Initial claims by Americans for state unemployment benefits fell for the second straight week, indicating no impact yet from the coronavirus, but that will likely change over the next few weeks.
The number of claims fell 4,000 to a seasonally adjusted 211,000 for the week ended March 7, the U.S. Labor Department said on Thursday. It also revised data for the prior week to show 1,000 fewer applications than initially reported. Economists were expecting the number of initial claims to rise to between 218,000 and 220,000 last week. Currently, the number of claims are near a 50-year low.
The decrease surprised many economists, who had expected to see the start of some layoffs after federal officials warned over a week ago that the coronavirus, also known as COVID-19, was spreading across the U.S. The data will become an even more closely watched metric to determine what the fallout could be from the impact of the virus as it spreads. But whatever impact there will be from the coronavirus will exacerbate issues already on the jobs front.
“Recent levels are in line with the lows of the past couple of years. However, a return to the lows of the last two years is not a sign of an improving labor market. Claims had been trending down fairly rapidly for years until early-2018,” Samuel D. Coffin, economist at UBS, said.
States tightening eligibility requirements and layoffs in retail where fewer people are eligible for claims are two reasons for the number of Americans who file for unemployment benefits, the economist explained. “We expect slowing in payrolls in March and [in the second quarter],” Coffin said.
The industries expected to be hard hit initially are travel and hospitality, entertainment, and restaurants as more and more Americans cancel vacation plans and follow health officials’ recommendations to practice “social distancing.”
The World Health Organization earlier this week concluded that the current global outbreak had reached “pandemic” levels. President Trump at a briefing from the Oval Office Wednesday night announced travel restrictions on people arriving from Europe. He also requested $50 billion in funding from Congress to help the Small Business Administration provide economic loans to struggling companies. That’s on top of the $8.3 billion Congress approved to help with testing kits and developing a vaccine.
In the past two weeks, the volatility roiled the U.S. equity markets as trading mirrored investor fears over whether a recession could derail the economy.
Cases of the coronavirus originated in Wuhan, China, and initially halted factory operations in parts of China since the end of January, although most factories by now have reopened and have restarted production. The disease has spread to other parts of Asia, the Middle East, Europe, and now the United States.