US economy

US jobless claims smash through record as lay-offs accelerate

The number of Americans filing for first-time unemployment benefits soared to more than 6m, hitting a record high for a second consecutive week as lay-offs stemming from the coronavirus shutdown accelerated and spread into new industries.

Initial jobless claims jumped to 6.65m in the week ending March 28, the labour department said on Thursday. That eclipsed economists’ forecasts for a rise to 3.7m.

The report also revised the previous week’s data higher to 3.31m from 3.28m as states worked through a backlog of applications. Last week’s total had been the previous record high, and the new data published on Thursday takes the two-week total to 10m job losses.

Column chart of Initial unemployment claims (weekly data, millions) showing US jobless claims at record level

As states and cities shut down non-essential businesses, retailers and restaurants facing a collapse in revenue have laid off employees across the country.

According to early state-level estimates that have not been seasonally adjusted, California reported the largest number of jobless claims at 878,727, while Pennsylvania reported 405,880. Meanwhile New York, which has emerged as the biggest US hotspot for Covid-19, reported 366,403 claims.

All three states have asked residents to stay at home to try to curb the outbreak’s spread. Florida, which on Wednesday announced a statewide order for its 21m residents to stay at home, reported 227,000 claims.

States reported that shutdowns continued to primarily affect the service sector, but the pain has spread to healthcare and social assistance, manufacturing, wholesale trade and construction industries as well. 

The $2tn coronavirus relief legislation passed by Congress last week widened eligibility for state unemployment funds to include self-employed and gig-economy workers, and added $600 per week to existing benefits. The rapid growth in claims shows that some businesses are still choosing to let workers go as they await federal support through the Small Business Administration and a fund for larger companies. 

Over the past month, weekly jobless claims figures have become an important bellwether for policymakers and forecasters, as they provide the most up-to-date snapshot of the US labour market. Friday’s non-farm payroll report is expected to show a smaller hit to the American workforce since the survey period ended in early March, before the worst effects of the coronavirus related shutdown were beginning to be felt.

US President Donald Trump has warned the nation’s coronavirus death toll could reach almost a quarter of a million people. He has told Americans to be ready for a “painful” two weeks.

The number of confirmed coronavirus cases in the US has surpassed 215,000 with fatalities climbing above 5,000.

US Treasuries failed to catch a bid after the data release. The benchmark 10-year Treasury note saw its yield rise roughly 1 basis point to 0.59 per cent. The yield on the more policy-sensitive two-year Treasury rose over 1 basis point to 0.22 per cent. Futures for the S&P 500 pared most of their earlier gains, pointing to a rise of less than 1 per cent when trading begins in New York. 

Jeff Kleintop, chief global investment strategist at Charles Schwab, said the number was “huge” and indicated people were getting access to necessary benefits.

“It shows the ability of local bureaucracy to process paperwork and to get money to people,” he said.

Additional reporting by Colby Smith in New York


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