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%”.
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”.