US weekly jobless claims hit 2.4 million, bringing the 9-week total to nearly 39 million

• US jobless claims for the week ending May 16 totaled 2.4 million, the Labor Department said Thursday. That matched the median economist estimate of 2.4 million claims.
• That raises the nine-week total to nearly 39 million.
• It's the seventh week in a row in which claims have declined but remained historically elevated.
• "Each week of such high claims is a disaster in its own right," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

The number of Americans who have filed for unemployment insurance during the coronavirus pandemic has continued to grow.

US jobless claims totaled 2.4 million last week, the Labor Department said Thursday. That matched the median economist estimate of 2.4 million claims for the seven days that ended Saturday.

The figure raises the nine-week total to nearly 39 million. That's more than the roughly 37 million people that filed unemployment insurance claims during the entire Great Recession, which lasted for a year and a half.

"Each week of such high claims is a disaster in its own right," said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a Thursday note.

Still, unemployment filings fell from the prior week, which saw nearly 3 million jobless claims. The number of new filings has now declined for seven straight weeks.

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The weekly report is a crucial indicator of the US labor market, a key segment of the economy that's taken a hit amid the coronavirus pandemic. In April, the US economy lost a record 20.5 million jobs and saw the unemployment rate triple to 14.7% as business was halted and consumers were told to shelter in place to contain Covid-19.

While declining weekly jobless claims is a step in the right direction, economists are beginning to worry that the rate isn't falling fast enough, especially as states begin to reopen. At this pace, claims are unlikely to dip below 1 million per week until August, according to Shepherdson.

That contrasts with prior economist expectations that saw claims falling below the 1 million level in June or July. For context, even 1 million claims in one week is significantly more than the worst seven-day stretch of the great recession, when about 665,000 people filed for unemployment insurance.

Peak unemployment

The jobs reports for May and June are expected to show even further damage. While job losses may not be as severe, there are a slew of dismal forecasts for the peak unemployment rate, which could come in either the May or June nonfarm payrolls reports.

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This is because the biggest hit to US gross domestic product is expected in the second quarter, which includes the months of April through June. JPMorgan forecasts a 40% GDP slump and a 20% unemployment rate, roughly inline with other estimates from large banks and the Congressional Budget Office.

But other estimates show more damage — The Federal Reserve Bank of St. Louis in March projected that job losses would reach 47 million in the second quarter and lead to an unemployment rate of 32%.

The peak unemployment number in part depends on how the Bureau of Labor Statistics counts workers in the report. In April, the BLS again noted that many of the people marked employed but not at work for other reasons probably should've been counted as unemployed on temporary layoff — a change that would've increased the unemployment rate roughly 5 percentage points.

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There was also a huge drop in labor force participation in the April report which lowered the headline unemployment print. To be considered in the labor force, unemployed workers must be actively job searching, which many put on hold due to the coronavirus pandemic as businesses are closed, some people are still sheltering at home, and unemployment benefits have been expanded.

"Clearly there is much greater weakness in the labor market than the current reported unemployment rate of 14.7% suggests," wrote Michelle Meyer, US economist at Bank of America, in a Wednesday note.

There have also yet to be strong rebounds in hiring that would calm the labor market and lead to a falling unemployment rate.

"As such, the unemployment rate will likely remain elevated for a prolonged period—we forecast it to reach roughly 10% by year-end and 8% by the end of 2021," Meyer said.

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