Via Wolf Street

This type of sudden, previously unimaginable fall-off-the-cliff data about the lockdown-economy is gut-wrenching.

By Wolf Richter for WOLF STREET:

Today, we got another dose of preliminary fall-off-the-cliff data about the lockdown economy: 6.648 million people filed initial unemployment claims in the week ended March 28, seasonally adjusted, about ten times the prior record set in 1982, according to the US Department of Labor this morning. This is on top of the upwardly revised 3.307 million that had filed during the week before.

State unemployment offices are inundated by the tsunami of claims, and there are reports that they’re behind in processing them and that what we’re seeing now is only the portion that they were able to process. And these are only the people that qualify to file for unemployment at this point.  So, as unreal as it looks, it’s just a foretaste. This is a close-up for the period since September last year:

States indicated in their comments that the breadth of the industries at the epicenter of the unemployment crisis has widened, with sharply rising claims now including:

  • Accommodation
  • Food services
  • Health care (areas not related to treating COVID-19 patients)
  • Social assistance
  • Manufacturing
  • Construction
  • Retail
  • Wholesale

The biggest states with the largest number of jobs are also the ones with the highest number of unemployment claims. And the states that kicked off their lockdowns early are now showing proportionally higher claims than states that just went into lockdown. The table below shows initial unemployment claims for the 10 states with the most claims, for the past two weeks combined (not seasonally adjusted):

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Top 10 States, Past 2 Weeks of Initial Claims 
1 California 1,065,060
2 Pennsylvania 783,331
3 Ohio 468,438
4 New York 446,402
5 Michigan 439,092
6 Texas 431,023
7 Massachusetts 329,514
8 New Jersey 321,330
9 Washington 317,410
10 Florida 301,313

But the lockdowns are still expanding. Florida has just joined the list of at least 34 states with some type of statewide stay-at-home orders, covering around 225 million people, over two-thirds of the US.

And these are the initial claims of Unemployment Insurance (UI). A week after they filed, and if they’re still unemployed, their claims are added to “insured unemployment.” Today’s claims that fall into this category will be added next week to the total “insured unemployment.”

Those who filed their initial claims through the week ended March 21 and are now considered the “insured unemployed” soared to 3.029 million. By next week, the level of insured unemployment, which will then include today’s initial claims of those who are still unemployed, will get painfully close to 10 million people.

With the stimulus package that was signed into law this week, the rules as to who can qualify for unemployment insurance have changed, and restrictions have been eased, and many more people will qualify going forward, including part-timers, free-lancers, and gig workers that have lost income (such as rideshare drivers with no one to drive around). But this expansion of Unemployment Insurance is mired down at the implementation level by the states. Once implemented, unemployment claims will spike further.

How that will work out and who exactly among those workers will be able to receive unemployment insurance remains to be seen. This is a large group of people. In the US economy, gig work has become a broad labor model that even big companies such as Uber and Lyft use as their foundation.

But there is more to it. The self-employed, the free-lancers and entrepreneurs also include well-paid tech workers, engineers, architects, and other professionals who work on a contract basis on various projects. When these projects get cut or put on hold, their work and pay dries up.

It also includes many others, such as comedians and musicians whose gigs were cancelled. It includes actors and singers and artists.  It includes Airbnb hosts with no guests.

There are many millions of people in the US who suddenly have seen their income streams dry up. Going forward, some of them will qualify under the new unemployment insurance rules to receive unemployment benefits (minimal as they are). But others won’t.

“Nobody has any taste for risk anymore. All of those exotic loan programs have ceased. All investors buying that paper are gone”: mortgage broker. ReadWeek Two: How COVID-19 Lockdowns Impact US Housing Market. Mortgages Give Clues: It Gets Uglier

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