The collapse of the U.S. economy because of COVID-19 is becoming more evident by the day, the latest sign a record 6.7% decline in the leading economic indicators in March.
The closely followed index measuring the nation’s economic health tracks 10 indicators, most of which showed sharp deterioration last month. New jobless claims posted a record surge, for instance, and stock prices plummeted.
The steep drop in the 60-year-old index shattered the prior record of a 3.4% decline in October 2008, when a financial panic plunged the U.S. into its deepest recession since World War Two.
The decline is all but certain to be even worse in April — probably a lot worse. The economy only started shutting down in the second half of March as the states and federal government ramped up efforts to slow the spread of the coronavirus.
What happened: The leading economic index showed deterioration in the economy across the board, the Conference Board said Friday.
The board has predicted the economy will shrink by as much as 7% in 2020 in light of all the damage caused by the viral outbreak and frantic efforts to contain it. Already a record 20 million American have applied for unemployment benefits.
Big picture: The U.S. economy is hurting badly, as is the rest of the world, a global recession is already here. How long it last and how much worse it gets depends on whether nations succeed in slowing the spread of the virus.
President Trump on Thursday offered guidelines on how the economy can reopen, but it’s going to months if not longer before things start to show any semblance of normality.
What they are saying? “The unprecedented and sudden deterioration was broad based, with the largest negative contributions coming from initial claims for unemployment insurance and stock prices,” said Ataman Ozyildirim, senior director of economic research at the board. “the sharp drop in the LEI reflects the sudden halting in business activity as a result of the global pandemic and suggests the U.S. economy will be facing a very deep contraction.”
U.S. unemployment rate has likely reached 15%, economists say
Some 5.25 million workers who’ve lost their jobs applied for unemployment benefits last week, driving the number of coronavirus-related layoffs above 21 million in just one month as the nation grapples with the worst pandemic in a century.
The huge increase in unemployment has likely pushed the jobless rate up to around 15%, the highest level since the Great Depression in the 1930s, economists say. The rate would be even higher if an unknowable number of Americans still being kept on payroll but not working were included.Advertisement
The rate of job losses finally appears to be slowing, but many more layoffs and furloughs are expected through the end of the month and probably into early May.
How soon most of the newly jobless Americans get back to work will depend on how quickly the economy reopens. President Trump on Thursday plans to announce federal guidelines on how states can begin to ease restrictions, though many governors say they are not ready to do so with the number of COVID-19 cases still rising.
Initial jobless claims have climbed by 5.25 million, 6.2 million, 6.8 million and 3.3 million in the past four weeks, reflecting an increase in unemployment that harkens back to the worst economic downturn in U.S. history 90 years ago.
Just a month and a half ago, new jobless claims were in the low 200,000s and stood near a 50-year low. And only about 1.7 million Americans were collecting benefits.
California, the nation’s largest state, has recorded the most new claims of all in the past month at about 3.2 million.
Altogether, the states reported that 12 million people were receiving benefits through the first week of April, according to delayed government data on continuing claims. They are reported with a one-week lag.Advertisement
While many states are still behind in processing the torrent of new applications for unemployment benefits, they do appear to be slowing down. Searches for the phrase “jobless claims” peaked in the last week of March and fallen steadily since then, according to Google Trends.
The big picture: The surge in unemployment and rapidly deteriorating economy are unlike anything the U.S. has seen since the Depression of the 1930s, but Washington and the states have sought desperately to ease the burden and stabilize the situation with trillions of dollars in extra benefits for families, workers and companies struggling to get by.
The U.S. is already in recession, economists say, and likely to remain so for the next several months and perhaps longer if COVID-19 continues to spread or reemerges in fresh hot spots.
And it may be a year or longer before the economy is on sound footing — assuming a cure or treatment is discovered.
March 17. 2020