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Initial jobless claims preview: Expect another big increase

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Labor market dynamics set off by the coronavirus crisis are moving faster than economists can capture with our linear models inside what is a profoundly nonlinear, disease-induced change in the economy.

For the week ending March 28, expect initial jobless claims to show an increase of 3.1 million.

Humility and not hubris is the order of the day for what will be another turbulent week and for the foreseeable future as economic data capture the depression-like shocks that are cascading throughout the economy.

We expect that for the week ending March 28, initial jobless claims will show an increase of 3.1 million when the figures are announced on Thursday. This would imply a two-week total of 6.4 million, in lieu of any upside revisions to the week ending March 21 linked to the inability of the states to accurately process the tsunami of claims for that week.

This implies that the domestic unemployment rate will jump by 4.5 percentage points, to at least 8%, by the time we get to look at the May employment report during the first week of June. We now expect the unemployment rate to jump to 10.5% by mid to late summer.

Turmoil in financial markets began around February 24, well before the March 12 reference week that captures the U.S. March Bureau of Labor Statistics estimate of employment, and we think it was sufficient to cause firms to pull back on hiring. Our forecast for the March employment report, to be announced Friday, is a 65,000 loss in top-line employment and an increase to 3.7% in the unemployment rate.

We expect a 0.2% increase in average hourly earnings on the month and a 3% increase on a year-ago basis. Average hourly earnings peaked at 3.5% on a year-ago basis in February 2019. It will be a number of years before American workers enjoy that type of nominal increase.

The Friday employment report will not capture the increase in initial claims of 3.3 million for the week ending March 21, and it will play no role in the upcoming March jobs estimate.

But the shadow of what has happened and what is to occur inside American labor dynamics will cast a long pall over the economy and drive the policy relief process inside Washington for the remainder of this era.

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About Joseph Brusuelas

@JoeBrusuelas

Joe Brusuelas, “chief economist to the middle market,” is the preeminent voice championing issues and policies facing midsize companies in the United States and around the world. An award-winning economist, Brusuelas has more than 20 years’ experience analyzing U.S. monetary policy, labor markets, fiscal policy, international finance, economic indicators and the condition of the U.S. consumer.

A member of the Wall Street Journal’s forecasting panel and the UCLA Anderson School of Management's Board of Directors, Brusuelas regularly briefs members of Congress and other senior officials regarding the impacts of federal policy on the middle market and the factors by which middle market executives make business decisions. He also frequently offers his insights on the U.S., Canadian and global economies in the financial media. In 2020, he was named one of the 100 most influential economists by Richtopia. In December 2023, Brusuelas and the economics team were recognized on Bloomberg's list of Best Bond Forecasters after correctly predicting where the benchmark Treasury would end the year.

Before joining RSM in 2014, Brusuelas spent four years as a senior economist at Bloomberg L.P. and the Bloomberg Briefs newsletter group, where he co-founded the award-winning Bloomberg Economic Brief. Earlier in his career, he was a director at Moody's Analytics covering the U.S. and global economies for the Dismal Scientist website. He also served as chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal.

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