As municipalities and states take action to stop the spread of the coronavirus — and as businesses begin to shed labor – we expect the number of claims for unemployment benefits to mount.
Because of the scope and scale of the human tragedy before us, we are not going to make a point forecast on the claims data this week. But it’s safe to say that, based on our analysis, the increase is likely to be in the millions when the figures are released on Thursday.
The increase is likely to be in the millions when figures for initial jobless claims are released on Thursday.
It will require a sustained policy response by both the fiscal and monetary authorities to mitigate the loss of wages and income over the next few months until social distancing ends and individuals and firms can return to work.
Local and state officials have taken the lead — after a slow start at the Federal level — in slowing the spread by enforcing social distancing. In the first week of this action, jobless claims have jumped above the cyclical five-year moving average.
When the new figures are announced, they will jump above the cyclical high of 665,000 set during the recovery from the Great Recession and the all-time high of 695,000 set in October 1982. The damage will be greatest in areas with a dependence on service-sector employment – such as Nevada and Washington, D.C. — as well as Washington state and Massachusetts, where the disease is prevalent. As the disease spreads to other states, policymakers and firm owners should anticipate a further increase in social distancing, increased jobless claims and rising unemployment rates.
State by state
Here we use the standard deviation of the increase in claims relative to the changes in the time series from January 2010 to February 2020 to illustrate the magnitude of last week’s increase and the extreme increases in the next several weeks to come.
Seven states/regions had significant increases in job claims (on a non-seasonally adjusted basis):
1. Nevada, with a 9.7 standard deviation jump in claims
2. Washington, 8.2
3. Washington D.C., 4.8
4. California, 1.8
5. Massachusetts, 1.5
6. Maryland, 1.2
7. Nebraska, 1.0
Source: Bureau of Labor Statistics, Bloomberg, RSM US
