This week’s US jobless claims data has hit unprecedented numbers, jumping to 3.28 million. Initial expectations of 1-1.5 million, which was still a very high estimate, were blown out of the water.
In response to this news, the Dow Jones Industrial Average, which had been on a resurgence in the past 3 days, is now reversing once again. Over the past few days, the Dow had been able to pull itself out from its bottom of 18,000 points back up to 22,000 due to the passing of the massive $2 trillion coronavirus economic stimulus package in the Senate. But now it is reacting quickly with a flatline and looks to soon plunge again. The NASDAQ and S&P 500 are on similar trajectories.
These unemployment figures are the highest ever recorded since the statistic was started back in 1967. For reference, the previous highest figure was 700,000, a number that is 5 times smaller. Some of the more negative predictions are also suggesting that this figure could well enter 12-15 million before the end of the crisis.
The jobless claims data is a figure taken by the Department of Labor in the US. These claims refer to the number of people that have filed for unemployment benefits. It is one way to measure the economic state of the country- much like the Non-farm payroll report (NFP). Currently it is estimated that 1 in 3 Americans are unable to work, due to being quarantined. This peak comes as more and more states in the country enter lockdown. Both California and New York, the states with the largest number of cases, have declared a state of emergency, and most other states have issued warnings to stay home as much as possible, with the closure of public areas such as restaurants and cinemas.
The US now has 81,000 cases, out of the 500,000 in the world. This makes it now the country with the most number of cases, surpassing China and Italy.
The Trump administration has been heavily criticised for its response to the pandemic, with a slow initial response and reluctance to take the virus seriously by introducing stricter measures earlier. Two weeks ago President Trump announced a travel ban from Europe as a means of stopping the virus from entering the States, but the number of cases continued to increase. Many states have become overwhelmed by the number of increasing cases, as they have run out of testing kits, ventilators, and other crucial equipment. Medical staff have also struggled to manage the number of new patients due to the lack of sick beds. In fact, some hospitals have now begun trialing sharing one ventilator between two patients.
It was not until the Dow Jones had lost all its gains since Trump’s inauguration that he was forced to conclude as to the severity of the outbreak. But even now, he is pushing for the shutdown to be over by Easter- a deadline which shows he is more concerned about an economic recovery than an nationwide one.
Seemingly in response to Trump's statements, the Chairman of the Federal Reserve Jerome Powell gave a rare TV interview yesterday in which he expressed that it was important to listen to medical experts in terms of setting a timeline for when the States could reopen its borders and resume business as usual. While he stated that the Federal Reserve would spend as much as it takes to support the economy through this crisis, he also stated that it was paramount to contain the spread of the virus before resuming economic activity.
This jobs data makes it very clear: we are now in a global recession. Some analysts are already predicting it to be worse than the 2008 financial crisis.
The effects of a recession are long lasting. As people lose their jobs, they are unable to spend, forcing businesses to drop their employees, in a cycle that does not stop without government intervention. However, in the case of this crisis, no matter how much money the government pumps into the economy, people are still unable to spend. And that is what is so deadly about this particular recession. Even after the worst is over and businesses will be able to resume operating normally, the economic impacts will still be felt for years to come.
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