• Claims expected to be the highest in the series 53 year history.
  • Estimates for initial jobless benefits range from 1 million to 4 million.
  • Previous highs were 695,000 in October 1982 and 665,000 in March 2009.
  • Restaurant and travel industries particularly hard hit.  

The Department of Labor will issue its initial jobless claims for the week of March 20 on Thursday March 26 at 12:30 GMT, 8:30 EDT.

Forecast

Initial claims are expected to rise to 1,000,000 from 281,000 the prior week. The range of the estimates is extraordinarily wide from 1 million to 4 million. The four-week moving average was 232,250 in the week of March 13.

Jobless claims as indicator

The speed at which large sectors of the economy have closed down is expected to produce the most severe shock to the labor market in US history.  

Between 1 and 4 million workers are forecast to have filed for unemployment benefits in the week through March 21. The magnitude of the claims will be the first indication of how extensive is the damage to the US economy caused by the abrupt business closures from the spread of the Coronavirus.

The travel, hospitality and leisure sectors employ15.8 million people and are largely shut with many of their non-managerial workers fired. Restaurant industry representatives have said that 5 to 7 million jobs could be lost. Employment losses are expected to continue in the weeks ahead with the intensity perhaps indicated by this initial figure. 

Even the rapid rise in claims which began in January 2008 took more than a year to climb from 321,000 to its peak at 665,000 in March 2008 and is dwarfed by this week’s anticipated inundation.  

In January 2008 the US was already in recession and unemployment claims were signaling beginning of the financial crisis. Last month the US economy was expanding at an estimated 3.1% annualized rate in the Atlanta Fed GDPNow model and sometime in March it is expected to have flipped into contraction.

The climb to the all-time high for claims of 695,000 in October 1982 from 392,000 in April 1981 also took place largely in context of deep 1981-1982 recession. 

Economic impact

There has never been an occasion where healthy fully employed industrial economy was thrown overnight into a recession of unknown depth and longevity.

Hurricanes Harvey which struck the Gulf Coast in 2017 and caused $126 billion in damage and Katrina in 2005 which hit New Orleans and cost $125 billion did not come close to pushing the US economy into recession.  The recoveries started the day the winds and tides subsided.

The duration of this shutdown and the speed at which the economy can reopen and employees return to their jobs depends on the course of the pandemic. The longer the closures continue the more of the job losses will become permanent and the more widespread the economic damage.

In the US where about 70% of economic activity is the product of consumer spending, any substantial decline in consumption translates quickly into lost employment and production.  

Economists anticipate a decline in GDP in the second quarter from 5% to 10% and unemployment rising from 3.5% to 7% to 10% contingent on the severity of the viral spread and the percent of the country that is forced out of work. It is currently estimated that about 40% of the US population is to some degree in voluntary or mandatory restriction.

Government stimulus

The $2 trillion stimulus and support package that has been agreed by Congress but not yet passed will help to mitigate the impact of the job and income losses.   It is designed to tide the economy over until normal functioning returns.  It cannot replace the economic life of the country.

Conclusion

The normal continuity of US economic growth from quarter to quarter has been dealt its sharpest blow in history.   

The US economy was not in recession in the first quarter, by every judgement it will be in the second. 

It may be one of the steepest recessions since the Depression in terms of output and certainly in job losses but it could also be on one of the shortest. If the virus is contained in a month the economy could come roaring back. If it takes 12 weeks or longer and the economy requires a careful and measured reopening, the recession could linger through the end of the year.

 

 

 

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD stays below 0.9800 after US inflation data

EUR/USD stays below 0.9800 after US inflation data

EUR/USD continues to trade in negative territory below 0.9800 in the American session on Friday. The data from the US showed that the annual PCE inflation declined to 6.2% in August but the stronger-than-expected core reading didn't allow the pair to gain traction.

EUR/USD News

GBP/USD rebounds from daily lows, reclaims 1.1100

GBP/USD rebounds from daily lows, reclaims 1.1100

GBP/USD fell to a fresh daily low below 1.1030 but managed to reverse its direction and climbed above 1.1100 during the American trading hours on Friday. The pair remains on track to snap a two-week losing streak despite having suffered heavy losses earlier in the week.

GBP/USD News

Gold extends daily rally beyond $1,670

Gold extends daily rally beyond $1,670

Gold preserved its bullish momentum and rose above $1,670 after the mixed inflation data from the US on Friday. The benchmark 10-year yield is down more than 2% as markets look to wrap up the third quarter, fueling XAU/USD's daily rally. 

Gold News

Shiba Eternity download day the biggest bullish catalyst in SHIB history?

Shiba Eternity download day the biggest bullish catalyst in SHIB history?

Shytoshi Kusama, the project lead for Shiba Inu, has dropped a teaser about Shiba Eternity games for the SHIB community. Proponents expect the launch of the collectible card game to be a bullish catalyst for Shiba Inu price. 

Read more

SPDR S&P 500 ETF Trust (SPY) Forecast: We are teetering on the brink

SPDR S&P 500 ETF Trust (SPY) Forecast: We are teetering on the brink

Equity markets remain at the precipice of a technical collapse, which we examine in the weekly long-term chart below. The overall picture remains one of nervousness ahead of the upcoming Q3 earnings season.

Read more

Majors

Cryptocurrencies

Signatures