The initial jobless claims report to be released Thursday (March 26) is predicted to show that due to the coronavirus pandemic, the largest number of Americans ever will have filed for unemployment benefits in such a short time, according to CNBC.
Different firms are predicting anywhere from 1 million to 4 million people filing for unemployment benefits, which would be much higher than the around 700,000 peak in 1982.
“It’s the tip of the iceberg, and they’re going to be ugly,” said Diane Swonk, chief economist at Grant Thornton. “It depends on the speed at which the claims were filed, and the next week will probably be worse.”
Swonk said she expects about 1 million to 2 million claims, which is a stark contrast to the 281,000 from a week before.
“It will be closely watched as a measure of how violent the shutdowns have been to the labor market,” said Jon Hill, fixed income strategist at BMO. “You have 15.8 million people working in leisure and hospitality, and you just shut down the industry.”
Barclays predicts 2 million, and Citigroup predicts 4 million, with the unemployment rate rising to as high as 10 percent from February’s 50-year low of 3.5 percent.
“There’s nothing to compare this to,” Swonk said. “It’s why we need extensions and shoring up of unemployment insurance and expanding it to a wider group of people. This will be the first shock and awe. … It’s terrifying, but it’s why nobody is going to tell Congress they did too much.”
Economists said the economy has entered a recession and it will hit especially hard in the second quarter, with estimated double-digit declines in GDP. The third quarter will be a little less impacted and things should start rebounding from the fourth, they said.
Congress is currently working on an economic stimulus bill to help.
“With the passage of these fiscal support bills, the attention is going to shift back to two things,” said Michael Gapen, Barclays chief U.S. economist. “Is it working to prevent large scale layoffs? And are the quarantine efforts working? If there are layoffs, but it doesn’t look draconian, if it looks in two to three weeks’ time most of the hot spots are under control, then it’s a better outlook. Then it’s a significant but transitory event for activity.”