Estimates for the latest US jobless claims data had ranged from one million up to four million. Even the lowest figure would have been the biggest ever by a factor of 50%.
As it turned out, the pessimists were right.
More than 3 million Americans filed a claim for unemployment benefits last week in the US. And they aren’t even the whole story of the surge in joblessness triggered by the coronavirus pandemic.
According to a weekly report from the US Labor Department, 3.28 million people claimed unemployment insurance, “the highest level of seasonally adjusted initial claims in the history of the seasonally adjusted series”. The previous high was 695,000 in October of 1982.
The previous week’s figure was 282,000, and 215,00 for the same week a year ago. A series that has always been measured on a scale of hundreds of thousands is now in the millions.
It wasn’t the only record set by the US in the last 24 hours. It has now overtaken China to become the country with the largest number of confirmed coronavirus cases in the world, with 81,943 Americans testing positive, ahead of the 81,285 cases reported by China, with the biggest outbreaks in New York, New Jersey and California. 1173 Americans have died so far.
The unemployment data also seriously understates the rise in the number of jobless. It excludes gig workers, independent contractors and the self-employed who don’t qualify for US unemployment benefits. The US$2 trillion emergency aid package that’s still making its way through Congress will broaden eligibility, but still leave hundreds of thousands of people outside this very flimsy safety net.
One of the reasons for this is that, because of changes in our economies (not just in the US but across the West and even in some wealthier developing countries like China) as well as the nature of the crisis, this is the first recession that started in the service sector and not in the traditional areas of manufacturing, construction/real estate, technology or finance.
This time around it is the huge number of gig workers (self-employed, food delivery people, website designers, retail assistants, labour hire casuals, Uber and Lyft drivers) who have felt the pain first because they’ve been sacrificed as the price of containing COVID-19’s spread.
Australia is no different. The US numbers point to what is unfolding here right now in our services sectors as governments shutter whole industries, with the impacts set to start showing up in next month’s jobless figures.
Our jobs support is better designed and more generous than the US, but the gig economy means people will still fall through the cracks. The UK — where the Tory government continues to demonstrate how far ahead of the Morrison government it is in economic thinking — last night extended its wage subsidy package to freelancers and the self-employed.
The record number of claims in the US will be just the start: next week is likely to see numbers surge by several million. Today’s numbers don’t include a million Californians who have made claims this week. The March labour force report on Friday next week will be miserable.
For Wall Street, it was good news, with the Dow Jones surging 6% overnight. Why good? Investors saw the unwanted record as putting pressure on the Democrat-controlled House of Representatives to approve the US$2 trillion package tonight and start pumping hundreds of billions of dollars into airlines, hotels, tourist business, carmakers, defence companies, retailers and others.
This will be on top of the US Federal Reserve’s colossal efforts to keep lending going for US companies, including purchasing corporate bonds.
At US$2 trillion, the package going through Congress is unlikely to be enough, but it still dwarfs the efforts of Morrison and co, who seem content to allow Australia’s small and medium business sector to burn to the ground and let our unemployment safety net catch the victims.