As COVID-19 reshapes our economy, our newsletter will help you unpack the news from the day.
Weekly unemployment claims start to give a snapshot of COVID-19 layoffs
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We got an important economic report from the Labor Department Thursday morning — first-time claims for state unemployment benefits. When the number starts going up sharply, it’s often a warning sign that the economy’s in trouble.
For the week of March 14, there were 281,000 new claims, the highest level for initial claims since Sept. 2, 2017, when it was 299,000. This is up 70,000 from the first week of March, when there were 211,000 — near a historic low.
So, the layoff spike has started. But things will only get worse: Thursday’s data doesn’t even account for this week, when layoffs related to COVID-19 really started to ramp up.
We’ve seen multiple signs in recent days that layoffs are on the rise. Marriott is furloughing tens of thousands of hotel workers. Nevada is shuttering its casinos. Empty ports are laying off truck drivers. Canceled festivals are laying off staff.
Joseph Brusuelas at RSM Consulting said states are now being flooded with requests for unemployment benefits, and we should expect more.
“Over the next two to four weeks, a massive increase in first-time initial jobless claims,” Brusuelas said.
Over the last five years, claims have averaged around 250,000 a week. Brusuelas said once we go over that number, it tells us “the business cycle is over and the onset of a recession has begun.”
Unemployment was 3.5% in February, and Ryan Nunn at the Brookings Institution said it’s likely to start rising sharply.
“If we do get to rates of unemployment like those we saw in the Great Recession, the consequences will be quite, quite bad,” Nunn said.
Then, unemployment peaked at 10%. Treasury Secretary Steven Mnuchin has reportedly warned lawmakers that without robust economic stimulus measures, unemployment could hit 20%.
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