More than 6.6 million Americans applied for unemployment benefits last week.
The record 6,648,000 seasonally adjusted claims figure comes after 3.3 million sought benefits two weeks ago. Claims have skyrocketed after large segments of the U.S. economy shut down in response to government orders aimed at combating the coronavirus pandemic.
Economists had expected claims to remain around 3 to 4 million but few had confidence about such forecasts in light of the rapidly changing economic conditions.
On an unadjusted basis, new claims came in at 5.8 million. Some economists will look to that as a more accurate read of the labor market because seasonal adjustments are less relevant in the unusual circumstances prevailing now.
Initial jobless claims are a proxy for layoffs. The extremely high levels recorded in the past two weeks are an indication that businesses have let go millions of workers as demand for goods and services, as well as the ability to provide them, has fallen dramatically due to fears of the virus and orders to stay at home.
The layoffs are widespread across the U.S., according to state-by-state data reported with a one week delay. All states reported increases in initial claims for the week ending March 21. The largest increases were in Pennsylvania, Ohio, Massachusetts, Texas, and California. The smallest increases were in the Virgin Islands, South Dakota, West Virginia, Vermont, and Wyoming.
“This kind of upending of the labor market in such a short time is unheard of,” said Heidi Shierholz, an economist at the Economic Policy Institute, a progressive think tank.
Some of last week’s jobless claims are likely delayed filings from the previous week, when state offices that handle unemployment benefits were overwhelmed by a surge of online and telephone claims. Yet many of those offices are still struggling to process all the claims they have received. As a result, applications for benefits will likely remain extraordinarily high over the coming weeks.
The magnitude of the layoffs has led many economists to envision as many as 20 million lost jobs by the end of April. That would be more than double the 8.7 million jobs lost during the Great Recession. The unemployment rate could spike to as high as 15% this month, above the previous record of 10.8% set during a deep recession in 1982.
Employers are slashing their payrolls to try to stay afloat because their revenue has collapsed, especially at restaurants, hotels, gyms, movie theaters and other venues that depend on face-to-face interaction. Auto sales have sunk, and factories have closed.
Roughly 90% of the U.S. population is now under stay-at-home orders, which have been imposed by most U.S. states. This trend has intensified pressure on businesses, most of which face rent, loans and other bills that must be paid.
Requests for jobless aid soared in all 50 states. In California, nearly 900,000 people sought benefits last week, almost four times the previous week’s figure, and equivalent to 5% of the state’s workforce.
In Michigan, jobless claims more than doubled last week to 311,000. In Florida, filings tripled to 227,000. In South Dakota, they quadrupled to 6,645.
How long the waves of layoffs last — an unknown — will be a key factor in determining the depth of the recession. Some companies are maintaining ties to laid-off workers, in hopes of rehiring them once the coronavirus outbreak passes. Relatively swift rehirings would help the economy rebound quickly. But if business shutdowns persist into the late summer or fall, many smaller businesses will likely go bankrupt. That would make it harder for workers to find jobs and would prolong the downturn.
The $2.2 trillion rescue package that was signed into law last week includes $350 billion in small business loans that can be forgiven if the companies use the money to retain or rehire workers. This provision could help limit future layoffs or lead some companies to recall employees back to work.
“The program is unprecedented, generous and ambitious and could be successful,” said Luke Tilley, chief economist at Wilmington Trust. “That said, it is challenging to roll out quickly.”
The economic rescue package also added $600 a week in jobless aid, on top of what recipients receive from their states. This will enable many lower-income workers to manage their expenses and even increase their purchasing power and support the economy.
–The Associated Press contributed to this report.