More than 26 million Americans filed for unemployment benefits over the past five weeks, a record-breaking number revealing the devastating toll the coronavirus pandemic has taken on the economy.
About 4.4 million people filed for unemployment benefits last week, the Labor Department said Thursday. Jobless claims provide the best measure of layoffs across the country.
Economists had estimated 4.5 million claims, lower than the roughly 5.2 million filed the week before, and down from the all-time high of 6.86 million applications filed in late March.
But while last week’s tally was lower, the number of claims was still staggering, building toward a projected unemployment rate of 16.4% in May that would be the highest since the Great Depression according to Morgan Stanley.
And more claims were filed in five weeks than all the jobs created since the 2008 economic downturn.
The nation’s economy began to shut down last month, as businesses closed and most residents were told to stay home to slow the spread of the coronavirus. Air travel ground to a halt, restaurant dining all but disappeared and shopping was limited to the grocery store or online sites as 43 states said most residents should stay inside.
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Companies faced with dwindling customers and revenue began laying off and furloughing employees. And economists say claims will keep mounting as the economy continues to sputter, cash-strapped local governments start to cut jobs, and gig workers apply for relief they could not have received in the past.
“Claims have declined over the past two weeks but remain at an extraordinarily high level,” analysts for the research consultancy High Frequency Economics wrote in a note. “That will likely continue over coming weeks as shut down orders remain in place or are extended, and businesses continue to lay off or furlough workers.”
Morgan Stanley had predicted that a slightly lower number of 3.8 million jobless claims were filed last week, adding that applications “have moved past the peak more visibly now, but the cumulative number is still rising significantly.”
It expects that even with a slightly lower number of weekly claims, the unemployment rate should top 15% in April, and the average jobless rate will hover at 15.7% during the second quarter.
Jobless claims may also continue to swell because the $2.2 trillion federal emergency stimulus package approved in March expanded the number of people who are eligible for unemployment benefits, including those who’ve gone from full-time to part-time work.
Dante DeAntonio with Moody’s Analytics wrote in a note that among workers with full-time positions in February, 1.4%, or more than 1.6 million, shifted to part-time schedules in March, the largest share in more than a decade.
“Assuming the lion’s share of that increase is the result of COVID-19 means that most of those workers are newly eligible for (unemployment insurance) benefits,” he wrote. “This is just the tip of the iceberg since overall job losses in April could be 10 to 20 times larger than those in March.”
With the number of workers moving to part-time schedules likely to increase, “the inclusion of self-employed workers and those forced into part-time hours in the (unemployment insurance) program is a positive step for those affected,” DeAntonio said, “but it will dramatically inflate (unemployment insurance) claims estimates relative to past downturns.”
Oxford Economics forecasts corporate earnings in the second quarter could drop 25% from the same period a year earlier, leading businesses to cut costs further.
“Corporate America is in distress,” Oxford Economics said in an investors’ note. “Highly indebted firms seeking to avoid default will undertake cost-cuts by reducing their workforce and capital expenditures, while rising defaults will further fuel layoffs. This will exacerbate the ongoing economic shock.”
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