Coronavirus: US unemployment hits highest for almost 40 years
The number of people without jobs in the US has surged to a record high as the economy goes into lockdown due to the coronavirus pandemic.
Nearly 3.3 million people registered to claim unemployment benefits for the week ended 21 March, according to Department of Labor data.
The previous record was set in 1982, when unemployment claims hit 695,000.
The sharp rise marks an abrupt end to a long period of slow and steady job market expansion.
It comes as officials in states across the country close restaurants, bars, movie theatres, hotels and gyms. Car firms have halted production and air travel has fallen precipitously. According to economists, a fifth of the workforce is on some form of lockdown.
State officials, who process unemployment claims, have reported being overwhelmed by requests for the benefits, which analysts said means the situation could be even worse than the data currently shows.
Ian Shepherdson, chief economist of Pantheon Economics, said he expects to see the unemployment rate increase to to at least 6.5% shortly – nearly double the prior rate – and continue to accelerate in future months.
“I’ve been writing about the US economy … since 1996, and this is the single worst data point I’ve seen, by far,” he wrote.
In Illinois, weekly jobless claims multiplied by 10. They more than quintupled in New York and more than tripled in California, which were among the earliest and biggest states to impose restrictions. The effects were even more dramatic in smaller states.
Nationally, the figures are nearly five times higher than the worst point of the 2008 financial crisis.
Analysts warn that lower income workers are particularly vulnerable, as the lockdown forces retailers, fast food outlets and other low wage employers to cut back or close. And as people lose jobs, the economic damage is likely to snowball, since consumer spending accounts for the majority of the US economy.
“Once the risks around the virus pass, it will not be just easy to flip the switch and employment returns to pre-crisis levels,” Joseph Brusuelas, chief economist at RSM wrote on Twitter. “That is not how this is going to work & will require more aid.”
In Washington, Congress is working on a $2tn (£1.7tn) stimulus bill, which includes direct payments of $1,200 (£999) to adults, an expansion of unemployment benefits, and financing for affected industries, such as airlines. The Federal Reserve has also taken unprecedented steps to shore up the economy.
But even with such action, a sharp economic contraction is inevitable, analysts said.
“Fed action and fiscal measures can only ameliorate the pain and we remain worried that the latter aren’t yet on a sufficient scale,” Mr Shepherdson wrote.
Last month, US unemployment was hovering near historic lows at 3.5%. As recently as three weeks ago, the number of jobless claims was only about 210,000 and President Donald Trump was trumpeting the labour market’s health on Twitter.
Mr Trump, who has made the strength of the economy his political calling card, recently said he wants to loosen restrictions on activity as early as next month, despite an ongoing surge in cases of coronavirus.
April 6, 2020