Last week, initial claims for unemployment insurance jumped sharply for the week ending March 14, rising 70,000 to 281,000, the highest level since September 2017 and the largest weekly increase since 2012. The four-week average came in at 232,250 versus 215,750 in the prior week.
According to the Employment and Training Administration within the Department of Labor, “During the week ending March 14, the increase in initial claims are clearly attributable to impacts from the COVID-19 virus. A number of states specifically cited COVID-19 related layoffs, while many states reported increased layoffs in service-related industries broadly and in the accommodation and food services industries specifically, as well as in the transportation and warehousing industries, whether COVID-19 was identified directly or not.”
The range of estimates for initial claims for the upcoming report on Thursday, March 26 go as high as 4 million, with 1.5 million a reasonable prediction. That 1.5 million number would dwarf the worst weekly reports from the 2008-09 recession and the 1982-83 recession (see chart). This is likely to be just the tip of the iceberg when it comes to the effects of the COVID-19 outbreak distorting economic activity. Economic statistics over the next several months are likely to reflect these distortions.