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America’s dispiriting weekly tally of COVID-19-related layoffs is likely to add millions more Thursday, though the figure is expected to continue to fall.
Economists estimate the Labor Department will report that 2.5 million Americans filed new applications for unemployment insurance last week, down from the 3.2 million the prior week. Jobless claims provide the nation’s most reliable gauge of layoffs.
That would push total unemployment claims the past eight weeks to a staggering 36 million and foreshadow another punishing jobs report for May, though payroll losses should fall noticeably from the record 20.5 million in April. April’s unemployment rate hit 14.7%, highest since the Great Depression, up from 4.4% the prior month, and a 50-year low of 3.5% in February.
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The weekly count of jobless claims has declined for five straight weeks after peaking at 6.9 million at the end of March. If the trend continues, the figure should dip below a million by June, says economist Greg Daco of Oxford Economics. That, however, would still remain far higher than the previous record of 695,000 unemployment claims during a deep recession in October 1982.
“We’ve been seeing a very gradual decline in the number of initial claims,” Daco says. But the overall picture, he says, is still “very dim.”
Daco reckons the May employment report will reveal about five million net job losses while economist Ryan Sweet of Moody’s Analytics predicts five to 10 million. A claims total below 3 million Thursday would generally bolster expectations for fewer job losses in May while a number above that could spark concerns of larger-than-anticipated cuts, Sweet says.
Most states issued stay-at-home orders and closed down nonessential businesses in mid-March to curb the spread of the virus. That spelled millions of layoffs, initially hitting restaurant, hotel and retail workers hardest. But the cuts have spread to other industries in recent weeks, including construction and professional services.
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More than 40 states have started phased-in reopenings of their economies, a development that’s likely to further curtail jobless claims in coming weeks. At the same time, millions of Americans have been stymied in their efforts to file claims because of jammed computer and phone systems, pushing applications to later weeks and keeping the tallies elevated, Daco says.
Keep in mind that jobless claims don’t necessarily equate to permanent layoffs. Many who file have been furloughed, or temporarily laid off, and some simply have seen their hours reduced under expanded eligibility criteria passed by Congress. April’s employment report showed that more than 90% of workers who lost jobs in April were on temporary layoff.
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Yet both Daco and Sweet question whether the vast majority of workers who believe they’re on temporary layoff will be rehired. Despite forecasts for a solid recovery in the second half of the year, many consumers are expected to remain wary of visiting restaurants and other gathering spots until a vaccine is available, limiting the rebound in economic activity. And some businesses have closed permanently.
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Still. by June, many laid-off workers could be rehired. The Paycheck Protection Program passed by Congress offers businesses with fewer than 500 workers forgivable loans of up to $10 million as long as they retain their employees or rehire those they laid off. That could mean zero net job losses in the June employment report, Daco says. Sweet expects monthly job gains by fall, though total employment is projected to remain below its pre-pandemic level for several years.
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