More than 3.8m Americans filed new claims for unemployment benefits last week, bringing the six-week total since the start of the lockdowns to curb the coronavirus pandemic to more than 30m.
The number of initial jobless claims fell from 4.4m the previous week, the US labour department said on Thursday, against expectations of 3.5m.
The proportion of Americans who have successfully filed claims and been approved for unemployment insurance rose to a record 12.4 per cent of the entire workforce by April 18.
The commerce department said separately that household spending tumbled a worse-than expected 7.5 per cent in March from the previous month — the most severe decline since records began more than six decades ago.
The jobless and household spending numbers underscored the widespread collapse in the economy, as states try to curb the spread of the virus by implementing stay-at-home orders and companies lay off or furlough their workers.
“The coronavirus fear, the social distancing measures, the financial volatility and plummeting confidence have taken a severe toll on consumers’ ability and willingness to spend,” Gregory Draco, economist at Oxford Economics, said.
The growing ranks of unemployed came one day after the government said the economy had shrunk at an annualised 4.8 per cent in the first three months of the year, the sharpest fall since the end of 2008.
The Federal Reserve on Wednesday warned of “considerable risks to the economic outlook over the medium term” and pledged to take additional measures to support the economy if needed, having already deployed a more drastic response than it did during the financial crisis.
Kevin Hassett, a top White House economic adviser, this week said the jobless rate would rise to as much as 20 per cent by June, which would be the highest figure since the Great Depression nine decades ago.
12.4% Proportion of American workforce approved for unemployment insurance
The latest weekly jobless report comes as states debate the balance between the health and economic risks as they consider when to start reopening their economies.
Large areas of Florida, which saw 432,465 residents file jobless claims last week, will reopen from May 4. Other states, such as Georgia, have already started reopening despite not meeting the federal guidelines for when they should start to lift restrictions on residents.
Florida recorded the most number of claims in the week, eclipsing California, which had suffered greater job losses than all other states in previous weeks.
In the latest week, California had 328,042 claims, a sharp fall of more than 200,000 from the previous week. One of the few states to see a rise from the previous week was Georgia, where 264,818 residents filed jobless claims.
Pennsylvania, which bore the early brunt of the crisis after the governor moved early to implement a tough lockdown, had 131,282 claims, roughly one-third of the state’s peak four weeks earlier.
Illustrating the harsh jobs landscape, Boeing on Wednesday said it would cut its 160-000-strong workforce by 10 per cent. Cities across the country have also had to furlough their workers as the health crisis and collapse in economic activity have devastated municipal budgets.
The government will on May 9 release unemployment data for April, which will show the fullest picture of the number of Americans who have lost their jobs because of the crisis. The rising unemployment comes as Americans continue to report difficulty getting their jobless benefits, for reasons that range from problems with computer systems to the huge backlog resulting from the record number of claims.
Eugene Scalia, the labour secretary, on Wednesday acknowledged at an event with President Donald Trump that “the states have had some challenges with their computer systems”. He said the federal government was working with states to help resolve the problems.
Stay at home orders, job losses, decline in wages and a dour near-term outlook for the US economy prompted Americans to severely curtail spending in March. The 7.5 per cent decline in household spending compared with economists’ expectations for a 5 per cent drop. That came as incomes slid two per cent month-on-month in March from the previous month, the commerce department said. That compared with economists’ expectations for a 1.5 per cent drop.
“Given that the lockdowns didn’t really begin until the middle of the month — and that the high frequency card transaction data show a short burst of panic buying ahead of those lockdowns — we fear a 10 per cent month-on -month decline in real consumption in April,” Paul Ashworth, economist at Capital Economics, said.
Even after assuming modest rebounds in May and June, he anticipates consumption in the second quarter to decline at a 40 per cent annualised pace and expects “decline in second-quarter GDP to be around the same magnitude”.
