March 26, 2020
This report is the tip of the iceberg in terms of bad economic data as the coronavirus (COVID-19) closures cascade through the US economy.

What Happened

Initial weekly jobless claims soared by 3.00 million to 3.28 million for the week of March 21. The prior record was 695,000 back in October 1, 1982. On a state level, the biggest jumps were: Pennsylvania (378,900), Ohio (187,800), California (186,800), Texas (155,657), New Jersey (155,454), Massachusetts (147,995) and Michigan (129,300). Despite having roughly half of the US confirmed coronavirus cases, initial claims in New York rose to 80,300, not nearly as much as we would have expected.

Bottom Line

The speed of the spike in jobless claims is, of course, unparalleled in US history. This report is the tip of the iceberg in terms of bad economic data. Jobless claims, along with all other economic data, will continue to deteriorate as the coronavirus (COVID-19) closures cascade through the US economy.

That said, the speed and size of the fiscal and monetary responses are equally unprecedented. For comparison sake, the fiscal stimulus package for the Great Financial Crisis was $787 billion, or 5.5% of US gross domestic product (GDP). The just-passed fiscal stimulus package is $2.2 trillion or 9.3% of GDP. Similarly, on the monetary side, the Federal Reserve (Fed) initially began buying $700 billion in US Treasuries and mortgage-backed securities in the first six months of the Great Financial Crisis and upped the amount two more times over the course of the next two years. In 2020, the Fed announced $700 billion in bond buying, which it bought over the course of a few days, and then said it would make unlimited amounts of purchases. While these measures will not stave off a US recession, they will certainly help to blunt the downside.

Lastly, while the speed of the spike in jobless claims is certainly unnerving, it does offer the possibility that the downturn will be concentrated rather than being spread out for months over a year or longer, as occurs during the typical recession. Likewise, given the massive fiscal and monetary responses, it might hasten the recovery.

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