- Jobless claims remained at a very high level for the week ended on April 4th, reaching 6.61 million. This was down slightly from the previous week, which was revised up to 6.87 million (previous: +6.65) However, it was well above what the markets had expected at 5.25 million.
- Continued claims data are reflecting the increases in initial jobless claims, rising to 7.46 million for the week ending on March 28th from 4.4 million in the week prior.
- Most states reported layoffs in the accommodation and food services, retail trade sectors. Many simply reported that the increase in claims was due to COVID-19.
- California reported the most number of layoffs (+925,450). Followed by Georgia (+388,175), Michigan (+384,844), New York (+345,246), and Texas (+313,832).
Key Implications
- Jobless claims remained at unprecedented highs last week. In almost real-time, these data are providing us with a peek into the extraordinary impacts COVID-19 and measures to contain it are having on the economy. Over the last four weeks, nearly 17 million people, or 10% of the labor force, have filed for unemployment insurance.
- With states experiencing backlogs in processing claims, and the recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act expanding unemployment insurance coverage, initial jobless claims will likely remain elevated in the weeks ahead.
- It is possible, though, that we see jobless claims retreat from their peak due to the payroll protection program (PPP) and the surge in hiring that COVID-19 has created in some sectors of the economy. PPP, which launched on April 3rd, provides loans to small and medium sized businesses so that they can cover essential expenses (which includes payroll). Initial reports tell us banks have been overwhelmed with applications, and as applications are processed, this could limit the number of layoffs in April.
- Another offset could be in the pick-up in hiring in some industries. The coronavirus has boosted demand for food, household products, and online shopping. This has led to large retailers increasing their in-store, warehouse, and delivery staff. Moreover, with some manufacturers re-inventing themselves as medical equipment suppliers, this too, could increase hiring in the near-term.
- Taking it all together, today’s report clearly is indicating a double-digit rise in the unemployment rate, possibly reaching the 20% mark in April.
