Yesterday was arguably the most important day of the business week due to a new initial jobless claims report awaited in the United States. This is a weekly report that registers how many new people registered as unemployed during the week. However, this week’s reading was especially important, as the pandemic in the United States worsened dramatically. The unemployment data, then, is a reliable gauge as to how the coronavirus pandemic is affecting the country and its economy.
There was wild speculation what the report would turn out to be like. Throughout 2020, the reports have been consistently around 200-250, indicating that roughly 200,000 or so people become unemployed each week. Nevertheless, last week’s report showed a record 3 million new jobless claims and was the first such report since the pandemic in the United States became so serious. This week, a number anywhere from 2 million to 6 million was expected.
The report on jobless claims released yesterday was worse than even the most pessimistic forecast, at 6.64 million, more than twice the previous week’s number. The most affected sectors are food and hospitality, as restaurants and hotels are either on lockdown, or working with limited staff. They had to make the most layoffs.
Although the United States enjoyed an unemployment rate of around 3.5-4.5% in recent years, now the predictions are that it will climb to 15% for the second quarter of 2020. The US will likely experience the worst economic downturn since the aftermath of World War II, according to experts. The economy could lose as much as 38% in Q2 and the GDP is expected to drop by at least 7%.
Despite timely action by the Federal Reserve and a generous stimulus package by the government, difficult times are ahead for the world’s strongest economy and everyone else.
