US jobless claims hit 6.6m as Covid-19 takes its toll
The number of Americans filing for unemployment benefits last week was much higher than expected as the coronavirus pandemic continues to take its toll, according to figures released by the Labor Department on Thursday.
US initial jobless claims fell by 261,000 from the previous week’s revised level to 6.6 million, coming in above expectations for a level of 5.3m. The previous week’s level was revised up by 219,000.
The latest data takes the total over the last three weeks to 16.8 million. California experienced the highest number of initial claims, up from 879,000 the week before to 925,000.
Meanwhile, the four-week moving average came in at 4.3m, up 1.6m from the previous week’s level, which was revised up by 54.750.
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.
The jobless figures came out just as the Federal Reserve announced further details on its Main Street Lending Program (MSLP), which will make up to $2.3trn in loans to support the economy.
Paul Ashworth, chief US economist at Capital Economics, said the fact that claims were down only trivially on the week before suggests that his forecast for the unemployment rate to peak at 12.5% could turn out to be too optimistic.
"That means more than 15 million claims have been made in the past three weeks alone. At this stage a 20% unemployment rate is no longer out of the question," he said.
"The only silver lining is that the March employment report revealed that a much higher share of the unemployed are on temporary layoff rather than being permanent job losers. That makes us hopeful that, once the lockdowns ease, the unemployment rate will come back down more quickly than in a normal economic cycle."
Ian Shepherdson, chief US economist at Pantheon Macroeconomics, said: "Next week’s number will be huge too, but probably considerably lower than this week. Google searches for 'file for unemployment' are now falling consistently on a w/w basis, by about one third. If that trend continues, we’d expect headline claims next week to drop to about 4.5m.
"That would mean excess claims between the March and April payroll survey weeks will total some 20.1m. The hit to payrolls should be a bit less than that, because the gap between the surveys this time is five weeks rather than four. Even after allowing for this, though, we reckon May payrolls will be reported falling by about 19m, driving the unemployment rate to 16% if none of the newly-unemployed leave the labour force. That seems unlikely, given that the labour force reportedly dropped by 1.6m in March, when household employment fell by 3.0m."
He said that if that proportion repeats in April, headline unemployment will be about 10%, matching the peak after the Great Recession. "But the true rate will be much higher, and it will rise further, along with the published rate, over the next few months."