On Thursday, the weekly jobless claims numbers showed filings for unemployment benefits spiking 70,000 to 281,000, the most since Hurricane Sandy in 2012.
As noted here (and everywhere else), that spike may look daunting on a chart as of this week, but going forward, 281,000 is going to seem like a wholly pedestrian figure. In fact, it won’t even be recognizable as a “spike” on a longer-term chart anymore, because the surge in weekly claims that is right around the corner is almost sure to be astronomical.
So worried about this is the Trump administration, that the Labor Department is imploring states to delay individual reporting in order to avoid causing a panic. According to a Wednesday e-mail seen by The New York Times, the government ordered state officials “to do nothing more than ‘provide information using generalities to describe claims levels (very high, large increase)’ until the department releases the total number of national claims next Thursday”.
Apparently ignoring the plea, Ohio’s Department of Job and Family Services said Friday that jobless claims in the state from Sunday through Thursday were 139,468. A week ago, they were 4,815. On Thursday alone, claims in the state totaled 28,413. They were 33,238 on Wednesday.
Consider this from The Sacramento Bee:
California is seeing a big spike in unemployment claims as the state and nation hurtle towards the first recession in 12 years.
“We are currently experiencing a large increase in claims filed in our programs and have staff working overtime to keep up with the demand,” said Loree Levy, spokesman for the state’s Economic Development Department.
“In addition, we are working to redirect other staff, and hire additional staff, as much as possible to assist with the claim filing process,” she said.
Gov. Gavin Newsom said Wednesday evening that the state typically receives about 2,000 claims daily. “Two, three days ago we saw about 40,000 … then 70,000.” he said. “Yesterday, 80,000 applications. It doubled in a 48 hours period.”
Well, if you’re wondering just how bad this is going to get, Goldman sees claims exploding to 2.25 million this week. That’s based on 30 preliminary reports across states.
“While it is possible that claims were front-loaded to start off the week — implying a slower pace of claims for the week as a whole — or that our sample is biased toward states with a larger increase in claims, even the most conservative assumptions suggest that initial jobless claims are likely to total over 1 million”, the bank said.
In case you’re curious, there is no precedent for that. If Goldman’s projection plays out, it will be more than three times higher than the previous record of 695,000 in 1982.
But if you think that’s alarming, you haven’t heard anything yet.
Goldman is now projecting a 24% contraction in the US economy in Q2. And no, that is not a typo.
“Over the past few days, social distancing measures have shut down normal life in much of the US”, the bank writes, calling the sudden surge in layoffs and collapse in spending “historic in size and speed”.
“We expect declines in services consumption, manufacturing activity, and building investment to lower the level of GDP in April by nearly 10%, a drag that we expect to fade only gradually in later months”, the bank continues. “We now forecast quarter-on-quarter annualized growth rates of -6% in Q1, -24% in Q2, +12% in Q3 and +10% in Q4, leaving full -year growth at -3.8%”.
(Goldman)
Folks, that projection is unprecedented and is, for all intents and purposes, Goldman saying the US economy is headed for a depression, although it’s not clear whether it makes sense to talk of a “short-lived” depression, which is what this would be.
For context, BofA sees a 12% contraction in Q2 and JPMorgan a 14% decline – those projections may well be revised lower going forward.
“A decline of this magnitude would be nearly two-and-a-half times the size of the largest quarterly decline in the history of modern GDP statistics (-10% quarterly annualized in 1958Q1)”, the bank writes, marveling at its own forecast.
They continue, writing that “the sudden stop in US economic activity in response to the virus is unprecedented, and the early data points over the week strengthen out confidence that a dramatic slowdown is indeed already underway”.
Here’s a look at the bank’s projections for the eventual rebound:
Goldman also cautions that their projection reflects what the final read will be, so the initial (i.e., advance) GDP prints could suggest things are better than they actually are.
In the simplest possible terms (and this is probably apparent to many readers already), the US is facing one of the single-worst quarters for the world’s largest economy in the history of the nation.
Goldman drives it home: “It would mean that in only one quarter, the economy would experience an increase in the output gap bigger than that experienced in the entirety of every postwar US recession”.
“Nearly recession proof economy” was almost as moronic as Bridgewater CIO’s comments. Exactly what you would say at the end of the cycle.
An economy in which the majority of people are living paycheck to paycheck and cannot scrape together $400 for an emergency should never have been described as “the strongest economy ever.” Shame on Trump; shame on the neoliberal elites who’ve been gaslighting us for the last 30-40 years.
So on point. I remember the incredible job creation numbers of the Clinton administrations. Let’s throw a ticket parade.
Never mind that most were underpaid retail jobs with no benefits. Let’s not forget the corporatist GOP and their lackey loons, the Libertarians. Their fingerprints are all over this mess. If your company used debt to finance buybacks and pump earnings only to goose executive earnings and increase dividends, then no bailouts for you.
And still I see commercial flights leaving GEG, which is somewhat near my home. Wuhan went to “zero departure” policy when they reported 400 new cases per day. We are still not taking this seriously. This does not end until there is a full box of N95 masks in EVERY pantry in the US, and that every person wears them every time they leave the house for a period of 6-8 consecutive weeks.
Yours truly,
A Medical-Microbiologist with 27 Years Experience
Last I heard they are flying empty planes: https://www.cnn.com/travel/article/airport-slots-ghost-flights/index.html
There was an attempt to fix this but don’t know if it’s happened yet.
At some point the US will need to shift strategy – the impact of a crippled economy on the healthcare system may kill more people than you save by trying to level out Covid emergency care. It may become a more life and death calculation than simply worrying broadly about the covid response being “worse” in some general economic fashion.
Problem is relative mortality; with universal, aggressive intervention (S. Korea), you can keep CFR <1%, but when aggressive intervention not always available (Italy, Iran), CFR rises orders of magnitude (10x-20x). True no-win situation – release economic strangulation and absorb >10m fatalities, or pursue current course, keep CF_tot to about 500k, but shrink GDP by 25-40% for extended period. It all ends about 1-2 months AFTER policy gets serious, and Flight Radar current data has no commercial icons on the screen whatsoever…
Flight Radar current data is showing no commercial flights where?
The difference is rapid policy development could offset the economic impact but it cannot address the virus. If we choose the economy over the virus… I guarantee people self impose these same measures but too late to avert thr medical disaster and then you get both disasters.
It’s criminal to not close markets, the argument being, do you close it now and piss off people, or, do you wait 8 weeks to digest another 50 per cent loss? As I mentioned the other day, stimlus needs to be closer to 20 trillion by next week versus pretending that one trillion in the pipeline will be magical. The economic impacts of this global tsunami will not be linear!!! Instead of wave cycles that have predictability, the whole global economy goes into a parobolic spike spike off any chart. Shut the fing markets today!!
Close the markets? Why so you can get better seat to watch the financial world burn? Instill even more panic while doing nothing but penning up a herd that will stampede for the exits as soon as the gate is opened? The Fed is so desperate to keep credit markets from seizing up (not talking stocks –it’s bonds that should cause everyone pause) they are buying short dated municipal bonds along with just about every short dated issue that isn’t junk. The balance sheet will be over 10 trillion by the end of the month and it may not be enough. And what would happen when you reopen? Close now and you might not reopen —ever
Closing the markets is the precursor to admitting the financial system is not working and will not survive without a complete re write of the rules of Capitalism . There has been a lot written on this website and many others suggest such a necessity…
Right– if you close you won’t reopen –do you have that rewrite ready to go? Might want to have something more than Bernie’s talking points on the back of an envelope. . .
Ironic that the person most qualified to work on this mess is right in front of us but will probably NOT be the Democratic candidate for president. Never been a Bernie fan but he sure seems right for this occasion.
Exactly.
A 24% contraction seems like a gross under-estimation
The same type of people hoarding food will be first in line at banks in time, if global authorities don’t wake up. Although the virus will receed in time, the damage from the tsunami and nonlinear impacts are racing forward far faster than human actions and reactions, thus getting cash to everyone ASAP is essential. Closing down the globe and giving everyone a paid three month vacation seems like a good idea, including shutting wall Street casinos. Cancel contracts and reward people who work to keep essential stuff running. Serious plans have to be on the table immediately, then reboot and fo back to shorting nursing homes in 4 months and streamline a recovery. Amen
Bearish much? Let’s assume you are still here at end of April and you still have a sandwich and Internet service. Extrapolate
S&P500 closed today at ~2,305. Clearly a substantial total decline (-31.9%) from its peak of ~3,386 on Feb 19.
But, this is the first close of the S&P500 below its low close in Dec 2018 (~2,351 on 12/24/2018). This Dec 2018 low was a drop of ~19.8% following its prior peak of ~2,931 on 9/20/2018. As best I recall, a significant contribution for this drop goes to markets not liking the then-Fed action: an increase in the federal funds rate by 25 bps on September 27th and another 25 bps on December 20th (plus into mid-December 2018 markets were anticipating at least two more 25 bps rate increases in the first part of 2019). Just before Christmas, the Fed changed its tone and the next rally was thus underway (followed by Fed rate decreases starting in August 2019). Interestingly, S&P500 earnings appear to have peaked around late 2018/early 2019.
As such, maybe the S&P500 drop so far hasn’t been that bad with respect to the potential economic impacts of this 100-year pandemic event (vs. the prospect of the Fed continuing to tack on a couple of more 25 bps increases after the end of 2018).