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Record Surge In Jobless Claims Suggests Unemployment Rate Rose More This Week Than Any Monthly Gain In US History

"[That] would raise the unemployment rate by more than half, by 2 percentage points from 3.5% to 5.5%, moving back to 2015 levels in just one week”.

The most hotly-anticipated jobless claims number in history is in the books.

The official number is 3.283 million.

That is, in a word, enormous. In another word, it’s unprecedented. In three words, it’s off the charts – literally.

Of course, it’s hardly unexpected.

Over the past week, economists have spilled gallons upon gallons of digital ink opining on the coming US unemployment crisis associated with the various lockdown measures implemented across the country to contain the coronavirus.

Economists’ efforts centered first and foremost around estimating near-term unemployment claims, using both state reporting and anecdotal evidence. The range of estimates varied from 1 million to 4 million, with the overarching point being that irrespective of where, in that range, the actual number fell, Thursday would be a historic day for claims.

Officially, consensus was 1.7 million. The range from 47 economists polled by Bloomberg was from 360k to 4.4 million. Not to put too fine a point on it, but whoever is responsible for that 360k prediction probably needs to look for another line of work.

The Labor Department last week ordered state officials “to do nothing more than ‘provide information using generalities to describe claims levels until the department releases the total number of national claims next Thursday”, according to a letter leaked to The New York Times a few days ago. That betrayed the extent to which the administration was concerned about the severity of these figures.

The irony is, the market was expecting this thanks in no small part to state-level reporting (in apparent defiance of the Labor Department’s “guidance” to keep quiet), which may mean the impact of the figure is muted.

Or not. Who knows. It’s certainly possible that market participants view this for what it most assuredly is: Evidence of the largest economy in the world coming to a screeching halt.

As part of their efforts to estimate the figures ahead of time earlier this week, Aaron Sojourner (a research associate at The Economic Policy Institute, a labor economist and an associate professor at the Carlson School of Management at the University of Minnesota) and Paul Goldsmith-Pinkham (an assistant professor of finance at the Yale School of Management), noted that “3.4 million Americans moving from employment to unemployment would raise the number of the unemployed from 5.7 million to 9.1 million”. That, in turn, “would raise the unemployment rate by more than half, by 2 percentage points from 3.5% to 5.5%, moving back to 2015 levels in just one week”, Sojourner and Goldsmith-Pinkham went on to say.

For context, the biggest monthly jump in the unemployment rate in American history was 1.3 percentage points in October 1949.

Read more: Coming Unemployment Crisis Plunges America’s Newly Jobless Into ‘Kafkaesque’ Nightmare

13 comments on “Record Surge In Jobless Claims Suggests Unemployment Rate Rose More This Week Than Any Monthly Gain In US History

  1. Perfect time to “buy the dip” –the disconnect between the market and the real suffering and dying in the real world is rather extraordinary.

  2. I’m not a sophisticated investor, but I was lucky enough to go all cash near the peak. I’ve been waiting for the right re-entry point and almost pulled the trigger at Dow 18,000. The last three days have made me want to throw up my hands and turn my accounts over to a money manager. Because honestly, I can’t make any sense of this price action. Do earnings and multiples mean nothing when the FED steps in? Are record unemployment numbers a BUY signal? Does a steepening pandemic curve and the prospect of months of lock down suggest that the water is safe? Can we print ourselves back to the highs despite companies shuttering nationwide? Honestly, I give up.

    • Well don’t give your hard earned lucky break to some money manager. They will screw it up.

    • Anonymous

      Last days price action reminds February, when market made one high after another while virus prepared to break out in Europe and the US.

  3. I’m sure H will let us know, but I’m guessing we’re in the throws of rebalancing flows at the moment in addition to trying to evaluate where Paul Tudor Jones “fed response nuclear bomb with a smiley face” winds up leaving us. Relentless buying. I expect we’ve also shifted from FOMO-top a couple weeks ago, to FOMO-bottom now.

  4. Price discovery is a very serious problem. I never thought the need for “happy talk” would reach the point where the Fed Chair would doing the morning talk shows. When Powell appears on “The View” it might be time to buy a “prepper” handbook.

  5. Could be the system in the process of abrogating it’s own rules is a rough equivalent to burning the house down to get mold and termite issues resolved ….

  6. From my perspective, we never even approached mean valuations – by any metric – and that completely discounts what will happen with forward earnings (or lack there of). By the end of Q2, we could be looking at P/E30 or 40. Am I wrong?

    • Pricing anything is very difficult establishing the NAV of Bond funds is an excellent example of how opaque pricing has become

    • For long periods valuation numbers are more for a thermometer showing the level of demand. High P/Es often reflect large buying pressure and less incentive to sell. Over longer periods, valuations can matter. Not so much in the short term.

  7. Thanks for your responses, folks.

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