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Initial jobless claims for the week ended April 04 came in at 6,606,000, down 260,000 from the week before. Over 16.5 million Americans filed for unemployment benefits in the last three weeks, with the true number of those out of work likely even higher. The previous week’s record-breaking surge in unemployment benefit claims was revised higher from 6.648 to 6.867 million.

Key Takeaways

• Unemployment claims for the week ended April 04 were 6.606 million, higher than most estimates.
• Claims for the week before were revised higher to 6.867 million vs. just 3.3 million expected.
• Last week’s claims were the second-highest in the history of the US as the labor market collapses due to the impact of the coronavirus pandemic.

Initial jobless claims are a leading indicator of layoffs in the US. The US labor market, which has helped drive expansion for a record-breaking 11 years, has collapsed. Unemployment is now forecast at above 10% by the end of the year, even by conservative estimates. Insured unemployment for the week ended March 28 was 7.45 million. Expectations for claims in the week ended April 04 ranged between 4.5 million at the low end to 7 million at the high end, making the staggering figures higher than anticipated by most economists.

The following graphic shows the incredible upward trend in jobless claims:

A total of 16.78 million initial jobless claims have been filed over the past 3 weeks. That's 45.21% of the Great Recession's entire 18-month total of 37.118 million. pic.twitter.com/eBpify4Vnl

— Spencer Schiff (@SchiffSpencer) April 9, 2020

Coronavirus Impact

California was by far the worst hit, with nearly double the claims of the second-most affected state. California saw 925,000 new claims last week on top of 879,000 the week before. Georgia saw 388,000 claims, Michigan reported 385,000, and New York reported 345,000. It’s likely that many of these claims were actually initiated the week before and only processed last week due to the incredible backlog which has been crashing government websites nationwide as millions attempt to file for benefits.

A sharp economic downturn is now expected in Q2, with businesses closed across the country in an effort to curtail the spread of the deadly coronavirus which will almost certainly claim hundreds of thousands of lives in the US even with these containment protocols in place. The US is the global epicenter of the outbreak, and may be worse affected economically than other countries. Out of 1.496 million confirmed cases and 89,435 deaths confirmed worldwide, 432,000 of those cases are in the US with 14,808 American deaths so far.The March jobs report indicated that 700,000 jobs were cut in March, well above expectations, with record unemployment insurance claims.

Expert Outlook

UBS economist Seth Carpenter stated “In last week’s data, about a third of the rise reflected states where processing had not kept up with initial claims during the first weeks of the crisis (CA and NY especially). We think claims in those states still have further to rise.

 “The states that delayed their restrictions on activity—FL, GA, VA, NC, TX—might seem to pose an upside risk to our claims estimate,” Carpenter said. “However, new claims in NC, at 66 times their normal level over the past year, already have risen more than the national average (32x), as have those in VA (55x) and FL (52x). We do not expect further increases. However, we do estimate spikes in TX and GA.”

Market Reaction

Gold prices have spiked following the release of the massive surge in layoffs throughout the US. Spot gold last traded at $1,683.40/oz, up 1.12% with a high of $1,684.36/oz and a low of $1,645.08/oz. The Fed announcement of  a $3.2 trillion stimulus package is likely adding to the upward momentum in gold as traders seek to hedge against the threat of what many believe to be an inevitable inflation of the US dollar.

Initial jobless claims for the week ended April 04 came in at 6,606,000, down 260,000 from the week before. Over 16.5 million Americans filed for unemployment benefits in the last three weeks, with the true number of those out of work likely even higher. The previous week’s record-breaking surge in unemployment benefit claims was revised higher from 6.648 to 6.867 million.