The Department of Labor reported Thursday that for the week ending March 14, initial claims for unemployment pay soared by 70,000 to 281,000, the highest level since Sept. 2, 2017. That’s still low by historical standards. But with the throwing of the dimmer switch on the economy, last week’s surge will almost certainly be greatly exceeded in next week’s report as thousands more people are laid off because retail businesses, major manufacturers, restaurants, entertainment venues, and all manner of other “nonessential” businesses and schools are shutting their doors to weaken the spread of the coronavirus.
The Economic Policy Institute says there could be 3 million more unemployed by summer. Treasury Secretary Steve Mnuchin says we could possibly see 20% unemployment, which would come in at 33 million additional unemployed. But we’re in uncharted territory and nobody really knows where exactly we’re headed. Plenty of financial pundits will nevertheless assert with an aura of certainty that they do know.
[UPDATE: A couple of readers point out that the figure released today is already obsolete, withThe New York Times reporting that unemployment claims for this week in just 15 states total nearly 630,000. Not hard to imagine that will be over a million when the other 35 states weigh in. And, of course, there is the half of American workers ineligible for unemployment benefits. A lot of them being laid off too, but not yet tallied. If it’s just 3 million added to the jobless rolls by summer, I’ll be very surprised—MB]
How much and for how long each out-of-work person can collect unemployment pay each week varies by state. Most set 26 weeks as the limit, except in recessions when the federal government picks up the tab for the extra weeks. During the long job recovery of the Great Recession, benefits were extended for 99 weeks, something that affected 7 million out-of-work Americans.
Some states only pay benefits for far fewer than 26 weeks, and some have sliding scales that provide more weeks when the unemployment rate is high than when it is low. Average weekly benefits: $385. Except in recessions fewer than half of American workers are eligible for unemployment pay.
At the beginning of a typical recession, job losses are, in statisticians’ jargon “lagging indicators,” meaning the economy will sour for months before employers start many layoffs. But where we’re headed is no ordinary recession. The abrupt impact on jobs of the go-home, stay-home policy has no precedent in the United States.
For employers who are hanging onto staff because they expect the temporary nature of the shutdown to remain temporary, a few weeks without customers or clients will be painful, but survivable. But the coronavirus—or rather the belated response to it—looks like it could kneecap the economy. How long the pain lasts is nothing more than guesswork given that we’re shutting off big hunks of the economy cold turkey with no certainty for when some kind of normalcy will return. Just too many variables. Stirring a trillion-dollar stimulus package into the mix adds uncertainty to any predictions. We can only wait and see how it shakes out.
One bit of data that won’t be much help in figuring where we may be headed will be the Labor Department’s monthly jobs report for March that comes out April 3. The surveys that ultimately determine how big job gains or losses were in the previous 30 days and what the unemployment rate was are completed on or around the 12th of each month. That is, the March report is actually a report on the last half of February and the first half of March. So the job numbers released in those monthly reports are always about three weeks old. Normally, that isn’t a big deal. However, the extent of layoffs between March 12 and April 3 could be immense. The jobs report won’t catch any of that.