As businesses shut down in the United States to slow the spread of the coronavirus and flatten the curve, a record-breaking number of American citizens filed for their first week of unemployment benefits last week.
The Department of Labor reported that the initial jobless claims increased drastically to a seasonally adjusted 3.28 million in the week ended March 21.
Previous records state that it is indeed the highest number of initial jobless claims in history since the Department of Labor started tracking the data in 1967. The previous high was 695,000 claims filed in the week ending October 2, 1982.
Daniel Zhao, Glassdoor senior economist wrote in his statement:
“Most historical comparisons of this scale are inadequate. The closest would be natural disasters like major hurricanes. However, as today’s report shows, the coronavirus outbreak is economically akin to a major hurricane occurring in every state around the country for weeks on end.”
Last week’s jump recorded a huge increase from a revised 282,000 claims in the prior week. Before the pandemic, initial claims had been playing in the low 200,000s each week, signaling a strong job market.
But during the last couple of weeks, the coronavirus crisis has forced most businesses to shut down immediately as the country tries to slow the spreading virus. For a lot of businesses that also indicates laying off or furloughing workers, at least for the meantime.
Authorities said it is the major difference between the coronavirus shock compared with past periods of economic distress, that it is sudden and affects virtually every industry and business model around the world.
Because of this, economists are expecting millions of job losses in the next coming weeks.
Heidi Shierholz, a former chief economist for the US Department of Labor who is now with the Economic Policy Institute, considers the surge in unemployment claims as just the tip of the iceberg.
“We estimate that by summer, 14 million workers will lose their jobs due to the coronavirus shock.”
Several economists now expect the US economy to fall into a recession in the second quarter, before preparing for a comeback later in the year after the spread of the virus subsides.
On the other hand, state labor departments across the country have struggled to deal with the sudden influx in claims for unemployment benefits. The New York Labor Department has added server capacity and hired more than 65 additional staff to process all the claims that are suddenly pouring in.
Just last week, Florida’s Department of Economic Opportunity said it targeted to hire 100 extra staff to help receive calls and guide people through the application process.
On Thursday morning, Treasury Secretary Steven Mnuchin downplayed last week’s surge in unemployment claims in an interview, calling the numbers “not relevant” because they pre-dated an economic relief bill passed by Congress on Wednesday.
The said bill includes support for workers, including checks from the government and expanded unemployment benefits.
In his statement, he added that businesses hopefully will be able to hire back a lot of these people.