In just over six weeks, 30.2 million Americans have joined the ranks of the unemployed, which implies a near real-time unemployment rate of 23.8%. For the week ending April 25, approximately 3.83 million individuals filed for first-time unemployment claims.
Once one accounts for those who have been denied unemployment or live in states that have not been able to process the rising claims of the unemployed, it’s almost certain that in less than two months the U.S. economy has smashed the Depression-era record of 23.6% unemployment. Continuing claims for the week ending April 18 increased to 17.99 million.
Lately there ain’t been much work
So far the U.S. federal government has put forward close to $3 trillion in aid to cushion the economic impact of the pandemic. With the extra $600 per week in unemployment insurance set to run out in July, initial claims casualties will continue to mount. It’s clear that should the relaunch of the U.S. economy not gain traction, another multi-trillion-dollar round of supplemental unemployment insurance will be needed to avoid a searing bout of evictions, foreclosures and individual bankruptcies.
Now the cards I’ve drawn’s a rough hand
A look at unemployment claims around the country by state strongly implies that there will be a surge in unemployment claims in two states: Texas and Florida. The collapse of the oil and energy complex in Texas will certainly cause a surge in claims, as well as in Florida, where widespread issues in processing so many claims will almost surely cause a jump in first-time claims over the next month. The only question here is will initial claims peak above or just below 40 million in the next month.
Lights out tonight, trouble in the heartland
Because it has been only six weeks, our estimation is that the macroeconomic data is noticeably understating the true damage inflicted by the pandemic. The first look at gross domestic product in the first quarter showed a 4.8% decline, which we think grossly understates the true damage to the economy during the final three weeks of March. We anticipate that growth in the current quarter will contract at nearly a 40% rate and are certain that the worst of the unemployment crisis still lies ahead. The distance between promise and reality for the working class of this economy has never been starker or more painful.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.
