What to expect in tomorrow’s unemployment insurance numbers: The leading edge of the coronavirus’s shock to the labor market, not the full picture
Tomorrow morning we will get the first piece of government labor market data that will show early signs of the coming coronavirus shock—initial unemployment insurance (UI) claims. When a worker is laid off and they apply for unemployment insurance, they show up in the Bureau of Labor Statistics’ initial unemployment insurance claims data, which means these data are a timely proxy for the number of workers who have been laid off. And reports of layoffs due to the coronavirus are beginning to stream in.
We estimate that by the summer, more than 3 million workers will have lost their jobs due to the coronavirus shock. How much of that will show up in the numbers released tomorrow? Definitely some, but perhaps not as much as you might expect. Tomorrow’s numbers capture unemployment insurance claims for the week ending last Saturday, March 14. While media reports suggest layoffs began accelerating last week, there is often a lag between when people are laid off and when they apply for benefits. If a worker was laid off last week and waited to apply for benefits until this week, they will not show up in tomorrow’s data. Further, while coronavirus layoffs began last week, the full weight of the impact—while swift—is still ramping up as businesses realize what they are up against.
This means that we should look at the numbers that come out tomorrow as just the leading edge of the labor market impact of the coronavirus shock. No one should take comfort if these numbers are relatively modest. In coming weeks, millions will likely be laid off, or not hired when they otherwise would have been. Policymakers should be thinking about a big fiscal stimulus package, including financing a sizeable amount of household consumption, giving fiscal aid to state governments, providing a payroll tax credit to businesses to not lay off workers, ramping up direct government purchases of things like medical equipment to help fight the virus, and making sure all measures to address the coronavirus economic shock are automatically continued until economic conditions warrant them being removed.
I will be analyzing the data when they are released tomorrow and down the road, as we have a fuller picture of how the coronavirus has impacted the labor market.
Update: Shierholz’s March 19 analysis of the unemployment data is available here.