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An additional 2.1 million Americans filed for unemployment benefits last week, bringing the total number of people who have sought unemployment since March to 40 million. Claims have been in the millions for ten weeks in a row as the coronavirus pandemic continues to collapse the once-flourishing US labor market. The Labor Department report released on Thursday morning reveals that 21 million people are receiving benefits on an ongoing basis.

Key Takeaways

• Initial jobless claims rose 2.1 million last week following a gain of 2.4 million the week before.
• Claims have fallen continuously since peaking at 6.8 million in late March, which was the highest increase on record by a large margin.
• While the majority of workers applying for claims are furloughed and will be able to return to work, many will be permanently laid off or out of work due to their employer going out of business.

Layoffs have collapsed the US labor market, with major retailers and manufacturers shutting their doors or making large staff cuts. Boeing announced yesterday that it was laying off 12,000 workers following no orders for new aircraft whatsoever coming in during April, as well as some cancellations for existing orders. A quarter of retailers have reported that they don’t know if their business will survive until the busy holiday season.

While states are now slowly reopening around the country, many businesses must operate at significantly reduced capacity to accommodate pandemic containment procedures, resulting in less business and also less need for staff.  Industries like services, manufacturing, and in-store retail have suffered, while e-commerce numbers have risen since the outbreak began.

For the first time since the crisis began, *continuing* jobless claims (as opposed to initial ) fell from the prior week.

A meaningful number of people are coming off the unemployment roles. Hopefully this is sustained. https://t.co/mB8O0cC8I1 pic.twitter.com/PVu8WbR2dj

— Joe Weisenthal (@TheStalwart) May 28, 2020

Summer camps and seasonal work like concert and festival rigging have been canceled, and demand for childcare services has plummeted, all of which has lead to increased initial jobless claims with millions of Americans out of work every week. New York governor Andrew Cuomo has expressed his concern that some companies will take the coronavirus pandemic as an excuse to accept benefits packages but trim their workforce regardless.

Expert Outlook

The influx of claims since the beginning of the crisis in mid-March has led to overwhelmed government systems, making data collection a challenge. Elizabeth Pancotti  of the National Bureau of Economic Research stated “When we think about what to do when benefits expire, it would be helpful to know how many people are actually getting them,” adding that the reports from Labor Department can only paint an “incomplete picture.”

Market Reaction

Gold has seen strong upward momentum in the markets today following the joint release of several reports highlighting the severity of the coronavirus pandemic and its impact on the US economy. Spot gold last traded at $1,722.27.oz, up 0.74% with a high of $1,726.80/oz and a low of $1,707.82/oz. The reports of further layoffs, a plunge in durable goods orders, and 5% contraction in Q1 GDP were all somewhat expected. Nevertheless, the news has lead to a risk-off sentiment in the financial markets, strengthening the use case for gold as a safe haven asset.