US jobs collapse shocks even the worst pessimists

The grim toll from the COVID-19 pandemic is starting to break America.

As it’s confirmed that there are now at least 236,000 cases of COVID-19 in the world-leading US, while at least 5,600 people have died, the rising economic cost was revealed with a record 6.65 million people filed for unemployment claims last week.

The number was far worse than forecasters expected. The average forecast from the market was 3.7 million, which itself would have been a new record. California had the highest number of claims with 878,727, followed by Pennsylvania and New York.

It means that in just the past two weeks alone, new unemployment claims far outstripped the peak number of people who collected benefits during the 2007-2009 recession. At the end of the last recession, 6.6 million people drew benefits, a record at that time.

The US Department of Labor also revised last week’s record figure up by 24,000 to 3.3 million.

The pace of unemployment is unlikely to slow: on Wednesday, Florida, all of Georgia, Mississippi and Nevada joined dozens of other states in telling people to stay home on Wednesday, raising to 39 the number of states with such orders.

Department store chain Macy’s (owner of Bloomingdale) and The Gap both closed their stores across America, putting 250,000 staff — full time and casual — on the streets to join the queues for benefits.

Bank of America Merrill Lynch chief US economist Michelle Meyer, said in a report on Thursday that America faced the most severe recession in its history: “What usually takes months or quarters to happen in a recession is happening in a matter of weeks.”

The bank’s economists say the jobless rate could surge to as high as 15.6% in a few months’ time from 3.5% in February, driven by three consecutive quarterly contractions in GDP, “with the US economy shrinking 7% (annualised) in 1Q, 30% in 2Q and 1% in 3Q”.

A prolonged US recession will drag down global growth, hampering the economic recovery of other countries like Australia that hope to have overcome the virus and begun reopening their economies later in the year. 

Ratings group Fitch was forecasting a global slowdown 10 days ago, but on Thursday changed that forecast to “deep global recession”. It now expects world economic activity to decline by 1.9% this year, compared to a March 22 forecast of global GDP growth of 1.3%.

Jobless numbers weren’t the only shocking news out of America. US manufacturing saw its outlook for new orders and employment plunge to levels not seen for 11 years.

March car sales were so bad that some companies such as Fiat Chrysler, Ford and GM have issued quarterly, rather than monthly, sales data in the last 48 hours. Ford’s sales, for example, were down 12.5% in the quarter. Hyundai, the South Korean giant, was brave enough to issue monthly sales figures, which were down more than 37% in March. Mercedes’ were down 50%.

Desperate to distract from the disastrous jobs data, Trump tried the old bait-and-switch tactic of raising another issue, claiming in an early morning tweet that there could be an oil deal between Saudi Arabia and Russia that could soon see an agreement to cut global production by 10-15 million barrels a day.

That sent the oil price soaring 30%. “My friend MBS” (that’s the murderous ruler of Saudi Arabia, noted for ongoing war crimes in Yemen and having journalists dismembered) had talked to Russia’s (equally murderous) President Putin, Trump claimed.

Except Trump was, as usual, lying. There was no such conversation, Putin’s spokesman said.

Trump resides permanently in a fantasy world. For ten million Americans and counting, reality is all too grim.