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The U.S. economy continues to shed jobs at a jaw-dropping pace, and there’s little sign the payroll losses will ease significantly anytime soon amid the spread of the coronavirus pandemic.
About 6.6 million Americans filed unemployment benefit claims for the first time last week, the Labor Department said Thursday, reflecting another surge in layoffs and an economy that has shut down in stomach-churning waves the past few weeks to minimize further contagion.
The previous week’s record 6.65 million jobless claims total was revised up by 219,000 to an all-time high of 6.86 million.
“Hideous,” Ian Shepherdson, chief economist of Pantheon Macroeconomics, said starkly of the new figures.
Economists had estimated that 5.5 million workers filed initial claims last week, according to a Bloomberg survey.
Forty-three states accounting for about 95% of the U.S. population are under stay-at-home orders, and nonessential businesses such as restaurants, stores, movie theaters and other outlets closed or sharply scaled back. Airlines and hotels have been deserted as Americans shun air and other travel.
A staggering 17 million or so Americans have sought unemployment benefits the past three weeks. The weekly figures dwarf the previous record of 695,000 weekly unemployment applications during a deep recession in October 1982.
Yet some laid-off workers don’t even qualify for unemployment benefits or receive only meager payments. Martha Rodriguez, 35, of Renton, Washington, lost her part-time job as a preschool instructor March 15 as businesses and schools shut down across the state. The same day, her husband, Rafael, was laid off from his part-time restaurant server job.
Martha, who typically worked 20 to 25 hours a week, said she was denied jobless benefits because she didn’t log enough hours, and Rafael receives just $126 a week in unemployment. He’s still working as a full-time food preparer, but his income isn’t enough to pay the $1,500 mortgage on their three-bedroom condo.
The couple, who have two children, have cut out the family breakfast and rely on a food bank for some meals. The bank agreed to defer their mortgage payments for three months, but Martha worries they’ll then owe a hefty sum. The family seeks state aid to pay their utility bills.
Martha said she plans to try to get a job at Costco or Target, among the few employers hiring, but she’ll have to juggle any position with home-schooling her kids.
“It’s really hard right now,” she said. “I don’t believe in the government anymore. It’s really frustrating to see what we can lose.”
Last week, 925,000 workers filed claims in California, just below the prior week’s 1 million. There were 388,000 claims in Georgia, three times the previous week’s total; 385,000 in Michigan; 345,000 in New York; and 314,000 in Texas.
“There are reasons to think this is only the beginning,” said economist Jesse Edgerton of JPMorgan Chase. In February, he said, there were nearly 50 million workers in industries directly affected by coronavirus-related shutdowns.
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“Its effects are also likely to spread well beyond these sectors,” he said.
Michelle Meyer, chief U.S. economist of Bank of America Merrill Lynch, said the national jobless claim numbers are likely to hover in the millions each of the next several weeks and could hit new records. That’s partly because more businesses are closing, at least temporarily, as they run short of cash or lose customers.
The $2.2 trillion stimulus package passed by Congress, known as the CARES Act, extends unemployment benefits up to 39 weeks and provides an additional $600 weekly federal supplement to state payouts averaging $300 to $400 a week, Meyer noted. Self-employed and contract workers are eligible to apply for the first time.
As a result, she said, a growing number of businesses may let workers go, knowing they’ll be covered financially, at least for a few months.
Meyer forecasts a total 15 million to 20 million job losses by May, pushing unemployment to 15% from the current 4.4%. Oxford Economics projects 26 million layoffs and a 16% jobless rate over the next two months.
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One consolation is that the claims totals don’t represent permanent layoffs only. Americans temporarily laid off, or furloughed – such as many restaurant workers – as well as many of those whose hours have been reduced are eligible for benefits. About half the 4 million people who reported in March that they had lost their jobs said they were temporarily laid off, Labor said last week.
Even some of the more traditional layoffs may not be permanent, said Gus Faucher, chief economist of PNC Financial Services Group. The stimulus package provides loans to small businesses of up to $10 million to cover payroll and other expenses. The portion of the loans funding eight weeks of costs is forgivable as long as the firms retain their workers or rehire those laid off. Many are likely to do so.
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