Virus Depression: Jobless Claims Could Approach 2-Million Next Week
Initial jobless claims rose 281,00 this week, exceeding projections of 211,000 and sending yet another bearish signal through an already collapsing market. But economists say next week’s jobless number could exceed 1.5-million or more as the impacts of coronavirus social directives slam the job market.
Bars, restaurants, coffeeshops and retail sales outlets idled by COVID-19 social distancing protocols contributed the majority of the claims, fulfilling an expected rise in unemployment as the stock market collapse and projected drop in Gross Domestic Product begin impacting employer labor demand, with economists warning that a labor market collapse is already underway and could surpass 1.5-million or more in next week’s report.
Economists said their own tracking of data from individual states suggests claims could shoot up to at least 1.5 million this week. Data for the week ending March 21 will be published next Thursday.
The theoretical relationship between unemployment and domestic production follows a formula familiar to economists as Okun’s Law, which predicts that for every 2% decline in GDP, unemployment rises by 1% and vice-versa. With projections of a virus inflicted 10-15% reduction in GDP over the coming year, (versus a projected 2%-2.5% rise, pre-virus) simple math indicates an expected minimum direct pullback in rounded workforce numbers of 7% to 10%, meaning unemployment at 10% to 16% by the end of the coming year. That estimation doesn’t include continuing liquidity issues and ripple effects of a targeted 40-50% market correction and labor participation impacts.
Treasury Secretary Steven Mnuchin this week predicted that based on a projected -10% drop in GDP, unemployment could eventually reach 20% or higher as a result of pandemic impacts.
“State filings offices for Ohio, Pennsylvania, and Connecticut report claims filings this week are running six to 14 times higher than the same week last year,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
President Donald Trump has promised stimulus measures to help blunt the personal fallout of an economic reversal of fortune that has already erased all of the wealth creation and market valuation gains made during his Presidency in the span of three weeks, notably promising a $2,000 check to most American citizens based on income, to help assist with work stoppages because of the virus.