US Unemployment Claims Pass A Staggering 6.6 Million

By Glenn Dyer | More Articles by Glenn Dyer

Now for the slowdown which could be the worst America has had outside the Great Depression as more than 6 million made their first jobless benefit claims last week – a record number in fact that followed an earlier record the week before.

Bank of America Merrill Lynch economists forecast that the US economy could fall by an annual 30% in the current June quarter after a 7% slide in the three months to March.

No one got close – the top market forecast for the number of first jobless claims in the US last week was 5.7 million. That was a massive 900,000 short of the 6.65 million figures announced by the US Department of Labor.

The average of the forecast was for a pessimistic rise of 3.7 million, more than the previous week’s now revised higher figure of 3.3 million. But no one was prepared for the massive record number when it was made public.

The news, however, was overtaken by a claim from President Trump that he was brokering a deal between Russia and Sadi Arabia to cut oil production by 10 million barrels a day (later he claimed 15 million). His claim in a tweet that the Saudi leader had spoken to Russian President Vladimir Putin was denied by a spokesman in a comment to the Russian Interfax newsagency who said there had been no phone call.

Still, that sent Wall Street higher and oil jumped by 30% at one stage before coming back as analysts realised that growing global economic slump could see demand for crude fall even more than forecast. Already one US shale fracker has collapsed (which is what Russia is trying to achieve).

In just the past two weeks alone, new claims have easily exceeded the peak number of people who collected benefits during the 2007-2009 recession.

At the end of the last recession, 6.6 million people drew benefits, a record at that time. Until last week, the worst week for unemployment filings was 695,000 in 1982. Now two unwanted weekly records in a row.

Florida, Georgia, Mississippi, and Nevada told people to stay home on Wednesday, raising to 39 the number of states with such orders. Economists say these orders (to maintain social distancing rules and prevent person to person infections) could see a huge economic contraction in the second quarter.

California had the highest number of claims with 878,727, followed by Pennsylvania and New York. The previous week’s level was revised up by 24,000 to 3,307 million.

The speed of the surge has been stunning – three weeks ago the number was just 281,000, a six month high. Now an all-time record and heading higher.

The speed of the worsening in the economy was best summed up by Michelle Meyer, Bank of America Merrill Lynch’s chief US economist who said in a report issued by the bank on Thursday forecasting the most severe recession in American history. “What usually takes months or quarters to happen in a recession is happening in a matter of weeks,”

Now economists predict 25 million Americans or more could lose their jobs in the next few months, at least temporarily. And it looks entirely possible, Macy’s the big department store chain (it owns Bloomingdale’s as well) and The Gap both closed their stores across America this week, putting 250,000 staffers – full time and casual – on the streets and joining the queues for first-time benefits.

Bank of America economists said the jobless rate could surge to as high as 15.6% in a few month’s time from 3.5% in February, far exceeding anything seen from 2007 to 2009.

The March jobless data out tonight will be irrelevant given the data was captured well before the widespread shutdowns started in the final 10 days of last month. The April figures, to be released in a month’s time, will be the first of many shockers.

The Bank of America Merrill Lynch economists said the approaching recession “appears to be deeper and more prolonged than we were led to believe just 14 days ago when we last updated our forecasts, not just in the US but globally as well.”

In fact, economists see America having the deepest recession on record with three consecutive quarterly contractions in GDP, “with the US economy shrinking 7% (annualised) in 1Q, 30% in 2Q and 1% in 3Q.” They do forecast a ‘pop’ in the final quarter with a return to positive growth if the social distancing measures are eased.

Ratings group Fitch has changed its forecast of 10 days ago for was a global slowdown, but with the economy managing to stay out of a recession. On Thursday it forecast a “deep global recession”…“The speed with which the coronavirus pandemic is evolving has necessitated another round of huge cuts to our [gross domestic product] forecasts,” Fitch said in a research report on Thursday.

Fitch says it now expects world economic activity to contract by 1.9% this year. On March 22, Fitch had projected global GDP growth of 1.3%.

The IMF issues its latest World Economic update in around a week with the Fund expected to now be predicting a recession for 2020, or most of it, especially for the US, and Europe.

In February manufacturing saw its outlook for new orders and employment plunged to levels not seen for 11 years – at the end of the GFC.

Car sales last month were so bad that some companies such as Fiat Chrysler, Ford, and GM issued quarterly sales data Wednesday and yesterday.

Ford said its sales, for example, were down 12.5% in the quarter which is bad enough, Hyundai, the South Korean giant was brave enough to issue its March sales figures – down more than 37%. Mercedes did likewise – a fall of 50%.

Walgreens, the big US drug store chain saw its same-store sales surge 26% in the first three weeks of March, then plunge by “mid-teens” in the final week of the month. That’s an experience a lot of other US retailers have shared.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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