports of many states saying their employment websites crashed because of heavy traffic.

Governors in at least 18 states, accounting for nearly half the country’s population, have ordered residents to stay mostly indoors. “Non-essential” businesses have also been ordered closed. According to economists, a fifth of the workforce is on some form of lockdown.

Economists’ collection of raw data from states, industry groups and their own models show an unprecedented jump across all states.

Morgan Stanley is forecasting unadjusted claims for California, one of the regions hardest hard by the respiratory illness called COVID-19 brought on by the coronavirus, to have shot up by 550,000. California Governor Gavin Newsom said earlier this week that new filings for jobless benefits there were running at an average of 106,000 a day in the past week.

Claims from New York, now at the center of the outbreak, are forecast to have increased by 210,000, according to the Morgan Stanley estimate. Applications in Washington state are expected to have risen by about 100,000.

With state employment websites overwhelmed, economists say some of the applications that were supposed to be filed during the week ended March 14 were pushed back to last week, which could also account for the anticipated surge in claims.

“In addition, reports from some states also suggest that the process for making claims has been in part shifted to a pen and paper approach, potentially delaying the filing process as well,” said Jan Kozak, an economist at Morgan Stanley in New York. “This means that some of the 3.4 million in claims we estimate might have been spread into this week as well.”

Last week’s claims data likely will have no impact on March’s employment report as it falls outside the period during which the government surveyed employers for nonfarm payrolls, which was the week to March 14. Economists, however, say the rush for benefits in that survey week suggests payrolls declined this month, which would end nearly 9-1/2 years of job growth.

“Jobs will decline in March,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania. “There are numerous reports of laid-off workers unable to file for unemployment insurance because so many people are trying to file at the same time. Millions of job losses are likely in coming weeks.”

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Politics

Three Republicans call for layoff language fix before Senate coronavirus bill vote

WASHINGTON (Reuters) – Three Republican U.S. senators on Wednesday said the Senate should not vote on a $2 trillion coronavirus stimulus bill until legislative language that they say would encourage layoffs is fixed or fresh guidance issued from the Labor Department.

“If the federal government accidentally incentivizes layoffs, we risk life-threatening shortages in sectors where doctors, nurses, and pharmacists are trying to care for the sick, and where growers and grocers, truckers and cooks are trying to get food to families’ tables,” Senators Tim Scott, Lindsey Graham and Ben Sasse said in a joint statement.

“We must sadly oppose the fast-tracking of this bill until this text is addressed, or the Department of Labor issues regulatory guidance that no American would earn more by not working than by working,” they said.

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Business

U.S. jobless claims could top record 1.5 million next week: economists

WASHINGTON (Reuters) – A wave of layoffs at restaurants, bars and hotels, as efforts to contain the coronavirus pandemic bring much of everyday American life to a halt, could drive new applications for U.S. unemployment benefits to a record 1.5 million or more next week, economists warned on Thursday.

New jobless claims already hit a two-and-a-half year high of 281,000 last week, jumping by 70,000 from the week before, the Labor Department said on Thursday. It was the biggest weekly increase since 2012 and officials laid the blame on the coronavirus, which a Reuters tally shows has infected nearly 9,500 across the country, killing at least 115.

And the worst is yet to come.

Economists said their own tracking of data from individual states suggests claims could shoot up to at least 1.5 million this week. Data for the week ending March 21 will be published next Thursday.

“State filings offices for Ohio, Pennsylvania, and Connecticut report claims filings this week are running six to 14 times higher than the same week last year,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

“A quarter of all claims filings are in two states, New York and California. Given the preliminary reports for a few states, next Thursday’s unemployment claims report could show an initial claims reading north of 1.5 million.”

(GRAPHIC – Unemployment benefits claims will soon surge: here)

This estimate, which other economists agreed with, would far outpace the previous record of 695,000 set in 1982. During the week ended March 14, unadjusted initial claims soared 14,000 in California and jumped 9,000 in Washington state, which has been hardest hit by the coronavirus. They increased 7,000 in Nevada.

“Last week’s jump in claims is likely to look minor in comparison to what lies ahead,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York.

According to Well Fargo Securities’ tracking, Ohio reported 36,645 unemployment claims were filed on Monday. This was in addition to 11,995 filed on Sunday. Ohio received only 562 applications the previous Sunday.

“Massachusetts reported 19,884 claims filed on Monday alone, more than the total received in February, while Pennsylvania reported 50,000 claims on Monday and even more than that on Tuesday,” said Sarah House, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

“Many states reported that their employment websites crashed due to a surge in traffic, suggesting demand for unemployment benefits is even higher than the reported figures.”

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