Over the next few weeks, U.S. data flow will capture the impact of the supply, demand and financial shocks that are cascading throughout the economy. Policymakers should anticipate a wave of layoffs reflecting the stunning downturn in the economy.
The most important of the data is the evolution of the weekly initial jobless claims data that will reflect job losses throughout the economy. Our model of initial claims implies that should first-time jobless claims climb above the five-year average of 242,300, it would indicate that the business cycle has come to an end and the economy has entered recession.
Given the Treasury secretary’s comments that the unemployment rate could soar to 20%, there is a sense of urgency among policymakers to mitigate what could be the largest adverse impact on the labor market at least since 2008-9 or perhaps the Great Depression.
Initial claims for the week ending March 14 are set to increase to 220,000 from 211,000 during the previous week. Given the job destruction that we are witnessing, policymakers and investors should anticipate first-time claims to soar toward the five-year moving average of 242,300 in the next few weeks.
In Ohio over the past week, 45,000 people have applied for unemployment.
Across the country, a series of anecdotes point to an outsized increase in first-time claims. For example, in Ohio over the past week, 45,000 people have applied for unemployment, 15,000 in New Jersey, 10,000 in Rhode Island and 8,000 in Connecticut. The states of Kentucky, Oregon and New York all reported that their websites had crashed as individuals attempting to file for unemployment claims flooded their information systems.
The list of potential hits to the economy is long because of broad shutdowns across the service sector and manufacturing complex. For example, the American Hotel and Lodging Association has said that 45% of all hotel jobs have or will be eliminated. The U.S. Travel Association indicated that roughly 4.6 million jobs would be lost this year, while Marriott noted that it expected to let go of thousands of employees across its lodging empire this year.
Whatever the case, it is certain that the states are not prepared for a sudden onslaught of rising jobless claims and will need assistance from the federal government to cope with the increase in unemployment.