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Market Wire:
US Jobless Claims Hit Record 3.28 Million

Karl Schamotta March 26, 2020

The number of Americans filing for unemployment benefits hit a record 3.28 million last week, suggesting that the world’s largest economy has hit a solid wall at full speed. Labor Department figures, released this morning, showed a massive thousand-percent weekly jump in the number of jobless claims submitted between March 15 to March 21, with claims increasing in all states and districts. The total number was more than four times higher than the previous record, set in 1982 – and five times higher than the worst week in the Global Financial Crisis.

In separate releases of interest only to historians, the US trade deficit narrowed to -59.9 billion in the month of February, and fourth-quarter gross domestic product growth estimates were held at 2.1%.

Policymakers were well prepared for a negative print. White House economic advisor Larry Kudlow told media that there would be a “very large increase” in jobless claims yesterday. In an interview ahead of the release, Federal Reserve Chairman Jerome Powell said, “We know that economic activity will decline probably substantially in the second quarter…we may be well be in a recession. But I would point to the difference between this and a normal recession. There’s not anything fundamentally wrong with the economy. Quite the contrary – we are starting from a very strong position”. “At a certain point we will get the spread of the virus under control and at that time confidence will return,” he said, predicting “a good rebound” once the crisis passes.

But with the jump in unemployment claims making the global financial crisis look tiny in comparison, the near-term human cost is appalling – and is likely to rise substantially in the weeks ahead.

Minds are being sharpened across the political establishment – a gargantuan $2 trillion stimulus plan continues to wend its way through Congress at an accelerated pace. The Senate approved the legislation in a 96-0 vote last night, with the House expected to pass it tomorrow – and discussions on another round of spending have already begun.

Market participants were also expecting a devastatingly-large claims number, with estimates ranging from 1.2 to 10.0 million ahead of the release – and S&P 500 futures jumped in a classic sell-on-rumor, buy-on-fact reaction. Exchange rates moved imperceptibly – but with the Federal Reserve running a dilutive monetary policy framework, the economy stalling, and growth differentials moving negatively against the United States, the dollar’s recent gains are looking increasingly vulnerable.

Karl Schamotta
Chief Market Strategist
@vsualst

 

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