People gather at the entrance for the New York State Department of Labor offices in Brooklyn, which closed to the public due to the coronavirus disease outbreak March 20, 2020.
Andrew Kelly | REUTERS
The number of weekly unemployment claims filed in the U.S. could soon exceed 8 million as the fallout from widespread shutdowns amid the coronavirus pandemic continues to worsen, one economist told CNBC on Friday.
In the week ending March 28, 6,648,000 Americans filed for unemployment, doubling the previous week’s 3.28 million figure which was itself a record high by a significant margin.
However, Pantheon Macroeconomics Chief Economist Ian Shepherdson told CNBC’s “Squawk Box Europe” on Friday that next week’s figure could be much higher still.
“Just looking at some of the state data and looking at some of the Google data of people who are searching for how to file for unemployment, that hasn’t really come down yet, in fact the latest numbers seem to me to be creeping a bit higher compared to last week,” Shepherdson said.
“So we might possibly see another record number, possibly 7 or 8 million and it might even be more than that, which is astonishing and breathtaking.”
Shepherdson suggested that the speed at which lockdowns across the country have been implemented and the subsequent speed of job losses in the consumer sector might have been a factor in the unprecedented spike.
He also highlighted the differences in policy between the U.S. and Europe, which has broadly implemented aggressive employment subsidies to furloughed workers.
“It has simply been that businesses, unlike in Europe, haven’t been able to enjoy these sorts of job retention schemes where people have been kept on payrolls even though they haven’t got anything to do,” Shepherdson suggested.
By contrast, U.S. policy has allowed workers to be laid off but offered increased unemployment benefits for an extended period of time, which is why such a huge number of claims are beginning to roll in stateside.
‘There is no good story’
Carl Weinberg, chief economist at High Frequency Economics, said the key question was not the significance of last week’s 6.6 million figure itself, but whether this is the peak or whether volumes of 10 million claims every two weeks would continue to run for the foreseeable future.
“I fear that the numbers are going to continue to get worse, at least for another couple of weeks,” Weinberg told CNBC’s “Street Signs.”
He suggested that The Blitz in London during World War II was the closest comparable example of an entire nation shutting itself down, but that most nations around the world doing so simultaneously had “no comparable basis.” Meaning governments and businesses are having to “change and adapt” on the fly.
“We don’t know how many businesses will survive this period of forced shutdown. We don’t know how many will come back, and that is critical to the question of how fast people can get back to work at the end of this, if they can get back to work at the end of it at all,” Weinberg said.
He added that a further unknown is the eventual impact on the financial system if Americans are unable to pay their rent, landlords are unable to pay mortgages, and banks are forced to write off mortgages and asset-backed securities, sending the economy into a “dark hole.”
“There is no good story at this point as to how we get out of this,” Weinberg concluded.