HomeRecord number claim unemployment in US

Record number claim unemployment in US

By Eliman Dambell

Super Thursday was supposed to be the day where we saw what the Bank of England would do in response to the UK’s nationwide lock down. Although we did see potential moves suggested, it was the numbers we saw across the Atlantic which moved markets. In the US we saw a record 3.3 million people claim unemployment, which sets us up for a very bearish non-farms payroll number next week Friday.

The number was an increase of 3 million people the previous week,and comfortably trumps the previous high of close to 700,000 which was recorded in 1982. With numbers now starting to be released showing the sheer magnitude of the COVID-19 pandemic. We will slowly begin to see the crisis move away from financial markets, and start to impact the everyday person more and more. 

Financial markets traditionally respond instantly to news, and the impacts are felt in the moment. However for this to then translate into consumer markets, can often take some time, and that is what seems to be happening. So now we are seeing the true toll of the crisis, what more is to be expected?

As seen in the chart above the current crisis has meant that 6 times more people are left without work, than the last 2 economic crashes. The first coming at the end of the 1990s into the 2000s was the dotcom bubble bursting, which at the time led to 250 – 400k people claiming unemployment. 8 – 10 years after this came the Mortgage crisis, which started in the US, where banks and consumers were over borrowing, without the means to pay back loans. During this crisis, where many, especially in the financial sector were made unemployed the total amount of people said to be jobless was just over 500,000. 

More unemployment to come?

As next week will be the first week of April, we will see the release of the US non-farm payroll, which has been over the last few years, shown monthly increases in the amount of people in employment. This has led to a record low in unemployment rate, which based on the last shown figures was at 3.5% of the population. However based on the figures in respect to the jobless claims, we may see this number potentially in double digits when next Friday’s figures are finally released.

As the US now records the highest number of cases around the globe, overtaking China, with 85,000 cases, the next few months may see the US potentially enter its worst economic slump since maybe the great depression. This all depends on how long the situation continues to worsen. 

So far markets have still been relatively unresponsive to the unemployment news, with US index markets still rallying on the news of the $2 trillion stimulus package. Dow Jones has been one of the big gainers as a result, climbing as high as 20% in trading this week alone. However could these gains continue in upcoming weeks? Or will we see the bear market once again rise to prominence, with more sell offs and weakness to follow next week?

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