WASHINGTON (Reuters) – The novel coronavirus epidemic threatens to devastate the U.S. labor market. With the number of Americans applying for unemployment insurance slipping below estimated last week, indicates a second round of factory layoffs in industries not previously affected.
The weekly jobless claims survey by the Labor Department, the most important data on the health of the economy. Confirms economists’ argument that rebounding activity would take a while, even as firms in several states reopened after mid-March shutdowns as officials sought to stop the spread of COVID-19, the virus-induced respiratory disease.
Federal Reserve Chair Jerome Powell warned Wednesday of a long period of weak growth and stagnant incomes. The nation shed 20.5 million jobs in March, the steepest decline in payrolls since the 1930s Great Depression. Economic output fell at its sharpest rate since the Great Recession 2007-09 in the first quarter.
Unemployment filings are still devastating American families, according to Robert Frick, Navy Federal Credit Union corporate economist in Vienna, Virginia. The expected ‘second wave’ of layoffs may have begun, with further layoffs built on the original as middle management and support staff lose their jobs.
Initial claims for state unemployment benefits totaled 2.981 million for the week ended May 9, the government said. While it was down from the previous week’s 3.176 million and marked the sixth consecutive weekly decline, claims remain remarkable.
In the last week, economists polled by Reuters had predicted unemployment benefits totaling 2.5 million. Claims have steadily decreased since the week ended March 28 reached a record of 6.867 million.
The accumulation of data backlogs, which persisted as state unemployment offices became overloaded by the enormous influx of applications, kept claims strong in addition to low competition triggering shortages in businesses and workers not originally hit by coronavirus shutdowns, economists said.
They said some employees possibly filed more than one claim.
States continue to record layoffs in the hospitality and food sector, education, and social assistance sectors, among others. They announced dismissals in the professional, scientific, technological, and educational fields.
U.S. stocks traded lower as investors worried about the prospect of continued economic stagnation and revived concerns regarding Sino-U.S. relations as President Donald Trump’s threatened China’s position in the coronavirus pandemic. The dollar went higher against a currency basket. The United States Treasury prices went up.
The number of people who have filed unemployment compensation applications since mid-March, or more than one in five employees losing their jobs, has risen to 36.5 million. Claims for signs that businesses will rehire employees when firms reopen should be closely watched over the coming weeks.
While many parts of the country are poised to reopen, businesses and factories are well below capacity. Unadjusted reports for Florida and Georgia, which contributed to the relaxation of business controls, increased last week.
While some companies have received loans from a fiscal package of nearly $3 trillion, which could be partly forgiven if they use it for employee wages, other small businesses are expected to close indefinitely, leaving some of the 21.4 million people who lost their employment for a long time in March and April out of work.
Jobless claims pour cold water on the V-shaped recovery talks, according to New York MUFG chief economist Chris Rupkey. Economic growth may be driven by pent-up demand, but labor markets have dug a deeper pit that’s going to be difficult to crawl out of.
But the optimism is cautious. The claims study on Thursday also shows that the number of people seeking benefits rose from just 456,000 to a record 22.833 million for the week ending May 2. The so-called continuing claims data have a one-week lag and are well below the cumulative number of initial claims. Some economists see it as a better gauge of health in the labor market.
Economists say April marked the peak in job losses and expect at least a 15 million May payroll decline.
The Labor Department has announced that in the week of April 25, 3.4 million people had their Pandemic Unemployment Assistance (PUA) applications approved.
The PUA system protects contract employees and others who do not apply for normal unemployment benefits, who were put out of jobs due to COVID-19.