With Over 22 Million Claims, What's the Unemployment Rate

Mish

In the past 4 week over 22 million people filed unemployment claims. What's the unemployment rate look like?

With each passing week the grim stats add up. But it also makes it easier to estimate the unemployment rate for April. 

Let's crunch the numbers starting with totals from the March Jobs Report and my understatement Unemployment Rate Jumps to 4.4% But Worst is Yet to Come.

Household Survey Numbers

Household Survey Data March 2020

Unemployment Rate Calculations

The unemployment rate does not come from caims. Rather, it comes from a phone survey in the week that contains the 12th of the month. That makes the current reference period April 12-18.

The March unemployment rate of 4.4% was wildly low (and will later be revised), because the reference week was before the mass layoff started. That will not be the case in April. 

Estimate of Claims to Come

There are two more weeks left in the month. I estimate there will be another 6 million new claims in the next two weeks.

Estimate of the Unemployment Rate

If we assume claims approximate Household Survey answers and further assume the next two weeks of claims were unemployed in the reference period We can estimate the unemployment rate as follows:

(New Claims + Existing Unemployed + Estimate of Claims to Come) / Labor Force

22.034 Million + 1.353 Million + 6 million / 162.913 Million = 18%

I have done three such estimates in the past 4 weeks and this is the most optimistic one yet. My ranges have been in the 19-22% range.  

Michigan Unemployment Rate

Michigan has been swamped with claims. Over a million people have filed for unemployment claims, out of a labor force of under 5 million. 

A recent number crunch on Michigan yields an unemployment rate of 24%-29%, truly a disaster. 

For details, please see Over 25% of Michigan Workforce Filed For Unemployment.

What's Next?

For a 20-point discussion of what to expect, please see Nothing is Working Now: What's Next for America?

The huge fear now is How Do I Pay the Bills?

This is the second crisis in 12 years. These scars will last.

No V-Shaped Recovery

Add it all up and you should quickly arrive at the correct viewpoint: The Covid-19 Recession Will Be Deeper Than the Great Financial Crisis.

Mike "Mish" Shedlock

Comments (46)
No. 1-17
Tony Bennett
Tony Bennett

Whatever the number, it will get worse.

As illusions of V recovery are dashed.

The cash burn has to be downright awful now.

Tony Bennett
Tony Bennett

"A recent number crunch on Michigan yields an unemployment rate of 24%-29%, truly a disaster. "

...

Explains the protests there to open up business.

Tony Bennett
Tony Bennett

Oil < $18 barrel

Quatloo
Quatloo

I’m seeing local businesses starting to shut down permanently. A gas station and fast food place (with drive-through) most recently.

The Trump plan to re-open the economy actually looks promising. Bill Deblasio’s statement about waiting until August to begin reducing restrictions in NYC would be a disaster. People will not stay inside all summer in New York, it just won’t happen.

STF
STF

@Mish - interested to hear your thoughts on the stock market. Can we live in a world where there is debt deflation, PEs shooting through the roof, yet stock market hitting all time highs due to Fed intervention. For how long?

Casual_Observer
Casual_Observer

Debt deflation is on its way. Bankruptcy filings will go up overall both for businesses and individuals. Can these businesses take government bailouts and then declare bankruptcy and never have to pay back the zero interest loans they took out ? That would be the quickest way to a recovery imo.

numike
numike

Landlords in denial as deflation beckons
Economists warn double digit house price inflation is about to turn into double digit house price deflation, almost overnight. Some landlords are even being advised to get out as aspiralling unemployment pressures rents lower https://www.newsroom.co.nz/2020/04/16/1129745/houses-of-pain-if-you-need-to-get-out

anoop
anoop

"This is the second crisis in 12 years. These scars will last."
What scars?

As soon as the economy opens, it will be like letting out a megaton of starved people on a buffet. In fact, people will be prone to over-consume and get all their desires out of the way in case there's a second wave.

cbide
cbide

April's employment numbers could be highly skewed since many companies surveyed for the BLS survey are on hiatus.

Realist
Realist

Although I am apolitical, and think that BOTH political parties in the US are ruining the country by refusing to cooperate with each other, I have a question.

Why is it that so many Republican administrations hand over an economy in recession to the Democratic incumbent?

“Every Republican president since Teddy Roosevelt in the early 1900's endured a recession in their first term. Four Republican presidents suffered through two recessions while in office and Republican President Dwight Eisenhower presided over three. Meanwhile, Democrats have largely skated past the recession quicksand. Four in five Democratic presidents saw no recessions during their terms since 1945.”

Is Trump going to be the next Republican to hand over an economy in tatters to the Democratic incumbent?

moyerdere2
moyerdere2

week over week claims dropped by 1.4 million, could that be the largest drop ever?
This is probably why the stock market has been going up!
The economy is roaring back! This is absurd....

RonJ
RonJ

"Cantor Fitzgerald Slashes Jobs, Prepares To Cut More Amid Economic Downturn"

Another addition to the unemployment line.

Mish
Mish

Editor

"April's employment numbers could be highly skewed since many companies surveyed for the BLS survey are on hiatus."

The BLS does not survey companies or look at claims. It surveys individuals.

MATHGAME
MATHGAME

The unemployment numbers together with the stock ownership distribution by wealth shows pretty conclusively that the Fed and Wall Street are just laughing hysterically at the majority of people in the country as they poke fun at stories about "wealth gap" and keep on widening it to their hearts content.

Casual_Observer
Casual_Observer

A lot of it will depend on if the household survey is close to the UI claims.

GeorgeWP
GeorgeWP

There is an assumption that the current infection surges will run their course and then the economy can open up, tough we need to be wary of a second surge. But much of Europe is supposedly in lock down. The rate of infection growth has slowed, but there is no indication it is under control. In some countries including the USA it may be too late to ever arrest the initial surge and the virus is now permanently in the wild, same as flu and rhinovirus. But more deadly.

This means heavy restrictions may have to be abandoned and people will just have to deal with social contact and travel being more dangerous that it used to be. Travel to countries where the virus is contained will be heavily restricted. And of course their may never be a vaccine, but presumably there will be treatments.

I hope governments are working on Plan B.

Advancingtime
Advancingtime

Of the thirty million small businesses in America, only 1.7 million received money from the 2.3 trillion dollar aid package. The promise of help from the Paycheck Protection Program delayed mass firings from the 54 million Americans employed by small businesses but now that the government has failed to come through the carnage is about to begin. More details in the article below.


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