US Unemployment Claims: Initial claims likely peaking in April – Wells Fargo

The weekly jobless claims report released on Thursday showed claims surged to 65.5 million during the week of March 28. Analysts at Wells Fargo explained that the 9.9 million initial unemployment claims over the past two weeks would push the unemployment rate up to 9.0% if the labor force remained at its average for the past 12 months. 

Key Quotes: 

“Weekly jobless claims provide the most current data point on the damage the COVID-19 outbreak has wrought on the economy. As dramatic as the past two weeks’ increase has been, we doubt we are anywhere near the peak.”

“New York reported that it received more than 7.8 million calls inquiring about unemployment benefits during the week ended March 28, compared to around 50,000 calls in a usual week. Given the magnitude of that increase, the fact that there were ‘only’ 366K claims officially reported in New York State suggests that when the processing logjam clears, there will be a much larger surge.”

“The abrupt halt to economic activity that occurred, as more than three-quarters of the U.S. population fell under stay-at-home orders, means that a great deal of the rise in jobless claims is likely to be compressed into a relatively short period of time, with initial claims likely peaking in April.”

“The 9.9 million initial unemployment claims over the past two weeks would push the unemployment rate up to 9.0% if the labor force remained at its average for the past 12 months. Given that the rise in jobless claims is far from over, the rise in the unemployment rate will likely be even greater. The rise and duration of  ontinuing claims will provide us with an indication about how large the hit to real GDP growth will be. What that hit will be is yet to be determined, but it will be massive on an annualized basis.”