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Link to original content: http://www.telegraph.co.uk/business/2020/04/02/us-unemployment-claims-double-hit-record-7-million/
Almost 10m Americans lose their jobs in a fortnight

Almost 10m Americans lose their jobs in a fortnight

The figures indicate that employers are shedding workers at a frightening rate to combat a sudden stop in economic activity

Jobs board in America
Donald Trump is facing record unemployment levels in an election year Credit: Gabby Jones  /Bloomberg

Unemployment in the US is set to surge to its highest rate since the Great Depression after a second week of record lay-offs dealt a stunning blow to the world’s largest economy. 

The number of Americans filing for unemployment benefits in the week ending March 28 doubled to almost 7 million, with economists warning that up to 20 million jobs could be lost across the country as lockdowns bite. 

Wall Street analysts predicted that unemployment will hit 16pc within months - a rate not seen since the end of the Great Depression in the 1930s. 

The shocking figures show that employers are shedding workers at a frightening pace to combat a sudden stop in economic activity as the White House struggles to contain the Covid-19 outbreak.

The weekly rise was 10 times higher than the pre-coronavirus record set in 1982 and means just under 10 million people have filed for unemployment benefits in the last two weeks. 

James McCann, of Aberdeen Standard Investments, said: “This is eye-watering and we are still only at the beginning of the layoffs spurred by the lockdowns.

“When we look at all the jobs at direct risk from social distancing policies, and those which could be affected indirectly, the numbers start to get pretty scary.”

More than four-fifths of Americans are in lockdown as the number of coronavirus cases in the US leapfrog all other countries.

Economists hastily revised their forecasts for unemployment after the shocking second week of jobless claims suggested many have been too optimistic on losses. The jump in claims suggests the rate of unemployment has already surpassed the financial crisis peak at above 10pc.

Unemployment will hit 16pc in the second quarter with between 16 and 20 million jobs lost, Bank of America economist Michelle Meyer predicted.

James Knightley, ING economist, said 15pc unemployment by May was “quite conceivable” and warned of a slow recovery in the jobs market. 

He said: “Many companies will not make it through the crisis due to the plunge in demand.

"Others will restructure and come out requiring a smaller workforce."

Rocketing unemployment and a deep recession could deliver a knockout blow to Donald Trump’s hopes of re-election in November as the coronavirus puts an end to the US jobs boom.

Ian Shepherdson at Pantheon Macro criticised the President's package to rescue the US economy, arguing it “didn’t have to be this way”.

He said: “The US could have followed the lead of several major European countries and offered job retention programs, paying most of people’s salaries, but preferred instead to increase and extend unemployment benefits."

Many European countries including Britain are paying a proportion of furloughed workers’ wages to save jobs, but the Trump administration has instead opted to beef up unemployment benefits.

Workers who have been laid off can get up to $600 (£485) a week for four months but this generous benefits package may not stem job losses.

Mr Shepherdson added the grim figures emerging from the US economy make another huge support package inevitable - on top of an unprecedented $2 trillion stimulus already agreed in Washington.

Labour markets also started to crumble in Europe as lockdowns take their toll on economies.

Almost 900,000 jobs have been lost in Spain since the country shut down last month, with a further 600,000 temporarily laid off. 

The French labour ministry said that businesses have asked to put 4m workers on furlough with their wages subsidised by the state. Economists have warned that the post-Covid-19 recovery could be slowed if governments fail to protect jobs and businesses. 

Analysts have warned that the West should brace for unprecedented drops in economic growth in the coming months. Capital Economics warned of a 25pc plunge in output in European countries under lockdown. 

The eurozone’s unemployment rate is likely to double in just a few months to 15pc before pulling back to 10pc by the end of the year, it said.

Global markets shrugged off signs of collapsing jobs markets in the US and Europe with the benchmark S&P 500 index edging higher.  The FTSE 100 closed 0.5pc up as oil prices soared on hopes of production cuts by Saudi Arabia and Russia.

Could the UK see similar numbers of unemployed?

The UK is also undergoing a huge spike in the number of people applying for benefits but the Government has announced unprecedented measures to stem job losses. Almost 1m people have applied for Universal Credit in the past fortnight - about 10 times the number of claims typically made.

Unemployment in the UK would hit 6.7pc if all those recently applying for Universal Credit had lost their job.

The Chancellor will hope that his package of measures to help businesses survive the coronavirus can stop Britain's unemployment rate rocketing.

Under the Coronavirus Job Retention Scheme, businesses can apply for a grant that will cover 80pc of a furloughed employee's wages. That gives employers the option of temporarily laying off their staff rather than permanently shedding workers.

The US has chosen to widen and increase unemployment benefits rather than follow the lead of European countries with job retention schemes. The unemployed can get up to $600 (£485) per week for four months but generous benefits may not stem job losses.

However, Brian Hilliard, UK economist at Societe Generale, believes Rishi Sunak's efforts to stop job losses will only be "partially successful".

He  predicted that unemployment will exceed 20pc in the second quarter before dropping sharply by the end of the year. "For some companies, the pressure is already so intense that they face imminent collapse," he said. 

What does it mean for the economic recovery?

Economists fear that an economic shock from the coronavirus could be prolonged if governments allow unemployment to soar and businesses to collapse.

A $2 trillion stimulus package has been agreed in the US to combat what is expected to be a deep recession but the damage to the jobs market appears to have already been done.

If millions are out of work, the economic recovery could be held back by a weaker than anticipated bounce in consumer spending. A stalling rebound in the world's biggest economy would most likely weigh on recoveries elsewhere.

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