The number of Americans making jobless claims surged again last week, meaning roughly 26m people made unemployment claims in a five-week period that has seen coronavirus wipe out all of the jobs created since the financial crisis.
New jobless claims hit 4.4m last week, the US Labor Department said today. This was a slight fall from last week’s figure of 5.2m but would have been unheard of before the coronavirus crisis. The highest monthly jobless claims figure during the 2008-9 crash was around 800,000.
The surge in new claims for unemployment benefits highlights the huge impact coronavirus is having on the world’s biggest economy. The International Monetary Fund (IMF) has said US GDP could shrink by six per cent in 2020.
The US now has more than half a million cases of coronavirus. Almost 28,000 people have died. However, there have been some signs that the number of new cases is peaking.
Coronavirus will continue to wreak havoc on the economy, however. JP Morgan analyst Daniel Silver said the US unemployment rate could hit 20 per cent.
He said most of the job losses so far had likely come in lower-wage industries such as transport, food services, entertainment and accommodation.
However, Silver said: “We expect job losses to spread much more widely to white-collar occupations… as a broader recession reverberates through the economy.”
US faces lockdown dilemma
There have been a number of protests against coronavirus lockdown measures across the US in recent days, mostly in traditionally Republican areas.
US President Donald Trump has fanned some of the resentment over lockdowns and their economic effects. However, with coronavirus still spreading, reopening the economy could be highly dangerous and puts the President in a difficult position in an election year.
The data today showed that Colorado and New York, the state most affected by coronavirus, suffered the biggest increase in jobless claims last week with more than 50,000 each.
The highest insured unemployment rates – the percentage of people receiving jobless benefits – were in Michigan (17.4 per cent), Rhode Island (15 per cent), and Nevada (13.7 per cent).
Stock markets took little notice of the surge in unemployment in the world’s largest economy, however.
The lack of movement following economic data has been a trend during the coronavirus crisis, with investors choosing to focus on stimulus measures. Congress is today expected to pass a $480bn (£390bn) stimulus bill that will take its total cash injection to around $3 trillion.
Wall Street’s S&P 500 and Nasdaq indices were set to open higher. The Dow Jones was scheduled for a small drop, according to futures prices.
Neil Birrell, chief investment officer at Premier Miton Investors, said: ‘It is difficult to know just how bad an employment number, or any other economic data point needs to be to hurt markets.
“As bad as it sounds, another 4.42m initial jobless claims in the US is not it, whilst the government and the [US Federal Reserve] are standing firm. Policy vs. reality, for now policy is winning.”