background image

U.S. initial jobless claims surge to a new record at 6648K

Macro

Christopher Dembik

Head of Macro Analysis

Summary:  U.S. initial jobless claims surge again in the week ending March 28. However, it is unlikely that the forthcoming March NFP report will reflect very well labor market disruption as the Labor Department's surveys have been done before most of the containment measures went into effect.


U.S. initial jobless claims surge again at 6648K vs 3700K estimate for the week ending March 28. This is a new unfortunate record. A bad figure was anticipated, as a large number of Americans were unable to fill unemployment claims in the previous week due to high demand and as the impact of the COVID-19 is becoming more visible. But this is worse than anyone could have ever imagined. To put into context how large these figures are: 1) the previous week, jobless claims peaked at 3283K, which was already in the high range estimate; 2) before that, the record high was set at 695K in 1982 when the United States went through recession due to the Fed’s contractionary monetary policy. The current level of unemployment claims in California (878K) alone surpass the record of 1982.

In the below chart, we see the evolution in America’s four largest economies (California, New York, Texas, Florida) which represent one third of US GDP. Total jobless claims skyrocket at 1747K. The sharp jump in jobless claims in California, which was one of the first major states to order all residents to stay home, certainly gives an idea of what is coming next in other states that implemented containment measures at a later stage. A wave of much uglier labor market data is about to start.

02_CDK_2

Note that, because of the timing of the Labor Department’s surveys that take place during the week that contains the 12th day of the month (which means before the impact of the COVID-19 was visible), the March Employment Report that is due tomorrow at 12:30 GMT is unlikely to show the bulk of layoffs that has happened over the past month. Simply stated, the March NFP report has zero value to assess labor market disruption related to the coronavirus. Investors will need to wait for the April Employment Report to be released on May 8.

Our baseline forecast (chart below):

If we make the assumption that NET job losses reach 10M in March, which might not be far from reality, the “real” number of unemployed people as percentage of the total labor force is probably close to 9-10% in March. Such a monthly increase would be unprecedented in modern history.

02_CDK_3

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.