‘Far more extreme than anything we’ve ever seen, including the worst weeks of the Great Recession’ — economist gasps as U.S. jobless claims jump 3,000% in 3 weeks


‘A portrait of disaster.’


Heidi Shierholz, a senior economist at the Economic Policy Institute

Initial unemployment claims jumped 3,000% to 6.6 million last week from 211,000 for the week ending March 7, the Labor Department said Thursday. Businesses have closed in an effort to stop the spread of coronavirus, as millions of Americans practice “social distancing” at home.

“This kind of upending of the labor market in such a short time is unheard of,” said Heidi Shierholz, a senior economist and director of policy at the progressive Economic Policy Institute, a Washington, D.C.-based think tank. She called the latest numbers, “A portrait of disaster.”

The $2 trillion stimulus package, passed by the Senate last week, will help the U.S. through the COVID-19 pandemic, of which New York City is now the epicenter, Shierholz added, but she added, “This kind of upending of the labor market in such a short time is unheard of.”

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“The spike at the end shows the unprecedented territory we are in right now,” she said, citing this graph (below), showing labor market trends over the last 50 years. “What the labor market is currently experiencing is far more extreme than anything we’ve ever seen, including the worst weeks of the Great Recession.”

The number of unemployed Americans is likely to surpass the prior record of 15.3 million, also seen during the Great Recession after the subprime-mortgage market crashed. Economists predict 25 million Americans or more could lose their jobs in the next few months, at least temporarily.


Department of Labor data presented by the Economic Policy Institute (above).

Shierholz said initial unemployment claims do not include many workers who are out of work due to the virus, including independent contractors, those who don’t have long enough work histories, those who had to quit work to care for a child whose school closed, so the actual number is higher.

‘The spike at the end shows the unprecedented territory we are in right now.’

“One of the most effective parts of the CARES ACT, the relief and recovery act that Congress passed last week, is a $250 billion expansion of unemployment insurance,” Shierholz said.

The $2 trillion stimulus package includes an increase in the level of benefits and the creation of a Pandemic Unemployment Assistance (PUA) program which would be available to many workers who are not eligible for regular unemployment insurance (independent contractors, for example).

The $2 trillion stimulus bill will pay workers $600 a week on top of whatever sum they receive in their state-level unemployment claim for a period of up to four months, according to provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Coronavirus had infected at least 216,768 people in the U.S. as of Thursday evening and killed at least 5,148 people, with 1,374 deaths occurring in New York City alone, according to Johns Hopkins University’s Center for Systems Science and Engineering. Worldwide, there were 962,977 confirmed cases of the virus and 49,180 reported deaths.



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The Dow marked its 2nd straight gain — but Thursday jobless claims may pose the stock market’s biggest test amid coronavirus


Jobless claims haven’t been a focal point for investors for more than a decade, but market participants will be keenly watching Thursday’s figures because they could provide the clearest sign yet of the damage wrought by lockdowns that have swept across much of the U.S. to mitigate the spread of the COVID-19.

“’How will the markets survive the U.S. initial claims going ballistic?’ is probably on everyone’s minds this morning” wrote Stephen Innes, chief global markets strategist at AxiCorp.

Check out: Jobless claims set to soar by the millions as layoffs surge due to coronavirus shutdowns

Market participants are bracing for a number that could run into the millions — figures that are likely to bring to an abrupt end the first win streak for the Dow Jones Industrial Average

DJIA, +2.39%

and the S&P 500 index

SPX, +1.15%

since early February.

With one out of every five Americans under some form of stay-at-home measure to help lessen the spread of the illness that was first identified in Wuhan, China, in December, some economists are anticipating that as many as 5 million workers will show as applying for unemployment insurance in the coming weekly report. It is a staggering number that some market participants say is too large to discount and one that will likely knock the air out of a market that is searching for its footing higher.

See: 23 million American jobs in immediate danger from the coronavirus crisis

“We realize freakishly bad economic data is coming,” wrote Fundstrat Global Advisors’ Tom Lee in a Wednesday research note. “On Thursday, some economists are projecting weekly jobless claims to surge to as high as 5 million,” he wrote.

“Many of our more active and tactical clients are short into this, arguing that such wildly bad news cannot be discounted and thus, this ‘tape bomb’ should lead to a big sell-off,” he said.

On Tuesday, BTIG analysts Julian Emanuel and Michael Chu said that if a $2 trillion coronavirus rescue package being voted on by lawmakers late Wednesday wasn’t approved by the time those gut-wrenching numbers come out on Thursday, it would likely knock the wind of the market’s sails.

The BTIG researchers wrote that the “psychology of such a large weekly claims number without a deal done will inflict incrementally larger damage” on an already fragile market.

The Senate late Wednesday approved the relief bill, which is designed to shield the economy from the pandemic that has halted normal business and personal activity.

“The problem is new jobless claims will measure the extent of U.S. policy failure, and with the Congress dilly-dallying, it will not help the matters,” wrote Innes.



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