The U.S. economy has transitioned from a state of shock to a feeling of acceptance, expecting that any piece of news emanating from the mouths of cable news talking heads or the digital pens of publications will be terrible, no good, and very bad. This is obvious in the financial markets, which has ostensibly priced every worst-case scenario into equities, from record joblessness to corporate hemorrhaging. Anyone with blood flowing through their veins anticipated a monumental initial jobless claims report for last week, so when the nation learned that it topped three million, it was not too surprising. But how long should we be numb to these gigantic and bearish numbers? Better yet, how will long the pain last?
Initial Jobless Claims – March 28
According to the Department of Labor, initial jobless claims came in at 6.648 million for the week ending March 28. This is a new record high. Continuing jobless claims surged from 1.784 million to 2.612 million. The four-week moving average, which removes the week-to-week volatility, rose from 1.004 million to 2.612 million.
For the week ending March 21, the initial jobless claims spiked to 3.283 million. The consensus was approximately 1.5 million. The reading was the highest on record, surpassing the previous two records of 695,000 and 665,000 that were set during the Great Recession and in October 1982, respectively.
The median estimate for this week’s jobless claims was 3.5 million. So, who got it right? Here were some of the predictions by the Wall Street juggernauts:
Bank of America: 5.5 million
Goldman Sachs: 5.5 million
Moody's: 4.5 million
Morgan Stanley: 4.45 million
HSBC: 4 million
Barclays: 3.75 million
The next big report is the March unemployment rate. The consensus is 3.8%, which would be up from the current 3.5%. Will it be higher or lower? Liberty Nation will have you covered!
A Crystal Ball
In recent weeks, the professionals have been releasing outlooks that project just how bad the employment situation intends to be in the near-term. Suffice it to say the robust labor market of a couple of months ago is gone – for now.
One of the first estimates came from St. Louis Federal Reserve Bank President James Bullard, who warned that the unemployment rate would spike to 30%, higher than it was during the Great Depression. This might take you aback at first, but Bullard assured CNBC viewers that this is only temporary and that the next quarter or two will boom due to “pent-up demand.”
“This number will be unparalleled, but don’t get discouraged,” Bullard said. “This is a special quarter, and once the virus goes away and if we play our cards right and keep everything intact, then everyone will go back to work and everything will be fine.”
Soon after, his central bank district released an official outlook that predicted 47 million job losses and a 32.1% unemployment rate. This topped Bullard’s prediction on the business news network.
Goldman Sachs is a little bit more optimistic. The Wall Street titan predicted unemployment to hit 15% during the second quarter of 2020 and the gross domestic product (GDP) to collapse by 34%, according to its “The Sudden Stop: A Deeper Trough, A Bigger Rebound” report.
The real unemployment rate, which considers workers who may have dropped out of the workforce or retired early, could be higher than the primary measurement of joblessness that dominates headlines.
The Waiting Game
The entire purpose of the Federal Reserve and the U.S. government’s actions are to cushion the blows being delivered by the Coronavirus pandemic. The central bank could double its projected balance sheet of $10 trillion and Washington could triple its deficit spending, and all the corridors of power would achieve is buying the American people time. That is the only thing 300 million Americans can do right now: Play the waiting game. Until a vaccine is developed or COVID-19 miraculous vanishes due to summer conditions, the public will need to either work from home or spend quality time with the family by re-watching The Sorrow and the Pity for the seventh time. Or drink another rum and Coca Cola.
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Read more from Andrew Moran.
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