3.3 Million File for Unemployment, Shattering Record
“America may be witnessing just the beginning of the dire situation as economists anticipate the unemployment rate will continue to climb.”
US stock markets closed Thursday with their third consecutive day on the rise on hopes of a historic $2.2 trillion stimulus. The emergency economic relief isn’t the only historic number to hit the economy this week, however; the US Department of Labor announced a record 3.283 million Americans filed their first-time applications for unemployment benefits last week.
Just the Beginning
The number is significantly higher than the week prior, which saw 282,000 applications, according to The Associated Press. The previous all-time record was 695,000 in October of 1982, the Labor Department noted. Even adjusting for an increased US population, the percentage is over three times higher—0.99% last week compared to 0.29% in 1982.
America may be witnessing just the beginning of the dire situation as economists anticipate the unemployment rate will continue to climb. After several weeks of the COVID-19 shutdown, the rate has likely already risen from 3.5% in February to 5.5%, said Martha Gimbel, labor economist at Schmidt Futures.
Ellen Zentner, an economist at Morgan Stanley, informed her clients that the crisis could cost the economy 17 million jobs before May and to brace for a 12.8% unemployment in the second quarter. Heidi Shierholz, economist at the Economic Policy Institute, echoed the sentiment, tweeting “We estimate that by summer, 14 million workers will lost [sic] their jobs due to the coronavirus shock.”
The numbers have not been witnessed since the Great Depression, which lost 8.7 million jobs, NPR reported.
“We may well be in a recession,” said Federal Reserve Chairman Jerome Powell. “This is a unique situation. People are being asked to close their business, to stay home from work, and to not engage in certain economic activity, and so they are pulling back. At a certain point, we will get the virus under control and confidence will return.”
System Outages Plagued Applicants
The number of applicants last week was momentous, but it could have been even worse; many laid-off workers who tried to apply faced hurdles with online systems. Kim Boldrini-Sen, 41, worked as an acupuncturist in Connecticut and also lives and runs her own company in New York. She tried applying in both states, but managed to get nowhere.
In Connecticut, her application was seemingly not received by the online system and the New York site kept crashing. So she tried calling to apply by phone.
“I’ve called at all hours of the day,” Boldrini-Sen said. “That’s been my life for a week, and I still can’t get through to anyone.”
Other would-be applicants in other states have received pre-recorded messages that ask them to call back at another time,The Associated Press reported. Once unemployed workers who haven’t been able to successfully file for benefits manage to do so, the unemployment rate will continue to trend upward.
Additionally, as Congress prepares to pass a stimulus package that could include an additional $600 per week for unemployment benefits, more laid-off workers may be motivated to apply to take advantage of it.
The stock markets have already mostly accounted for the onslaught of unemployment filings in advance of the Labor Department report, thus limiting the effect now upon its release. Still, economists are failing to equate it to historical examples, and the prospect of the the scenario growing dimmer into the summer months could continue to weigh the markets down.
“Most historical comparisons of this scale are inadequate,” said Daniel Zhao, economist for Glassdoor. “The closest would be natural disasters like major hurricanes. However, as today’s report shows, the coronavirus outbreak is economically akin to a major hurricane occurring in every state around the country for weeks on end.”
The House of Representatives is expected to vote on the $2.2 trillion stimulus package on Friday, which could mean relief is on the horizon even if jobs are not.