A stunning 26.5 million Americans have sought unemployment benefits over the last five weeks, confirming that all the jobs gained during the longest employment boom in U.S. history have been wiped out as the novel coronavirus savages the economy.
The labor market slaughter added to collapsing oil prices, retail sales, manufacturing production, homebuilding and home sales in reinforcing economists’ contention that the economy entered recession in March.
As the economic slump deepens protests have risen against nationwide lockdowns to control the spread of COVID-19, the potentially lethal respiratory illness caused by the virus. President Donald Trump, who is seeking a second term in the White House in November’s general election, has been anxious to restart the paralyzed economy.
Trump on Wednesday applauded steps taken by a handful of Republican-led states to begin reopening their economies, despite warnings from health experts of a potential new surge in infections.
“Today’s report shows the labor market is almost certainly pushing into new territory, jolting the unemployment rate up above the Great Recession’s 10% peak and wiping out more jobs than we’ve gained in the recovery,” said Daniel Zhao, senior economist at Glassdoor, a website recruitment firm.
Initial claims for state unemployment benefits dropped 810,000 to a seasonally adjusted 4.427 million for the week ended April 18, the government said. Data for the prior week was revised to show 8,000 fewer applications received than previously reported, reducing the count for that period to 5.237 million. Economists polled by Reuters had forecast claims falling to 4.2 million in the latest week.
All told, 26.453 million people have filed claims for jobless benefits since March 21, representing 16.2% of the labor force. The economy created 22 million jobs during the employment boom which started in September 2010 and abruptly ended in February this year.
The Labor Department said “the COVID-19 virus continues to impact the number of initial claims.”
Last week’s claims report covered the period during which the government surveyed business establishments for the nonfarm payrolls component of April’s employment report. Economists are forecasting as many as 25 million jobs were lost in April after the economy purged 701,000 positions in March, which was the largest decline in 11 years.
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 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.
Though weekly jobless filings remain very high, last week’s data marked the third straight weekly decline, raising hopes that the worst may be over. Weekly claims appeared to have peaked at a record 6.867 million in the week ended March 28.
U.S. stocks opened higher as investors focused on the decline in claims. The dollar was slightly higher against a basket of currencies. U.S. Treasury prices were trading lower.
“While layoffs and furloughs are likely to continue across a number of industries in coming weeks, we are cautiously optimistic that the peak in layoffs following initial widespread closures has occurred,” said Andrew Hollenhorst, an economist at Citigroup in New York.
Some of the decline in claims has been attributed to a historic $2.3 trillion fiscal package, which made provisions for small businesses to access loans that could be partially forgiven if they were used for employee salaries.
The U.S. Senate on Tuesday approved $484 billion in a fresh relief package, which mainly expands funding for loans to small businesses.
With claims expected to gradually decline in the coming weeks as more small enterprises access funding, attention will shift to the number of people on unemployment benefits rolls.
The so-called continuing claims data is reported with a one-week lag and is considered a better gauge of unemployment. Continuing claims jumped 4.064 million to a record 15.976 million in the week ending April 11.
Next week’s continuing claims data will offer some clues on the magnitude of the anticipated surge in the unemployment rate in April. Continuing claims have not increased at the same pace as initial jobless applications.
Economists believe some people thrown out of work because of state-mandated “stay-at-home” orders found employment at supermarkets, warehouses and delivery services companies. They expect the unemployment rate will shatter the post-World War Two record of 10.8% touched in November 1982.
The jobless rate shot up 0.9 percentage point, the largest single-month change since January 1975, to 4.4% in March.
