The number of Americans filing claims for unemployment benefits shot to a record of more than 3 million last week as strict measures to contain the coronavirus pandemic ground the country to a sudden halt, unleashing a wave of layoffs that likely brought an end to the longest employment boom in U.S. history.
Initial claims for unemployment benefits rose to 3.28 million in the latest week from a revised 282,000 the previous week, eclipsing the previous record of 695,000 set in 1982, the U.S. Labor Department said on Thursday. Economists polled by Reuters had forecast claims would rise to 1 million, but estimates had ranged to as high as 4 million.
The jobless blowout was announced shortly after Federal Reserve Chairman Jerome Powell said on NBC’s Today Show that the U.S. “may well be in recession” but progress in controlling the spread of the coronavirus will dictate when the economy can fully reopen. His remarks were an unusual acknowledgement by a Fed chair that the economy may be contracting even before data confirms it.
JAMES KNIGHTLEY, CHIEF INTERNATIONAL ECONOMIST, ING (EMAIL NOTE TO CLIENTS)
“Even in the knowledge that tens of thousands of businesses shuttered in response to Covid-19 containment measures, the 3.3 million spike in initial claims is still shocking.”
“This is obviously the result of the city and state lockdowns that have been spreading across the US as a response to try to contain Covid-19. Pennsylvania reported the highest number of claims (378,900), with Ohio reporting 187,800, Illinois 114,700, California 186,800 and New York 80,300.
“The latter two states seem low given anecdotal evidence, which may indeed reflect issues with websites crashing and phone lines jammed and a general reluctance of people to stand in line with lots of other claimants in the current environment. We would expect numbers from these states and others to climb in coming weeks, particularly with the number of lockdowns increasing across the US.”
QUINCY KROSBY, CHIEF MARKET STRATEGIST, PRUDENTIAL FINANCIAL, NEWARK, NEW JERSEY
“This is a record breaking number. The number has sent chills through the markets. If these numbers continue for three or four weeks, there will be demand for more fiscal support. Even monetary support from the Federal Reserve which has moved over to the fiscal area in a number of ways that’s different from their usual focus on monetary policy.”
“The question had been how much has the market discounted in terms of a weaker than expected data? If the market can stabilize after the open, it will suggest that market participants expect a larger stimulus package or fiscal package from the government than the $2 trillion that has been agreed upon. It will have to be augmented.”
STAN SHIPLEY, MACRO RESEARCH ANALYST AT EVERCORE ISI
“Jobless claims were terrible. I think the market thought it would be terrible so they got their number here.”
“You’ll probably get a bad number – maybe not as bad – next week and April payrolls will be terrible. We’re still several months away from this turning higher.
SUBADRA RAJAPPA, HEAD OF U.S. RATES STRATEGY, SOCIETE GENERALE, NEW YORK
“This is to be expected. At this point it’s really hard to put a lot of weight into one number that was well-anticipated to be higher than expected. It’s quite impressive the unemployment authorities were able to tally up these numbers.”
“This is the beginning of the really bad numbers we’re going to see for the foreseeable months. The bond market was rallying before, so we haven’t seen much of a reaction following the data.”
IAN LYNGEN, HEAD OF U.S. RATES STRATEGY, BMO CAPITAL, NEW YORK
“The previous record was 695,000 in October 1982. The move was greater than the consensus of 1.7 million, however the error bands were particularly high given all the reporting risks. Suffice it to say, this is a troubling number but given the non-farm payrolls survey week has already passed, the full ramifications will not be until the May release of the April employment report.
“A quick back-of-the-envelope calculation shows that this past week alone translates into a 2 percent increase in the unemployment Rate. Ten states saw 100,000 or larger increases in claims; Pennsylvania had the most with 363,000. Treasuries were trading higher ahead of the release with 10- and 30-year yields down 9 bp and 11 bp, respectively. Since the data, we have seen a very modest selloff - which suggests investors were concerned about an even greater spike.”
JUSTIN HOOGENDOORN, HEAD OF FIXED INCOME STRATEGY AND ANALYTICS, PIPER SANDLER, CHICAGO
“It takes your breath away. Obviously the immediate reaction to something like that is going to be fear, especially when (jobless claims) were just about double what economists were even predicting, thinking dire scenarios.”
“ It will be a short-term bounce for Treasuries. It’s tough on any type of risk position. But I think people very quickly will say ‘yeah that’s what we orchestrated. That’s why both fiscally and monetarily we’re throwing trillions of dollars at this’. Although the reality of the situation kind of hits you here, really the key question is not the level of severity, which we know is something the country has never gone through before, but the length of severity and that’s what we don’t know. “
NAEEM ASLAM, CHIEF MARKET ANALYST, AVATRADE, LONDON
“When we look at the gold price the momentum to the upside was already building up since the start of pretty much the European session, and these numbers have pushed the gold price even higher because the masses know that these numbers are going to continue to get worse from here. From our perspective, we’re taking the numbers with a pinch of salt to the extent that Donald Trump, one thing he is doing really well is that he is assuring markets, he’s providing some confidence in a time that we really need it that he is determined to open (industries) as soon as possible…The way that the numbers are falling now, the rebound is going to be pretty much in the same extent as well, and that is where the focus should be.”
EDWARD MOYA, SENIOR MARKET STRATEGIST, OANDA, NEW YORK
“Many people were expecting a record jobless claims number just based on initial state-by-state reports. And it is, but ultimately no one is really surprised at this number. The dollar is sort of all over the place. Some people were expecting as high as 5 million, so we came in the middle of the range of expectations. But it’s going to get worse.”
CHARALAMBOS PISSOUROS, SENIOR MARKET ANALYST, JFD GROUP, CYPRUS
“The key points for me are that he said the Fed is not going to run out of ammunition and that the committee still has policy room for more action.
“By saying that he raises the question - will they go for negative interest rates? Because the Fed has not been in favor of negative rates. Now it remains to be seen whether the virus situation will lead to the exception of cutting into negative territory.”
“I agree with his comment that the economic activity could resume in the second half of the year, but with a condition. We need to have a vaccine ready for distribution and the slowdown of the whole situation for economic activity to rebound again.
“The whole situation has not reached a peak yet and we cannot say that the situation has slowed, in my opinion.”
“And I also agree with the fact that there is nothing fundamentally wrong with the economy. Before the outbreak, the U.S. economy was performing pretty well.”