A quick note about jobless claims
EDITOR'S NOTE
We will get a data point tomorrow that may go down in history as the single worst piece of economic data the U.S. has ever reported.
At 8:30 a.m. ET, the Labor Department releases its weekly tally of "jobless claims," i.e. new filings for unemployment insurance. I've always called this my "desert island" economic indicator. If I could only take one data point to tell me what's happening with the economy, this one would be it. Timely; a long track record; a strong record of signaling turning points in the business cycle.
Before the coronavirus hit, jobless claims were near historic lows. They've rarely ever dipped below 200,000 per week on a sustained basis (the data is seasonally adjusted). We were hovering around 215,000. But tomorrow, we could see that number hit two to three million. I've never seen any economic indicator report such a shocking change in magnitude so quickly. Even if it's "only" over a million new claims, that's breathtaking. We never got that high even in the depths of the Great Recession.
So, expect a ton of coverage, and a ton of terrifying headlines.
But...keep this in mind: for some employees, gaining access to these benefits--especially now that they've been beefed up by the "stimulus" bill--is better than being left on payrolls without actually getting paid.
Plus, the details of who can file for jobless benefits varies state by state, and for some states, like New Jersey, you can qualify for benefits even if your hours have just been reduced. That's another thing to keep in mind when we see this number skyrocket tomorrow--not all of these workers have actually lost their jobs.
Still, it's grim news all around. And it portends a surge in the unemployment rate to upwards of 6% and possibly higher in the months ahead. The hope is that the extremely tight labor market going into this pandemic will help make sure that employees are swiftly rehired once the panic clears.
The bulk of these newly unemployed workers will likely come from "small" businesses with fewer than 500 employees. On that note, the stimulus bill's provision for eight weeks of cash flow coverage for such companies--up to $350 billion in total spending--is promising. Companies that retain or rehire their workers will not have to repay those funds, according to reports.
So: support for companies to retain their workforces; expanded support for workers who are laid off. It's not perfect, but it's better than nothing.
See you at 1 p.m!
Kelly
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