New unemployment claims reached a record high of over 3 million last week. But this astonishing plunge in unemployment is likely to underestimate the full damage the outbreak of the corona virus has done to the US job market, several economists say.
In the week ending March 21, seasonally adjusted new unemployment claims were 3.283 million or more than double the Bloomberg 1.7 million consensus economists. The number was more than four times higher than the previous record high of 695,000 in 1982.
The level was astronomical compared to the 282,000 applications from the previous week and the 190,023 first applications that were submitted in the comparable week 2019. As the Department of Labor put it, “almost all states that made comments quoted the effects of the COVID-19 virus.”
The report confirmed economists’ fears that the outbreak of the corona virus and subsequent social distancing measures have forced companies to release workers in a record-breaking situation. However, with the escalation of the pandemic, the government’s ability to accurately track these unemployment claims has been compromised.
“There are good reasons to believe that understandable restrictions on the ability of offices to process claims will make the true picture of layoffs worse,” wrote Paul Ashworth, chief economist in the United States, in a note on Thursday.
And as James Knightley, chief economist for ING, emphasized, the states that reported the most new unemployment claims in the Department of Labor report don’t match the anecdotal evidence and state-reported data released last week.
The Department of Labor reported California’s claims at 186,809 and New York’s claims at 80,334 last week, each of which followed nearly 379,000 in Pennsylvania.
As of Wednesday, California Governor Gavin Newsom said more than a million Californians have applied for unemployment benefits since March 13, an unprecedented increase in unemployment for the country’s most populous state. And in New York, the home epicenter of the coronavirus outbreak, a rush of people looking for unemployment benefits crashed on the State Department of Labor website last week.
According to the Department of Labor report, claims in California and New York appear to be “low given the anecdotal evidence, the problems with website crashes and clogged phone lines, and the general reluctance of people to deal with many other applicants in the United States his current environment, ”said Knightley.
“We would expect the numbers of these and other countries to increase in the coming weeks, especially as the number of locks in the US increases,” he added.
Elsewhere, Connecticut’s new weekly unemployment benefits were reported in print by the Department of Labor on Thursday at 25,098. However, data from a local news agency suggested that submissions may have been even higher. In this report, data for the week ending March 17 was 30,000, or approximately ten times the weekly average.
“The [unemployment claims] go through the roof, ”said Ned Lamont, governor of Connecticut, recently in an interview with Yahoo Finance. “The computer system has just reached its threshold a few times. Like many things in the state government, it is an old system that should be updated in a year. We need it now. “
Regardless of the accuracy of the number reported by the Ministry of Labor, the trend reflected in the latest report on unemployment claims is clear: unemployment is rising at a dizzying pace given the coronavirus pandemic. And these effects could continue long after the domestic outbreak has been contained.