Layoffs are skyrocketing as the coronavirus upends the U.S. economy.
The number of Americans filing initial applications for unemployment benefits jumped nearly twelvefold to a record 3.28 million last week, the Labor Department said Thursday, offering the most vivid evidence yet of the outbreak’s widespread damage to the economy.
The total was well above the 1.5 million claims economists had forecast, according to the median estimate of those surveyed by Bloomberg.
The pandemic has set off the most abrupt near-shutdown of the economy in history. Many restaurants, shops, movie theaters, sports arenas and other gathering spots across the country suddenly closed their doors or scaled back service last week to contain the spread of the virus.
Layoffs continued in accommodation and food services, Labor said. Other industries hit hard included health care and social assistance, arts, entertainment and recreation, transportation and warehousing, and manufacturing industries, Labor said.
Economists’ estimates of the jobless claims total – a reliable gauge of layoffs across the country – varied widely, from as little as 1 million or so to upwards of 4 million.
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The actual total was on the higher side and so was expected to roil stocks, says Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. But the Dow Jones industrial average was up nearly 900 points in early afternoon trading Thursday in a sign that many investors had anticipated a dismal number and instead were pinning their hopes on the $2 trillion stimulus package passed by the Senate late Wednesday to cushion the outbreak’s economic blow. Many health officials expect the number of U.S. infections to begin waning in May or June as the weather warms.
The previous week’s jobless claims total was revised up marginally, to 282,000 from 281,000. The four-week average, which normally smooths out volatility, jumped by 765,750 to 998,250. To put the economy’s breathtaking turnabout in perspective, the 211,000 claims filed the week ending March 7 were near a half-century low.
Last week’s total is several times larger than the previous record tally of 695,000 unemployment insurance claims in October 1982. It also far surpasses the count of 517,000 two weeks after the 9/11 terrorist attacks, and 570,000 during the depths of the financial crisis in December 2008, Morgan Stanley said.
Unemployment claims jumped by 343,000 in Pennsylvania, 180,000 in Ohio, 146,000 in New Jersey, 140,000 in Massachusetts, 139,000 in Texas, 129,000 in California and 119,000 in Washington.
The concern is that “layoffs are just starting,” says economist Kathy Bostjancic of Oxford Economics.
Marriott has said it will furlough tens of thousands of employees. McMenamins, which operates brewpubs and hotels in the Northwest, is laying off 3,000 workers. Other job cuts include 145 drivers at the Port of Los Angeles, 360 by Oyo Hotels and 250 by Christie Lites, a stage lighting company, according to outplacement firm Challenger, Gray and Christmas.
Restaurants, hotels and transportation companies have been particularly hard hit, as eateries are shuttered or restricted to take out or pick up orders only, and Americans forgo travel to hunker down at home amid the spread of the virus.
Rusty Bucket Restaurant and Tavern filed notice that it would be laying off 975 workers in five states, including Indiana and Ohio where the coronavirus or a disaster declaration was specifically noted as a reason for the cuts.
“This is without a doubt, one of the most incredibly difficult times we have ever faced at Rusty Bucket Restaurant and Tavern,’’ founder and president Gary Callicoat said in the message. “The devastating impacts rippling through the restaurant community due to this situation cannot be overstated.’’
Embassy Suites, part of the Hilton family of hotels, said that it would be cutting the jobs of 120 workers in Arizona and Ohio. The virus outbreak was listed as a cause.
Casey Sexton of Middleton, N.H. said he lost his job as a restaurant server March 17, the day after New Hampshire governor Chris Sununu mandated the closing of restaurants and bars.
Sexton, 34, said he has been calling creditors to let them know he will be unable to pay any of his bills.
“You hear people say they live paycheck to paycheck,’’ he said. “I lived shift to shift. I relied on every single tip.
“I’m very concerned about how I am going to come out of all this when it ends. I’m not sure if that means I’m going to have to file for bankruptcy.’’
Some economists say the largest single wave of layoffs likely occurred last week as about half the states ordered the shutdown of restaurants and bars and scores of other businesses, including shops, movie theaters and hotels, closed or scaled back.
“We would likely expect there not to be nearly as many layoffs” in subsequent reports, says Barclays economist Jonathan Millar.
Ian Shepherdson of Pantheon Macroeconomics believes claims “will drop over the next few weeks” but remain highly elevated as more businesses cut jobs. He also notes that some states were overwhelmed by applications for benefits last week and many didn’t go through, pushing them into the following week.
California Governor Gavin Newsom said California has gotten 1 million applications in less than two weeks, butt the state reported just 186,000 for last week, signaling hundreds of thousands still to come.
The outbreak ultimately could trigger about 7.5 million layoffs, largely in the second quarter, as the 3.5% unemployment rate, a 50-year low, climbs above 10%, estimates .Mark Zandi, chief economist of Moody’s Analytics.
Oxford Economics says it foresees 15 million to 20 million job losses in coming weeks.
Forecasts differed for last week’s claims differed sharply because many states released partial-week reports to media outlets, leading economists to extrapolate weekly tallies for all the states.
Such state reports previewing the figures may not continue. In a recent letter, the Labor Department asked the states to no longer report their totals until Labor releases its national figure on Thursday.
“The data from these reports is monitored closely by policymakers and financial markets to determine appropriate actions in light of fast-changing economic conditions,” Gay Gilbert, the administrator of Labor Department’s Office of Employment, wrote in the letter.
In a statement to USA TODAY, Labor said, “The public must be able to trust in the accuracy, integrity and completeness of the data being reported. Premature release of partial data may give the public an inaccurate picture.”
Contributing: Charisse Jones and Josh Peter