The Federal Reserve reportedly estimates that the coronavirus economic crisis could cost 47 million jobs and send the unemployment rate past 32%.
There are nearly 67 million Americans working in jobs that are at a high risk of layoffs, according to the analysis reported by CNBC.
The projections are even worse than St. Louis Fed President James Bullard’s much-publicized estimate of 30%, CNBC explained.
“These are very large numbers by historical standards, but this is a rather unique shock that is unlike any other experienced by the U.S. economy in the last 100 years,” St. Louis Fed economist Miquel Faria-e-Castro wrote in a research paper posted last week.
However, CNBC did offer a glimmer of hope and a caveat to what Faria-e-Castro calls “back-of-the-envelope” calculations: “They don’t account for workers who may drop out of the labor force, thus bringing down the headline unemployment rate, and they do not estimate the impact of recently passed government stimulus, which will extend unemployment benefits and subsidize companies for not cutting staff and extending unemployment benefits.”
Meanwhile, the number of Americans filing for unemployment benefits is forecast to set a record for the second straight week following 3.28 million in last week’s data, with the darkest prediction expecting the figure to almost double, Bloomberg reports.
The release, due Thursday for the week ended March 28, is now being looked to as a more timely barometer than the payrolls report because it shows how the coronavirus and the sudden economic stop implemented to contain it are reshaping the labor market. The median projection from economists surveyed by Bloomberg puts the figure at 3.5 million, slightly above the prior reading, which was already more than quadruple the previous record.
The claims report “will likely reflect both newly laid-off workers as well as states catching up on previously filed claims that had not yet been captured in the system due to overwhelming demand,” Wells Fargo economist Sam Bullard wrote in a note. He doesn’t have a projection for Thursday’s figure.
While Friday’s payroll figures are forecast to show a more-modest decline in jobs in March, they reflect data from earlier in the month before most virus-related shutdowns. So, the bigger job losses — and an unemployment rate potentially rising by several percentage points — are more likely to show up in the April data due in May.
The most dire prediction puts the figure at 6.5 million — the forecast of Thomas Costerg at Pictet Wealth Management — while Goldman Sachs Group Inc. estimates 5.25 million and Citigroup is at 4 million.
Claims have seem stark leaps as states have instituted social distancing recommendations and shelter-in-place orders. California Governor Gavin Newsom said last week that 1 million in his state have filed claims since March 13, while Colorado received 45,000 applications from Monday to Wednesday last week, more than double the prior week.
Meanwhile, the sheer volume of laid-off workers has created headaches for agencies that process the claims. Websites have crashed and phone lines have been clogged.
New York State’s Department of Labor website is instructing residents to file on specific days based on the first letter of their last name. “Due to enormous volume our systems are slow but we are serving each and every New Yorker,” a message on the page reads. “Please be patient.”
The new jobless claims figure will arrive days after President Donald Trump announced that guidance around social distancing — the virus containment measure that has also shut much business activity — would extend until at least April 30, amid rapidly rising infections and deaths across the nation. The president previously said he hoped that the economy would be “raring to go” by the Easter holiday.