6.6 million file for unemployment

Record jump points to a labor market ‘in a historic free fall’

For the second straight week, millions of new layoffs underscored the staggering toll the coronavirus pandemic is taking on America’s workers.

A record 6.65 million Americans filed first-time jobless claims last week, the Labor Department said Thursday, in a sign the sudden shutdown of a vast swath of U.S. commerce may be just starting to wreak havoc on the economy.

The total is double the previous week’s claims tally of 3.3 million, which was revised up by a modest 24,000. A stunning 10 million workers have sought unemployment benefits in just two weeks, exceeding the nearly 9 million who lost jobs from 2008 to 2010 amid the Great Recession.

Economists surveyed by Bloomberg estimated that 3.5 million Americans filed initial claims last week. The appli

cations represent the nation’s most accurate gauge of layoffs and furloughs.

Last week’s total is about tenfold the 695,000 weekly unemployment insurance claims in October 1982, which was the previous record before the dismal numbers of the past two weeks.

“The labor market is in a historic free fall,” says Nick Bunker, director of economic research for the hiring lab at Indeed, the online job search giant.

Accommodation and food services continued to lead the industries pummeled by layoffs, followed by health care and manufacturing, Labor said. More sectors are starting to be affected as a growing number of states cite retail and wholesale trade and construction.

Nichole Martens, 27, was laid off from a server job at the Mercury Cafe in Denver less than a week after residents were ordered to stay home to contain the spread of the virus. She filed a jobless claim, but Colorado’s unemployment website says the enhanced benefits included in the $2.2 trillion federal relief bill aren’t yet available.

Martens, who lives in a three-bedroom townhouse with two roommates, needed $1,100 to pay for rent, utilities, a phone bill and auto insurance.

“It’s frustrating because I’ve now been out of a job for three weeks,” she says. “I actually had to pull money from a 401(k) I had from five years ago.”

About 879,000 workers filed claims in California, a massive total that was largely expected after Gov. Gavin Newsom said about 1 million workers sought benefits in two weeks. Only 186,000 filed the week before.

There were 406,000 claims in Pennsylvania, 366,000 in New York, 311,000 in Michigan, 276,000 in Texas and 227,000 in Florida.

The historic numbers could mark just the initial wave of a punishing couple of months.

Gregory Daco, chief U.S. economist of Oxford Economics, expects a total 22 million job losses by May, pushing the historically low 3.5% unemployment rate to 12%, before the outbreak eases and the economy and labor market begin to revive. The Federal Reserve Bank of St. Louis predicts as many as 47 million layoffs and a mind-boggling 32% jobless rate, higher than the 25% rate during the Great Depression.

In contrast to other recessions, the job cuts are the result of a calculated halt to economic activity. Thirty-six states issued stay-at-home orders affecting 86% of Americans and shutting down restaurants, stores, hair salons, movie theaters and other nonessential businesses to stem the spread of the virus. More states could follow, intensifying layoffs in parts of the country now feeling more subdued effects.

Several factors probably fueled massive jobless claims last week, analysts say. Major corporations such as Marriott, GE and ZipRecruiter announced layoffs or furloughs that probably translated into a surge of claims.

Many states reported a flood of applications for benefits that jammed phone and online systems the previous week, pushing many of the claims into last week, Morgan Stanley said.

The $2.2 trillion stimulus bill, which Congress passed late last week, expanded eligibility for unemployment benefits to contractors and the self-employed. Many of those gig workers could have applied in anticipation of the bill passing, Bank of America says.

The abrupt closures of service businesses may mean a disproportionate share of layoffs took place the past couple of weeks. Nomura economist Lewis Alexander expects jobless claims to slow in coming weeks, partly because the stimulus forgives small-business loans for firms that hold on to their workers. Daco expects claims to ratchet even higher the next couple of weeks before easing as the outbreak ebbs and many businesses reopen by summer.

Friday’s jobs report for March is likely to reflect only a fraction of the job losses because the survey was taken the week ending March 14, before the bulk of the layoffs.

In a sign of the economy’s drastic reversal, the Labor Department had tallied a booming 273,000 job gains in February.