Thursday, March 26, 2020
Initial Jobless Claims for last week went up. They went up a lot. In fact, no week in U.S. history has ever seen a spike of 3 million claims from an already higher-than-average 281K the previous week. Lock-down orders and people vacating the streets of towns and cities across America in order to thwart the contagion of COVID-19, and the week’s new claims figure came in at 3.283 million. The past few years of excellent labor market health between 200K-225K new jobless claims are, to say the least, over.
Comparisons are impossible here. Back in March 2009 — the nadir of the mortgage-backed financial crisis that led to the Great Recession — new claims surged to 665K. A recession hitting the economy in the early years of the Reagan administration, back in October 1982, brought with it 695K initial jobless claims for one week. Today’s number dwarfs this by more than 4x.
Continuing Claims still reflect the previous week’s activity, where numbers had increased but had yet to really surge, and registered 1.803 million. This is still in robust employment territory, but these figures are set to spike in the weeks to come, as well.
Also, looking forward to monthly non-farm payrolls a week from tomorrow infer a bleak period on the horizon (though the sample for March unemployment, etc. is from before the bottom fell out). Thus, the new norm is not only social distancing, but absorbing record numbers of newly unemployed Americans.
The silver lining with all this is that our system was equipped to actually process 3.283 million jobless claims, especially with a coronavirus threat hamstringing efforts in unemployment claims offices everywhere. It also means relief is on the way for these millions of newly unemployed citizens, as Congress has yet to pass legislation that would bring $2 trillion in aid to our seized domestic economy. If/when this aid package is passed, it will hopefully add stimulus to help companies keep employees on their payrolls.
The third and final look at Q4 GDP remained steady at +2.1%, closing the book on the final quarter of 2019. Next week brings the end of Q1, after which we are very likely to see a negative headline on GDP. Should this continue another quarter or more, as most analysts expect, this would put the U.S. economy into recession — where we haven’t been in more than a decade.
Advance Trade in Goods for February came in a little light of expectations: -$59.9 billion was beneath the -$63 billion analysts were looking for. Wholesale was down 0.2% and Retail -0.3%, though again, we expect numbers to plummet here and elsewhere in reads to come next month and beyond.
Remarkably, pre-market futures are flat on this news, after rising roughly 14% so far this week. It’s been a good time for bargain shoppers looking to make fast gains, but it’s likely too early to call a bottom at this stage. That said, both the stock market and our unemployment payroll processing systems are showing resiliency in these trying times.
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