US initial jobless claims surge past 3m due to Covid-19
The number of Americans filing for unemployment benefits surged to a record 3.28 million last week as businesses shut down and people were let go due to the coronavirus.
According to the Labor Department, jobless claims rose a whopping 3m from the previous week’s level, which was revised up by 1,000 to 282,000. This marked the highest level of seasonally-adjusted initial claims in the history of the series. The previous high was 695,000 in October 1982. Economists had been expecting a 1.5m increase.
The four-week moving average came in at 998,250, up 765,750 from the previous week's level, which was revised up by 250.
The four-week average is considered more reliable as it smooths out sharp fluctuations in the more volatile weekly figures, giving a more accurate picture of the health of the labour market.
Continuing claims - i.e. the number of people already collecting unemployment benefits - rose to 1.803m from a revised 1.702m the week before and versus expectations of 1.708m.
"The increase in initial claims is due to the impacts of the Covid-19 virus," the Labor Deparment said. "Nearly every state providing comments cited the Covid-19 virus impacts. States continued to cite services industries broadly, particularly accommodation and food services. Additional industries heavily cited for the increases included the health care and social assistance, arts, entertainment and recreation, transportation and warehousing, and manufacturing industries."
Paul Ashworth, chief US Economist at Capital Economics, said the unprecedented surge in initial jobless claims starkly illustrates the extent of the economic devastation that the coronavirus has unleashed.
"To put that in perspective, claims have never exceeded 700,000 in a single week before.
"Furthermore, there are good reasons to believe that understandable constraints on the capacity of offices to process claims mean that the true picture of layoffs is even worse. The state breakdown of these figures imply that claims in California were slightly less than 200,000 last week, whereas the latest information we have is that claims there have now reached 1,000,000. Pennsylvania was by far the worst affected state according to the breakdown, with nearly 400,000 claims last week.
"Based solely on the historical relationship between claims and the unemployment rate, 3,283,000 equates to an unemployment rate of somewhere between 30% and 40%. We are not suggesting the latter will rise to those levels, but we would be amazed if it didn’t exceed 10% by May, if not April. There will be a very significant drop back in unemployment when the number of new coronavirus infections fall and the economy begins to reopen, but it won’t reverse all of these losses. The unemployment rate could remain elevated for years."