The layoffs are only getting uglier.
If you thought last week’s gauge of U.S. layoffs was ugly, brace yourself for an even more brutal tally Thursday as the economic damage wrought by the coronavirus pandemic mounts.
Economists surveyed by Bloomberg estimate a Labor Department report Thursday morning will show 3.5 million Americans filed initial applications for unemployment insurance last week, up from the record 3.3 million who sought benefits the prior week.
Some economists expect a far bigger total. Nomura forecasts 4.1 million; Morgan Stanley, 4.5 million; and Bank of America, 5.5 million. Such first-time jobless claims represent the best measure of layoffs across the country.
The numbers could mark just the initial wave of a punishing couple of months.
“We could see unprecedented job loss in the April jobs report in the tens of millions, with the unemployment rate (now a 50-year low of 3.5%) reaching double digits,” Bank of America said in a research note.
Gregory Daco, chief U.S. economist of Oxford Economics, expects a total 22 million job losses by May before the outbreak eases and the economy and labor market start to revive. The Federal Reserve Bank of St. Louis predicts as many as 47 million layoffs and a staggering 32% unemployment rate.
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Several factors likely pushed the count higher last week, analysts say.
► By the end of the week, 30 states accounting for 60% of private employment had issued orders for residents to stay at home or for nonessential businesses to close to contain the spread of the virus, says Nomura economist Louis Alexander. That’s up from five states with 25% of private payrolls the previous week, he says.
Restaurants, stores, movie theaters, hair salons, sports arenas and other businesses nationwide have temporarily shut down or sharply limited service.
► Major corporations such as Marriott, GE and ZipRecruiter recently have announced layoffs or furloughs that likely translated into a surge of jobless claims.
► Many states reported a flood of applications for benefits that jammed phone and online systems the previous week, pushing many of the claims into last week, Morgan Stanley said.
► The stimulus bill, known as the CARES Act, which was passed by Congress late last week, expanded eligibility for unemployment benefits to contractors and the self-employed. Many of those gig workers could have applied in anticipation of the bill’s passage, Bank of America says.
► Twenty-two states were expecting jobless claims to nearly double to 2.5 million last week, according to a roundup of news reports, Bank of America says. California Governor Gavin Newsom recently said the state got 1 million applications in less than two weeks, but the state reported just 187,000 for the week ending March 21.
The abrupt shutdown of 30% to 40% of the economy may mean a disproportionate share of layoffs took place the past couple of weeks. Nomura’s Alexander expects jobless claims to slow in coming weeks, partly because the CARES Act forgives small business loans for firms that hold onto their workers. Daco, however, expects claims to ratchet even higher the next couple of weeks before easing.
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Meanwhile, Friday’s jobs report for March is likely to reflect only a fraction of the job losses to date because the survey was taken the week ending March 14, before the bulk of the layoffs occurred. Economists surveyed by Bloomberg estimate the Labor Department’s report will reveal 100,000 net job losses, which includes both layoffs and hiring that largely has come to a standstill.
Payroll processor ADP, which tries to forecast Labor’s total, on Wednesday reported just 27,000 private-sector job losses last month.
In a sign of the economy’s stunning reversal, Labor tallied a booming 273,000 job gains in February.