Around 5 million more people filed first-time unemployment claims last week as the coronavirus pandemic continues to devastate the job market in every sector of the economy.
The staggering weekly number comes as President Donald Trump weighs plans to pull back on the social distancing measures that have shuttered businesses across the country and to reopen parts of the economy as soon as May 1.
State-mandated lockdowns have choked vast parts of the once-booming economy, kicking a total of 22 million people out of work and launching the nation into the worst crisis since the Great Depression.
Still, even that number may not tell the whole story, as state unemployment offices continue to struggle to process the unprecedented number of people rushing to file claims.
“The job losses are historic,” said Julia Coronado, a former economist for the Federal Reserve Board. “It means that we are going to be in for a double-digit unemployment rate.”
Weekly jobless claims have taken on new importance as economists and policymakers try to get their arms around the size of the crisis.
“The labor market is obviously very, very important and has a high correlation with what is going on in the economy,” Jay Bryson, the acting chief economist at Wells Fargo, told NBC News. “It is showing us what I think we all know, that the economy is falling off a cliff at an unprecedented rate.”
Economists are studying weekly numbers as they await other data from the government. At the same time, the public health crisis continues, and no one knows when social distancing measures will end.
“My guess is the unemployment rate is probably already over 10 percent, maybe 13 or 14 percent,” said Joel Prakken, chief U.S. economist at IHS Markit. “And I do think a day that Trump really dreads is May 8.”
On that Friday, the federal government is scheduled to release unemployment data for April, and economists agree that it is likely to be pretty grim, with job losses totaling at least 20 million.
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And things are likely to get worse before they get better.
“I think we still have a way to go before we will see some tapering of these claims,” Prakken said. States continue to be overwhelmed by first-time filers, and weekly claims reflect that. Because of bottlenecks, Thursday’s number probably includes claims filed weeks ago, which were finally processed last week.
The $2.2 trillion coronavirus relief package, known as the CARES Act, is another reason there have been more claims. The fiscal package expanded eligibility for unemployment insurance. Part-time workers are allowed to file, and so are contractors. Some states have waived job-search requirements.
Policymakers hope that the labor market will rebound as quickly as it has fallen and that employers who have laid off workers will decide to rehire them.
According to Coronado, “Policy has been focused on keeping those ties alive.”
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When it comes to the CARES Act, “the design is well-intentioned,” she said. “It is focused on relationships. We’ll see how successful that is.”
As the crisis drags on, economists will pay more attention to continued claims for unemployment benefits, not just first-time claims. They are already at record levels. Thursday’s data from the Labor Department showed around 11 million continuing claims.
“Over time, that will tell us about the speed with which people are finding new jobs,” Coronado said. “If you start to see a drop, that tells you about the net flow.”
See the per-state jobless numbers and how they’ve changed.
It goes back to that correlation Bryson described, between the labor market and the economy as a whole.
“If continued claims three months from now remain very, very high, it means that the labor market is not bouncing back as fast as we had hoped,” which wouldn’t bode well for an overall recovery, Bryson said.