U.S. weekly jobless claims set second straight record as COVID-19 paralyzes economic activity

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WASHINGTON — The number of initial jobless claims in the United States soared to reach 6.65 million last week, doubling the record set a week earlier, as the economic impact of the COVID-19 pandemic ripples across the country.

In the week ending March 28, the number of people filing for U.S. unemployment benefits spiked by 3,341,000 to 6,648,000, the U.S. Bureau of Labor Statistics reported on Thursday.

The newly released number came after the figure spiked by 3 million to reach a record 3.3 million in the previous week.

To put it into perspective, the staggering figure is several times more than the initial jobless claims of 695,000 during the deep recession in October 1982, and 665,000 during the financial crisis in March 2009.

“Today’s initial jobless claims reflect the accelerating closure of commerce as Americans quickly embrace social distancing and face stay at home orders in a rapidly widening number of states,” said Michael Hicks, director of the Center for Business and Economic Research at Ball State University.

As the novel coronavirus continues to sweep across the country, some 40 states have ordered residents to stay at home unless necessary, including the heavily hit New York, New Jersey, Michigan, California, and Louisiana.

Non-essential businesses, such as theaters, museums, gyms, and shopping malls are largely shut down, and restaurants and bars are asked to avoid in-person dining, effectively paralyzing the consumption-driven U.S. economy.

The weekly jobless claims report noted “states continued to identify increases related to the services industries broadly, again led by accommodation and food services.”

However, state comments indicated a wider impact across industries. “Many states continued to cite the health care and social assistance, and manufacturing industries, while an increasing number of states identified the retail and wholesale trade and construction industries,” the bureau said.

Payroll data company Automatic Data Processing (ADP) reported on Wednesday that private companies in the United States slashed 27,000 jobs for the month ending March 12.

It was the first time the private payroll count had contracted in 10 years, and total job losses probably will total 10 million to 15 million, Mark Zandi, chief economist at Moody’s Analytics, was quoted by CNBC as saying.

In a recent study, Hicks and two researchers found that extreme social distancing occurring in the United States is more than sufficient to create a recession as mass layoffs cause unemployment to exceed 10.5 percent nationally with 45 days, with nearly 10.6 million job losses in total.

After 90 days of social distancing, they anticipate the unemployment rate to spike to 14.6 percent.

Constance Hunter, chief economist for major accounting firm KPMG LLP, said “our estimate is that 20 million jobs will be lost in the 2nd quarter!”

“This is an unprecedented loss of jobs. Both the speed and magnitude are unprecedented,” she said in a tweet.

To cushion the economic impact of the epidemic, the U.S. Congress last week approved a long-awaited 2-trillion-dollar relief package, which includes measures to stabilize the labor market, such as emergency loans for small businesses, business tax breaks, unemployment benefits expansion, and 1,000-dollar-plus direct payments for working Americans.

“Because of uncertainty about duration of restrictions, we need automatic triggers to keep policy support in place,” said Ryan Nunn, a fellow in Economics Studies at the Brookings Institution.

The United States has reported more than 230,000 confirmed COVID-19 cases and over 5,600 deaths as of Thursday afternoon, according to a data tracking tool developed by the Center for Systems Science and Engineering at Johns Hopkins University.

In a recent report, National Retail Federation Chief Economist Jack Kleinhenz argued that stopping the pandemic is first step to restoring sound economy.

“How quickly the country gets a handle on containing the virus will determine the degree of the impact on the economy and how soon businesses can reopen,” Kleinhenz said.

“We expect a severe contraction, and if the nation doesn’t get the virus under control the fallout will be worse,” he added.

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