US jobless claims poised for historic surge

People wearing masks are seen in New York on March 14, 2020. PHOTO: AFP

WASHINGTON (BLOOMBERG) - As efforts to contain the coronavirus intensify, the number of Americans filing for unemployment benefits is poised for a historic surge when figures are released on Thursday (March 19).

Ohio saw almost 78,000 applications in the past three days, about fourteen times last week's total, a state spokesperson said on Wednesday. In Connecticut, about 30,000 claims have been filed since Friday, about 10 times the average weekly total, the Hartford Courant reported on Tuesday.

A spokesperson for Illinois said it had received more than 41,000 claims over the last two days, versus 4,445 during the same time last year.

These represent a slice of the potentially millions of Americans likely to lose jobs as the virus halts travel and events. It's forced restaurants and bars to close and slowed business to a crawl in any still open. As more people stay home, a swath of businesses - from coffee shops to dentist offices - are also laying off workers.

For a sense of the enormity of what's coming, those state numbers compare to total US jobless claims of just 211,000 for the week ending March 7, which was in line with recent trends and not far from the 49-year low of 193,000 in April.

If this handful of states represents what's happening broadly across the nation, there could be a historic surge in filings for unemployment benefits in the federal government's report on March 26.

The report at 8:30am Thursday in Washington - which reflects claims through March 14 - may only reflect a fraction of virus-related claims so far.

About a dozen states, including New York, California and Illinois, have turned to more drastic measures in an attempt to contain the virus, including closing restaurants and bars to dine-in customers. One estimate says the US restaurant industry is poised to lose 7.4 million jobs.

Marriott International Inc. has started furloughs that could hit tens of thousands, and the American Hotel & Lodging Association projects the industry will be forced to shed 1 million jobs in coming weeks.

US jobless claims, reported with a one-week lag, are one of the best real-time indicators of labour-market health. The full effect of the job losses likely won't be evident until the April unemployment data given the majority of reported layoffs occurred after the Labor Department's reference week. That data is set to be released on May 8.

That doesn't mean the unemployment rate won't surge. It stood at a half-century low of 3.5 per cent in February, down from a 26-year peak of 10 per cent just after the last recession.

The national jobless rate could surge above 8 per cent in the next three months, according to Bloomberg News calculations based on estimates for payroll cuts from the restaurant and lodging industry groups.

Greg Brown, finance professor at the University of North Carolina's Kenan-Flagler Business School and a former Federal Reserve Board researcher, said the jobless rate will rise as high as 9 per cent.

JPMorgan Chase & Co chief US economist Michael Feroli wrote Wednesday that the rate will probably rise to 6.25 per cent by mid-year and ease back to 5.25 per cent by year-end, based on his downgraded forecast calling for the economy to shrink at a 4 per cent annualized pace in the first quarter and 14 per cent in the following three months.

Join ST's Telegram channel and get the latest breaking news delivered to you.