Via Financial Times

More than 4m Americans filed for first time unemployment benefits last week, taking the total over the five weeks since coronavirus lockdowns began to a record 26m and more than erasing the number of jobs created by the US since the financial crisis.

The initial jobless claims total of 4.4m in the week ended April 18 was a decrease of 810,000 from the previous week, the labour department said on Thursday. That compared with economists’ expectations for 4.5m and marked the third week that claims declined, signalling a peak in lay-offs may have been reached.

The number of Americans who have successfully filed claims and been approved for unemployment insurance rose to 11 per cent of the entire workforce by April 11 — the highest on record.

California reported fewer claims in the last week but still processed 533,568 last week, to represent the largest number of claims, according to the preliminary state-level estimates that have not been seasonally adjusted.

At the same time, claims in Florida more than doubled to 505,137. Applications filed by people in Michigan, Kentucky and Rhode Island accounted for around a third of the total employment in those states in February, the month before the Covid-19 pandemic began acutely affecting the US labour market, said Ernie Tedeschie, a former US Treasury economist.

The tide of job losses continued to spread from services and retail industries to suppliers and manufacturing in the latest week.

If overall unemployment climbs by a total of 20m in April that would push the unemployment rate to about 16 per cent, and an additional 10m unemployed in May would push the rate up to 22 per cent, according to James Knightley, economist at ING.

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“Less than half of working age Americans will be earning a wage next month,” Mr Knightley added. “In an election year, this means that the call for politicians to reopen the economy is only going to get louder, irrespective of the health advice.”

The mounting joblessness has spurred Americans in more than a dozen states to protest stay at home orders that have closed businesses and resulted in furloughs and job losses even as the death toll from the pandemic has surpassed 42,000 in the US. 

The economic hardship stemming from the outbreak was further underscored by two other reports released on Thursday. A gauge of manufacturing and services, the IHS Markit flash composite PMI index, showed activity contracted further, falling to 27.4 in April, the lowest reading since records began in 2009.

At the same time, sales of newly constructed homes were hit by job losses and social distancing measures, dropping 15.4 per cent last month for their biggest fall since July 2013.

Several southern states have begun to take steps to reopen their economies even as President Donald Trump has sent mixed messages, on the one hand warning Georgia’s governor not to reboot the economy, while on the other hand defending those protesting lockdown measures.

The president on Wednesday signed an order banning green card applications for 60 days that he said would protect American jobs from the pandemic.

The House of Representatives is expected to vote on a $484bn stimulus package agreed to by the White House and Congressional leaders later on Thursday.

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The bill includes more than $300bn to replenish the depleted small business rescue fund, known as the pay cheque Protection Program. Of the new funds to replenish PPP, $60bn will be earmarked for small lenders and community-based financial institutions.

While the PPP is designed to support American jobs some have cautioned the pace at which people will return to work remains unclear.

“At least for some, the very generous unemployment benefits will make it a tough call on whether to come back to work if what they’ll receive is no different or even less than what the benefits are paying,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group, noting that in some states benefits can reach about $1000 per week.

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