The U.S. labour department reported a record 3.3 million Americans filed claims for unemployment last week as U.S jobless claims surge. The figure was far in excess of most forecasts and eclipsed the previous record of 695,000 claims set in October 1982. 

The consensus estimate was for an increase of 1.7 million claims over last week’s figure of 282,000. The rise is by far the largest weekly rise seen in unemployment claims since the department began publishing figures in 1967. 

New York Times Front Cover 23rd March 2020
New York Times Front Page 23rd March 2020

Job Losses Soar; U.S. Jobless Claims Surge; U.S Virus Cases Top World

This is the first sign of an impending unemployment shock likely to hit the U.S. economy as businesses struggle to cope with sudden operating restrictions and as many parts of the country go into lockdown in an attempt to reduce the rapidly escalating number of COVID-19 transmissions. 

As the impacts to the economy and to the jobs market are still in the early stages of being modelled, there are widely varying estimates for what US unemployment rates could reach in 2020. 

Despite only last month being near record lows around 3.5 percent, US Treasury secretary, Steve Mnuchin, now predicts that U.S. unemployment could soon hit 20 percent while the Federal Reserve Bank of St Louis president, James Bullard, has said he believes unemployment could hit 30 percent as soon as the second quarter.

Morgan Stanley has provided an estimate of 12.8 percent unemployment by the end of Q2. 

Jerome Powell, the Fed Chair has admitted that the U.S. may very well be headed into a recession. In response to the crisis, the Trump administration is rushing through a record $2.2 trillion stimulus package, which was yesterday approved by the Senate.

The package includes increases to state jobless benefits as well as direct cash payments to low and middle-income families of up to $1,200 per adult for those earning less than $75,000 a year.

The mounting job losses come as the U.S. recently overtook Italy and Spain to report the highest number of confirmed COVID-19 cases.

According to the latest Johns Hopkins University figures, there are now 85,840 confirmed American cases and 1,290 reported deaths. With nearly half of the national total, New York is by far the hardest-hit state, with 39,140 confirmed cases. China has 85,653 cases, while Italy has 80,589. 

Global Pandemic - COVID-19 Cases
Global Pandemic – COVID-19 Cases

Despite the bleak jobs data, the U.S. stock market continued it’s three-day rally, with the S&P 500 up 6.24 percent.

U.S. Treasuries also advanced, with yield on the benchmark 10-year note down to 0.8 percent. Yield on the two-year note was steady at 0.3 percent. 

The somewhat surprising stock market rally, considering the severity of the jobless claims, seems to be more closely linked to optimism related to the impending approval of the $2.2 trillion relief package or of a strong rebound by the U.S. summer if the virus can be contained by then.