Last week, America witnessed the largest spike in jobless claims in recorded history, as 3.28 million people filed for unemployment benefits amid mass layoffs associated with the lockdown measures put in place to contain the coronavirus.
Calling the figure a “record” understates the case.
That number recalibrated the y-axis – literally. We sailed into uncharted waters – and then right off the edge of the world. The figure was quadruple the old high mark.
Unfortunately, it’s going to get worse. Or at least according to some estimates.
The median estimate for jobless claims in the week ended March 28 is 3.5 million, larger than last week’s mind-boggling surge, but the distribution is highly amusing. Have a look:
(Bloomberg)
Way over there in the right tail is a projection from Banque Pictet & Cie. That forecast is 6.5 million.
In case you’re having trouble imagining what that would look like on a longer-term chart, I’ve taken the liberty of plotting it, along with estimates from Goldman, Citi and the median. Feast your eyes on this:
Now that is quite something.
For obvious reasons, the claims figure has become one of (if not the) most germane indicators for market participants. Indeed, you could easily argue that Thursday’s print will be far more important than the next day’s payrolls report.
On Monday, Maryland joined the list of states instituting a stay-at-home orders.
“Some people are still choosing to ignore executive orders and directives. Those individuals are endangering others”, Gov. Larry Hogan said, at a news conference. “Those ignoring the directives are in violation of state law”.
Some mumbling out there about going out as a political statement. A big middle finger to the coastal know-it-alls from the Trump base.
One not so enduring condition, lingering Ominously from the GFC, is the amount of vacancies, left behind from Mom & Pop businesses. In the tsunami wake of The Virus, it’s easy to ponder that few small businesses will go about business as usual, if they survive at all. Who will be able to take on the risky nature of economic instability, after the economic implosion?
If be surprised if the number is below 5 million and wouldn’t be surprised if it goes closer to 10 million for the week.
With the stimulus allowing small businesses to keep/bring employees on payroll, I expect the numbers to normalize (below 500k/wk).
The amount of time, effort, and brain damage required to apply for and be approved for a loan will result in many small business owners choosing to let go employees, instead.
If I were a Restaurant owner, and had the choice
1. to lay-off my staff and let them get gov’t. unemployment, or
2. Go deeper in debt with a new Government loan, and personally pay my employees to sit at home
Remember that many of these small businesses are forced to close to the public, and those that are not, are seeing drastic reduction in there businesses.
I think I’ll take choice no. 2
Here’s an interesting comparison – (from Bloomberg) “…in the 10 days between March 16 and March 25, some 1.55 million Canadians applied for jobless benefits, according to a senior government official with knowledge of the matter. That represents about 8% of the labor force.”
Last week’s US number is about 2% of the US labor force.