Record Jobless Claims Coming Next Thursday

Don’t let the recent stabilization in stocks fool you into thinking the worst is over in the economy. The worst is just beginning. There is about to be a tsunami of layoffs. Bank of America predicts there will be 3.5 million layoffs this year. There will be 500,000 in March and 1 million per month in Q2. The unemployment rate is expected to spike to 6.3%. They also see -12% GDP growth in Q2. The number of job losses contextualizes the hardship that corresponds with the huge contraction in the economy coming in the spring and summer.

COVID-19 is already causing disastrous outcomes and the shutdowns are still not complete. California just gave a ruling to its nearly 40 million citizens to shelter in place. Furthermore, in Pennsylvania non-life sustaining businesses must close by 8 PM. Many beaches in Florida are being closed which eliminates the economic boom that is spring break.  

Survey USA did a poll on COVID-19’s impact on the labor market. In a survey of 1,000 adults on March 18th and 19th, 56% said they don’t continue to go to their place of employment (of the 593 who usually work outside home). 9% of workers who work outside of home have been laid off because of the virus and 2% have completely lost their job. This is only the beginning of the negative repercussions of the draconian measures taken to slow the spread of the virus. We will see how well they are working in the next few weeks.  

Jobless Claims Set to Spike

Everyone was anticipating the Thursday jobless claims report from the week of March 14th, but it was largely a dud because the weakness only started at the tail end of that week. The real weakness will be seen in the next report. Specifically, initial claims rose from 211,000 to 281,000. That’s not a recessionary figure (although the 70,000 increase was the highest weekly change since November 2012). However, the next report will be recessionary. It will be an utter disaster. It will be the worst jobless claims report ever. That sounds like a prediction, but it’s almost complete certainty now. It’s certainty because there will be the most jobless claims in a week by far. This is like when a candidate wins a race in a landslide allowing the media to call the race as soon as polls close based solely on exit polls.

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