COVID-19
collides with
the U.S. economy 

Weekly initial unemployment claims roughly doubled from 3.3 million to 6.6 million, setting a record high for the second consecutive week. The two-week total of 10 million reflects the unprecedentedly abrupt deterioration in economic activity. For perspective, during the Great Recession it took roughly 29 weeks to reach a running total of 10 million initial claims. 

Job losses in March totaled 701,000, exceeding even some of the bleakest forecasts. That represented the worst performance in the labor market since March 2009 near the end of the Great Recession. It also ended an uninterrupted expansion in the labor market that began in October 2010. Unsurprisingly, the leisure and hospitality industry lost 459,000 jobs (mostly from bars and restaurants), roughly 65% of the total net loss. Employers eliminated 76,000 health and education jobs, predominantly from physicians’ offices and day care centers. Despite the overall severity, the figure likely understates the magnitude of job loss because the surveys behind the figures were conducted in early March before the widespread closure of businesses. April’s figure could reach into the tens of millions, a staggering total. 

The unemployment rate jumped to 4.4%, an increase of 90 basis points from February’s 3.5%. That represented the highest rate in roughly three years and the largest monthly increase in the rate since January 1975 toward the end of the oil crisis recession. Although we expect the unemployment rate to soar, it will likely understate the magnitude of deterioration in the labor market. The U.S. Bureau of Labor Statistics (BLS) only counts non-employed workers as unemployed when they are actively searching for a job. Many furloughed workers will likely intend to return to their jobs once the crisis abates and will not actively look for a new position, tempering the rise in the unemployment rate.

Sales of motor vehicles in March totaled roughly 11.7 million, a decline of roughly 5.5 million from February. That marks the lowest figure since June 2011. The figure surprised because lockdowns did not occur until the middle of the month in many states. We expect the figure to decline past the lows from both the Great Recession and the early 1980s when interest rates hit record-high levels. The figure bodes ill for broader retail sales, particularly for categories not available via e-commerce. We expect monthly sales for some goods and services to reach record-low levels.

Global economic growth likely came to an abrupt halt in the first quarter. If so, that would mark the first quarter of contraction in the global economy in 11 years, since the first quarter of 2009 at the end of the Great Recession. While countries around the world have addressed the COVID-19 outbreak on slightly different timelines, using somewhat different measures, the economic impact has generally proven consistent. Strong involuntary measures, as well as voluntary reductions that have been implemented to combat the coronavirus outbreak, have severely impaired economic activity.