Thursday’s Initial Jobless Claims for the week ending March 21st are going to be something we have never seen before. According to Bloomberg, the average estimate of economists surveyed is 1,500,000, with a high estimate of 4,000,000 and a low estimate of 360,000. For comparison, last week’s initial claims number was only 281,000, while the prior week was 211,000.
Service businesses have been forced to close their doors until the coronavirus pandemic is under control. These include cruise ships, restaurants, bars, nightclubs, gyms, retail stores, etc. In addition, many non-essential factories were forced to temporarily shut down. As a result, many of these businesses have had to layoff workers, sending possibly millions of people to file for unemployment benefits.
To put this week’s initial jobless claims number in historical perspective, the highest number of claims ever recorded during a single week was 695,000 in October of 1982. The second highest initial jobless claims number was during the height of the Great Financial Crisis in March 2009, at 665,000. This week’s number is expected to be roughly 4 times to 6 times those amounts!
This is one of the reasons Congress is on a mission to pass a stimulus bill which would give people cash in hand immediately. Many in Congress feel this is a necessity for the plan, as opposed to a payroll tax cut. This is also one of the main reasons President Trump is battling senior heath officials on “reopening” segments of the economy as soon as possible.
Thursday’s Initial Jobless Claims will serve as the new benchmark going forward. If initial jobless claims increase from Thursday forward, it’s going to be a long Q2. However, if the claims data starts to fall after this week’s number, it may be a sign that things are starting to improve.
Next Friday is the first Non-Farm Payrolls data since the country began shutting down. One has to wonder how high the unemployment rate could reach over the next few months as the coronavirus continues to plague the world. We’ll find that out next week. As for Initial Jobless Claims, don’t be surprised to see an extreme number. Keep in mind that the market is already pricing in 1,500,000!