Initial Claims Double from Previous Week to Record 6.648 Mln
Continuing layoffs and administrative backlogs will lift initial claims to new record highs for the next several weeks before the flow of new filings finally slow.
This week, the level of new claims was double last week’s, adding to the overall number receiving benefits.
The level of initial claims jumped by 3.341 million to a record high 6.648 million in the March 28 week, reflecting not only further layoffs, but also backlogged filings from the previous week. With millions of workers overloading the system and federal government add-ons to state benefits, these numbers will continue to climb.
Without seasonal adjustment, the actual number of new claims was 5.824 million.
The consensus forecast was for a 3.35 million level following an upward revised 3.307 million level in the previous week. Some forecasts were as high as 9 million new claims.
Again, to put the current situation in context, the highest initial claims level reached during the Great Recession was 665,000 in March 2009.
The Labor Department again cited the accommodation and food services sectors as the key contributors to this week’s claims spike, but noted that a wide swath of sectors contributed to the total based on state comments.
The state breakdown for the current week, which is not seasonally adjusted, showed gains in excess of 100,000 claims in many states. Most notably, New York filings finally surged after a surprisingly low number last week. The state has, by far, the largest number of COVID-19 cases in the US, so the delayed increase was likely due to backlogs and the more immediate concern of health rather than filing.
Continuing claims, the measure of the people currently receiving benefits, rose by 1.245 million to 3.029 million in the March 21 week, the highest since July 2013.
Even when the pace of new claims slows, the level of those receiving benefits will extremely elevated, with some workers returning to work after the crisis, while others needing to find new jobs in a very rough market.
Earlier Thursday, Challenger reported 222,288 layoffs in March, the largest monthly total since January 2009, with 141,844 attributed directly to COVID-19. The entertainment and leisure sector, which includes shuttered hotels, was the largest contributor.
This is just the beginning of a downsizing trend that will persist for many months until the COVID-19 related business shutdowns are reversed, and several of the layoffs could prove permanent.
Because most of the layoffs likely occurred later in the month, after the employment report survey week, the impact on Friday’s March jobs report will be muted.
On a positive note, Challenger reported that hiring plans at delivery firms surged in the month as homebound consumers made the best use of internet commerce to get their groceries, medications and pizza.
Also released, February’s trade deficit narrowed to $39.9 billion from $45.5 billion, as previously suggested by the advance goods gap data released on March 26.
While the full impact of the virus had not reached the U.S. at that point, trading partners, particularly China, were in the middle of full-blown shutdowns. At the same time, trade barriers enacted to prevent import of goods from those countries reduced trade and cut off supply chains.
The bilateral trade gap with China narrowed sharply to $16.0 billion from $26.1 billion in the January and $24.8 billion a year ago.
The March data will likely show further contraction in international trade activity, both import and exports, as U.S. businesses shut down as well.