WASHINGTON • The number of Americans filing for unemployment benefits surged to a 2½ year high last week, as the coronavirus pandemic forced employers to start laying off workers.
Initial claims for state unemployment benefits jumped 70,000 to a seasonally adjusted 281,000 for the week ended March 14, the highest level since September 2017, the United States Labour Department said yesterday.
The total topped the median estimate of 220,000 in a Reuters survey, and may be poised to surge into the millions next week as much of the economy shuts down to fight the pandemic.
Pantheon Macroeconomics chief economist Ian Shepherdson estimates two million claims for next week's report. "It appears from state numbers that the order of magnitude increase compared to normal is about 10," he said.
Also yesterday, the Federal Reserve Bank of Philadelphia's survey of factories showed conditions in the area deteriorated this month by the most on record, indicating the heavy toll on demand due to the virus battle extends to more of the nation's producers.
The Labour Department attributed the jump in jobless claims to the virus outbreak.
"A number of states specifically cited Covid-19-related lay-offs, while many states reported increased lay-offs in service-related industries broadly and in the accommodation and food services industries specifically, as well as in the transportation and warehousing industry, whether Covid-19 was identified directly or not," it said.
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 will not be evident until the April unemployment data, given the majority of reported lay-offs occurred after the Labour Department's reference week. That data is set to be released on May 8.
About a dozen states 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 has started furloughs that could hit tens of thousands, and the American Hotel & Lodging Association projects the industry will be forced to shed one million jobs in coming weeks.
The US jobless rate could surge above 8 per cent in the next three months, according to Bloomberg News calculations. It stood at a half-century low of 3.5 per cent last month, down from a 26-year peak of 10 per cent just after the last recession.
Professor Greg Brown, a 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.
BLOOMBERG, REUTERS