Goldman Sachs warns coronavirus pandemic led to 'unprecedented surge' in jobless claims this week
The level Goldman estimates for the week through March 21 would blow past the previous record of 695,000 set in 1982
Filings for U.S. unemployment benefits likely surged to a record 2.25 million this week as the coronavirus pandemic forces businesses across the country to shut down, according to a Goldman Sachs analyst note.
Jobless claims in the U.S. are already climbing -- on Thursday, the Labor Department said the number of Americans filing applications for jobless benefits jumped to 281,000 for the week ending March 14, the highest level since June 2017 -- but are expected to skyrocket in coming weeks as American life comes to a grinding halt.
The level Goldman estimates for the week through March 21 would blow past the previous record of 695,000 set in 1982.
CORONAVIRUS LAYOFFS SKYROCKET, CATCHING NEARLY HALF OF STATE UNEMPLOYMENT PROGRAMS UNPREPARED
“Many U.S. states have reported unprecedented surges in jobless claims this week,” economist David Choi wrote in a note to clients late Thursday. “While it is possible that claims were front-loaded to start off the week -- implying a slower pace of claims for the week as a whole -- or that our sample is biased toward states with a larger increase in claims, even the most conservative assumptions suggest that initial jobless claims are likely to total over 1 million.”
The prediction is based on anecdotal data from 20 states, which reported a spike in unemployment claims this week. California, which typically receives 2,000 applications per day, was flooded with 80,000 on Tuesday, Gov. Gavin Newsom told The Sacramento Bee. The New York State Department of Labor was inundated with 159,000 calls before noon Thursday, nearly 16 times its normal daily volume.
In Ohio, the Department of Job and Family Services said Friday that filings jumped to 139,468 from Sunday through Thursday from 4,815 a week earlier.
WHAT TRIGGERS AN ECONOMIC RECESSION?
State unemployment insurance systems across the U.S. are ill-equipped to handle the expected deluge of claims from workers who are getting laid off at an unprecedented pace. Despite the historically long, 11-year economic expansion, 22 states’ unemployment trust funds are unprepared to pay out enough in unemployment benefits in the case of a recession, according to Labor Department data.
The grim estimate comes amid a New York Times report that the Trump administration is asking state labor officials to delay releasing the precise number of unemployment claims they are receiving as the virus, and fear of an impending recession that could rival the 2008 financial crisis, roils the financial markets.
In an email obtained by the Times, the Labor Department asked state officials to do nothing more than “provide information using generalities to describe claims levels (very high, large increase)” until the agency releases the total number of national claims next Thursday.