US Jobless Claims are off the Charts

You probably didn’t need today’s data release to tell you we’re already in a recession, but here it is. Weekly jobless claims, also known as filings for unemployment benefits, are the first hard piece of data to show it. We knew it would be in the millions, so while it’s not unexpected, it is unprecedented by an order of magnitude.

Since January 1967, the average level of jobless claims has been 350,335 every week.  Last week that number was 3,283,000, 9 times as much as the average.  And it’s 4.7 times as much as the biggest ever record beforehand, 695,000. How’s this chart for an eyeful?

Another way to look at it is to compare the percentage change of claims from week to week.  The charts below capture both that change and the level, and each dot is a single week going back to 1967.  The first chart is before today.  The second chart is after today, and you can see that we had to change the scale to plot it.

Until last week, the biggest weekly change on record was 43.9%. Last week it was 1064%, 24 times as much.

It’s hard to compare today’s data with anything from before, but here’s an analogy. Suppose you scratch someone else’s car while maneuvering in a parking lot – let’s equate that to a bad weekly report.  Then suppose you get into a fend-bender at 10 miles per hour – that’s a recession.  But now suppose you’re in a head-on collision at 60 miles per hour – that’s what today is, and it’s a whole different regime. And we can extend the analogy a little further, and that’s where the good news comes in. Today’s cars have such good protective systems that you can survive the head on collision and you can heal from most of the injuries. And it’s the same thing in the economy; we may have been in a terrible accident, but we have the protective systems of massive monetary and fiscal policy to prevent much injury (if it all works that is) and we will heal. It’s going to hurt, but we will heal. And most importantly remember that these jobless claims were deliberately driven up by the government, and that same government is very anxious to drive them back down again.

That’s why we continue to expect to see very dire data like this through the next few months, but it will be followed by a solid recovery later.

Next week there are four particularly important data releases. On Tuesday the Consumer Confidence Index is released, on Wednesday we get the ISM manufacturing index with the non-manufacturing index coming in on Friday. The ISM indexes are going to plummet since those surveys are finished late in the month of March. The Consumer Confidence survey is taken in the middle of the month, just as coronavirus fears were starting to ramp up, but we still expect to see a sharp downturn there.

Next Friday at 8:30 AM we get the most closely watched economic data release in the world, the U.S. employment report. The data for the employment report is gathered on the week of the 12th, a week prior to the jobless claims reported today, so we won’t see numbers as dramatic in next Friday’s report as we did today.  However, we know that large parts of the economy were already being shut down when the data was being gathered, so we can expect to see a very unpleasant report indeed.

And to end on a lighter note, as we mentioned we expected a huge number today. After the report, CNBC’s Rick Santelli said, “If you tell someone they’re going to have triplets, don’t be surprised if they come home with three babies”.

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