Initial claims for unemployment insurance shattered records last week, climbing to 3.283 million from 282,000 the previous week and 4.7 times higher than the previous record. The coronavirus outbreak is a truly unprecedented event in American economic history. Unlike past economic slowdowns, the outbreak’s sudden onset is flash freezing the economy by forcing businesses to shut down and putting millions of American workers out of jobs.
The closest historical comparison would be natural disasters like major hurricanes, which lead to sudden spikes in unemployment claims, but even those comparisons are inadequate. The effects of hurricanes tend to be concentrated, affecting specific geographic regions and snapping back in the weeks after as communities recover. The coronavirus outbreak is akin to a major hurricane occurring in every state around the country for weeks on end.
Table: Coronavirus Outbreak Compared to Previous Natural Disasters
|Week Ending||Description||Claims Week Prior (000s)||Claims Week Of (000s)||WoW # Increase (000s)||WoW % Increase|
|3/14/20||2 Weeks Ago||211||282||71||34%|
Source: Department of Labor, Unemployment Insurance Weekly Claims Report
On a technical note, last week’s newly unemployed workers won’t show up in the March Jobs Report unemployment rate from the Bureau of Labor Statistics because the household survey reference period has already passed. We’ll have to wait until the April Jobs Report, scheduled for May 8, to see the full impact of this surge in unemployment claims. A very simple back-of-the-envelope estimate suggests that an additional 3.283 million unemployed workers could increase the unemployment rate from 3.5 percent—a 50-year low—to 5.5 percent—the highest rate since May 2015.
Next week’s UI claims report is likely to continue to show elevated claims as more cities and states require business to shut down and more workers are furloughed or laid off. A prolonged coronavirus-induced shutdown could hit businesses particularly hard and lead to a sustained increase in unemployment rates as businesses are slow to recover and rehire workers.
To speak with Daniel Zhao about today’s report or to discuss labor market trends, contact pr at Glassdoor dot com. For the latest economics and labor market updates, follow @danielbzhao on Twitter and subscribe to Glassdoor Economic Research.