WASHINGTON — Accelerating layoffs brought the number of Americans applying for jobless benefits to a record 10 million in just the last two weeks, an unprecedented level that pointed toward double-digit unemployment and prompted calls for another tranche of federal rescue aid to avoid a second Great Depression.
The U.S. Labor Department reported Thursday that 6.6 million people filed for initial unemployment claims in the week ending March 28, double the record 3.3 million from the previous week and far more than what most economists were expecting.
That was just the latest evidence of how fast and how far the economic damage from the coronavirus is spreading across the country. Separate reports this week showed car sales in the U.S. plunged 39% in March, manufacturing fell back into recession, and trade showed early signs of faltering.
It was the weekly unemployment benefit filings, however, that left economists stunned, eliciting words such as “tectonic,” “cataclysmic,” “eye-watering.”
“Today’s jobs report underscores the historic devastation that is happening in America’s labor market,” said Josh Lipsky, director of global business and economics policy at the nonpartisan Atlantic Council think tank. “To put it bluntly, the U.S. economy went from full speed to full stop, and millions of workers were not wearing seat belts.”
The U.S. jobless rate in February was a 50-year low of 3.5%, with the economy having generated 273,000 net new jobs for the second straight month. But that’s all history now.
The government Friday will issue its first monthly employment report, for March, since COVID-19 cases began to mushroom across the country. It’s expected to capture just a glimpse of the fallout as both the jobless rate and employment numbers were based on surveys conducted in the second week of the month — before the wave of lockdowns that prompted mass business closings and layoffs across the nation.
Analysts expect the government to report a jobless rate of about 4% for March, even though real unemployment, based on extrapolations from jobless benefit applications, is at least 10%. With layoffs expected to keep rising in coming weeks, to a total of as much as 20 million — or one out of every seven workers in the nation — unemployment could hit 15% or higher this spring.
Friday’s report is also likely to show a loss of just 50,000 to 100,000 jobs in March, ending what had been a decadelong period of uninterrupted employment growth. Employers have added jobs for 113 straight months, with job growth last year averaging about 175,000 a month.
Weekly unemployment claims data are a more timely indicator of changes in the labor market. And those numbers are expected to keep growing by the millions in the next few weeks.
In the week ending March 28, California led the way with more than 878,000 people applying for benefits, followed by Pennsylvania, New York and Michigan.
Based on such numbers and the historical relationship between jobless claims and unemployment, the real jobless rate for March is closer to 17%, according to estimates by William Rodgers III, former chief economist at the Labor Department, and Andrew Stettner, a senior fellow at the Century Foundation.
“If the (lockdown and stay-at-home) guidelines continue as they are or get tighter,” Rodgers said, “next month you’ll see the dramatic rise in the unemployment rate.”
Wednesday’s report on industrial activity, which covers manufactured production as well as delivery of raw materials and other supplies necessary to keep plants humming, came just a few days after a survey on consumer confidence also showed an ominous drop.
The manufacturing report, by the Institute for Supply Management based on its survey of factory purchasing managers, was sobering, especially for the industrial heartland. The nation had only recently begun to recover from a manufacturing slump that lasted most of last year.
Although manufacturing today accounts for only about 10% of economic activity, the industrial sector remains important, with its higher-than-average pay and proportionately larger spillover effects on other parts of the economy.
A significant downturn in manufacturing also could have major political consequences because it would strike a bundle of swing states that are expected to play a decisive role in November’s presidential and congressional elections.
Among those states are Pennsylvania, Ohio, Michigan and Wisconsin, with small but potentially significant effects on Iowa, North Carolina and Minnesota.
In Wisconsin, which has the nation’s second highest concentration of manufacturing employment, 30% of state residents said they or someone in their family lost a job or were laid off due to the coronavirus. And about half of the respondents said the same thing about reduced work hours, according to a March 29 poll by Marquette University Law School.
In Wisconsin and the nation overall, manufacturing employment grew solidly in 2017 and 2018, but was essentially flat last year. And it now looks like factory jobs will fall along with much of the rest of the nation’s employment.
“The coronavirus has significantly disrupted global supply chains and caused auto manufacturers to shutter plants in the U.S.,” wrote Ryan Sweet of Moody’s Analytics.
“Add to that Boeing’s decision to halt production of the 737 MAX in January, a global recession, and a strong U.S. dollar, and manufacturing is going to struggle,” he said.
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