The increase in out-of-work Americans became a tsunami of household distress as municipalities and states took action to stop the spread of the coronavirus. All states – with the exception of Utah – reported significant numbers of workers filing for unemployment benefits as state and local authorities and businesses took the lead in slowing the virus by shutting down the normal flow of interaction.
On a national basis, first-time jobless claims were 267 standard deviations above post-crisis (2013-2020) norms. Put simply, we have never observed anything like this in the history of the American labor market.
We have never observed anything like this in the history of the American labor market.
The unprecedented shocks across the individual states will undoubtedly have a long-run impact on consumer behavior, shopping and working arrangements. If it was not clear before this morning’s data, aid to the states inside the federal government’s stimulus package is likely not to be sufficient to help address the needs of the unemployed and provide a backstop for states that are going to face severe budget stress.
This is clearly not a time to pursue orthodox austerity programs at the state level. While the usual suspects will be preaching the adoption of fiscal austerity, should states follow that policy path they will create economic conditions for an intensification of the current crisis.
We recognize that balanced budget amendments in some states are a real constraint; it’s also quite clear that the political economy of the United States is about to change. Making the same mistakes that followed the Great Depression and Great Recession is not an option.
That means that the states are going to have to engage in expansionary fiscal policy to help offset the shocks that are cascading across the economy. The initial claims report for the week ending March 21 is the first in what will be months of depression-like data.
The status quo ante is not going to return.
By the numbers
Below is our map that tracks the change in initial claims and the standard deviation change in claims. It shows three numbers below the state name:
- The cumulative number of initial unemployment claims since March 7, the week before the effect of shutdowns began in earnest.
- The latest increase (decrease) in the number of claims.
- The Z-score of the latest increase (decrease) in claims, which is the number of standard deviations above (below) the pre-coronavirus average.
The first number indicates the depth of the impact of the virus on the labor force.
The second number indicates the direction of the claims (a first derivative of sorts): Positive numbers indicate an increase in claims and labor market distress; positive numbers approaching zero indicate the deceleration in new filings; zero would suggest a plateauing of claims; and negative numbers are an indication that businesses and employees are returning to normal.
The third number shows the unprecedented degree of the shock, with Z-scores outside the range of plus-or-minus two standard deviations considered to be outside of normal occurrences.