The number of Americans filing for unemployment benefits surged by the most since 2012 to a two-and-a-half -year high last week, as companies in the services sectors laid off workers because of the coronavirus pandemic.
The darkening economic outlook was underscored by other data on Thursday that showed factory activity in the mid-Atlantic region plunged to its lowest level since 2012 in March, as the highly contagious virus disrupted the supply chain.
The coronavirus has crippled the transportation, leisure and hospitality industries, as well as the manufacturing sector. Economists are predicting a surge in job cuts and a recession by the second quarter.
Some believe a downturn is already underway. "This shouldn't come as any surprise as the government has sent people home from work to stop the virus spread," said Chris Rupkey, chief economist at MUFG in New York. "Spending and jobs in the economy won't come back until the virus counts of positive cases level out." Initial claims for state unemployment benefits jumped 70,000 to a seasonally adjusted 281,000 for the week ended March 14th, the highest level since September 2017, the Labor Department said on Thursday. Last week's increase was the largest since November 2012.
Economists polled by Reuters had forecast claims would increase to 220,000 in the latest week. Jobless claims are the most timely labor market indicator, and last week’s acceleration offered a glimpse of what lies ahead, with economists predicting sharp declines in employment in the months ahead and a surge in the unemployment rate, which is currently at 3.5 per cent. The Labor Department attributed the jump in claims to Covid-19, the respiratory illness caused by the coronavirus. “A number of states specifically cited Covid-19 related layoffs, while many states reported increased layoffs in service related industries broadly and in the accommodation and food services industries specifically, as well as in the transportation and warehousing industry, whether Covid-19 was identified directly or not,” it said. The coronavirus outbreak has forced millions of Americans to hunker down in their homes, with state and local governments closing schools, bars, restaurants and theaters in an escalation of “social distancing” policies aimed at containing the virus. - Reuters
