Holy Smokes: Corona recession hits the layoff data

The Staggering Rise in Jobless Claims This Week

By Quoctrung Bui and Justin WolfersMarch 19, 2020

Nationwide unemployment claims

281,000 claims officially filed last week

629,899 claims filed in just 15 states this week

Note: Official figures are seasonally adjusted. This week’s claims are not seasonally adjusted and represent a third of total national employment. Source: Department of Labor, state level reporting.

Numbers released on Thursday by the Labor Department — as well as a preliminary analysis of even more recent data — provide the first hard confirmation that the new coronavirus is bringing the United States economy to a shuddering halt. The government reported that the number of initial unemployment claims rose to 281,000 last week, a sharp rise from 211,000 the previous week. This rise in initial claims of 70,000 is larger than any week-to-week movement that occurred during (or since) the 2008 financial crisis.

But even these numbers understate the economy’s free fall, as they reflect the state of the economy last week. Based on preliminary news reports this week from 15 states, it’s already clear that initial claims will skyrocket next week, most likely to levels never seen before.

The numbers for the state of Washington, where the coronavirus pandemic took hold earlier and has had a severe impact, are particularly notable. There, jobless claims more than doubled last week, and are now at levels recorded during the depths of the last recession.

Washington is an especially relevant case study because it imposed containment measures — including the closing of schools and restaurants and a ban on large gatherings — a week or so ahead of many other states. It seems likely that other states’ labor markets will also follow Washington’s path.

Although Washington has not revealed the most recent official figures, state officials said that claims increased 150 percent last week and that the state was seeing an “even more dramatic increase this week.” They also mentioned that call volume surged more than eightfold on Tuesday.

As the accompanying charts show, jobless claims rose sharply in the vast majority of states. These figures come from state unemployment insurance offices tallying up the number of people newly applying for unemployment benefits.

This state-level data report is often ignored in normal times but is closely watched at economic turning points because it provides detail on what’s happening week by week, rather than each month or quarter. These figures are produced rapidly — providing hard numbers a mere six days later.

The big picture is clear: When we write the history of the coronavirus recession, we’ll say the downturn started in early March.

But don’t take these official numbers or the preliminary reports from individual states as providing precise signals: There are numerous anecdotal accounts of phone lines to unemployment offices that are jammed, offices that are closed, or websites that have crashed. The official data is on the number of claims filed, whereas the number eligible and attempting to file may be much larger.

Weekly initial unemployment claims in California

58,208 claims officially filed last week

190,000 claims this week according to state level reports

Note: Not seasonally adjusted. This week’s data include March 15 through Tuesday, March 17, according to the governor's remarks.

Weekly initial unemployment claims in Ohio

7,051 claims officially filed last week

78,000 claims this week according to state level reports

Note: Not seasonally adjusted. This week’s data include March 15 through Tuesday, March 17, according to the state’s lieutenant governor.

Weekly initial unemployment claims in Minnesota

4,121 claims officially filed last week

50,000 claims this week according to state level reports

Note: Not seasonally adjusted. This week’s data are as of Wednesday, March 18, according to reporting from The Associated Press.

Weekly initial unemployment claims in Rhode Island

1,109 claims officially filed last week

9,593 claims this week according to state level reports

Note: Not seasonally adjusted. This week’s data include March 15 through the morning of Wednesday, March 18, according to reporting from WPRI.

The stark rise in jobless claims reflects the unusual nature of this recession. In a “normal” recession, the economy slows over a period of months, and joblessness rises over an even longer period as individual employers see the effect on their businesses. The resulting rise in initial unemployment claims tends to be spread over several months.

This is different. State government directives shut down many businesses, leading to an unusually rapid downturn. A rapid spike in jobless claims will also be an extremely large spike, as what would normally be a few months’ worth of job loss happens in a few weeks.

As you look at what’s going on in your state, keep in mind that these numbers reflect developments last week, but that in most states, the more draconian changes in economic life were imposed this week.

The last recession began in December 2007, but even half a year later, some economists were still debating whether the economy had entered a recession. This time, there’s no debate.

Trump Sticks to His China Tariff Guns, Ignoring Pleas for Relief [feedly]

Bloomberg up to date econ news:

Trump Sticks to His China Tariff Guns, Ignoring Pleas for Relief
https://www.bloomberg.com/news/articles/2020-03-19/trade-war-latest-trump-keeps-china-tariffs-as-economy-shuts-down

It's taken weeks of calls and letters to the Trump administration to get a response over potential tariff reductions as the coronavirus outbreak threatened to snuff out countless small- and medium-sized U.S. businesses.

American companies, and importers in particular, on Wednesday once again pleaded with President Donald Trump to allow for tariff relief to ease the dire economic situation.

According to one estimate, suspending the duties he's imposed on Chinese goods and global steel and aluminum imports would provide a boost to the U.S. economy of more than $75 billion, or 0.4 percent of U.S. GDP, Americans for Free Trade wrote in their letter.

For weeks the administration's response was noncommittal. And suddenly, they got their answer.

"There's no reason to do that. I can't imagine Americans asking for that," Trump said on Wednesday, again falsely claiming that China pays the tariff bills.

The debate over tariff reductions — tax cuts, in effect — has been playing out among Trump advisers and outside allies, with opponents of the move making their case known to the White House as well. The calls have intensified in the crisis because Trump has the authority cut tariffs pretty much immediately.

Wendy Cutler, vice president at the Asia Society and former trade official, said the increasingly heated rhetoric and barbs exchanged between U.S. and Chinese officials in recent days are "unhelpful and frankly irresponsible."

"Now is the time for the U.S. and China to work together to help the rest of the world navigate through this crisis," she said. "Rolling back tariffs would be a good first step."

And whether the administration wants to admit it or not, the U.S. still imports from China a lot of the equipment and supplies needed to respond to this public health crisis. The numerous exemptions that the U.S. Trade Representative's office has recently granted seems to be a recognition of that fact.

Charting the Trade Turmoil

The European Union can't stop the coronavirums pandemic from rocking its foundations: The response by EU member states — including the reintroduction of internal border controls by some of them — is threatening to disrupt trade and undermine the postwar integration project.

Today's Must Reads

• War footing | The economic impact of the coronavirus outbreak is shifting from service industries like hotels and restaurants to the manufacturing sector on both sides of the Atlantic.
• Container crunch | A shipping container shortage that's left everything from Thai curry to Canadian peas idling in ports may be about to get a lot worse as China steps up precautions on incoming vessels.
• Brexit or bust | U.K. Prime Minister Boris Johnson dismissed calls to postpone Britain's final break with the European Union at the end of this year, even as the health emergency puts politics as normal on hold.
• Medical supplies | Trump gave the federal government broad powers to direct the production and distribution of health protective gear, ventilators and other supplies as the virus spreads in the U.S.
• Roll with it | Kevin Holt wants American shoppers to know one thing: You'll get your toilet paper. You just might not get the soft, four-ply type you love.

Economic Analysis

• Virus economics 101 | We have not seen an economic shock this rapid and this global in modern times, but five lessons already stand out.
• Crude problem | Lower oil prices typically boost global growth, but the recent decline to an 18-year low will likely provide less support than usual. 

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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 [feedly]

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
https://www.epi.org/blog/what-to-expect-in-tomorrows-unemployment-insurance-numbers-the-leading-edge-of-the-coronaviruss-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 14th. 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.

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Boeing suggests at least $60 billion to help aerospace manufacturing industry [feedly]

Boeing suggests at least $60 billion to help aerospace manufacturing industry
https://www.washingtonpost.com/business/2020/03/17/boeing-asks-at-least-60-billion-trump-expresses-support-bailout/

text only:

President Trump said in a news conference Tuesday that he supports a bailout for Boeing, which has been reeling from the combined economic fallout of the global pandemic and a prolonged safety crisis involving its flagship commercial jetliner.

Without providing details of a bailout package, the president said that "we'll be helping Boeing," which previously confirmed it was in discussions with top government officials about short-term access to cash. Boeing's stock price has lost 44 percent of its value in the past five days alone.

Trump alluded to troubles with the 737 Max jet, which has been grounded for more than a year after equipment problems played a role in two deadly crashes.

"It was unthinkable what happened to Boeing … unthinkable," Trump told reporters. "Probably I would [have] considered it the greatest company in the world prior to a year ago, now they get hit 15 different ways. … It was coming along well, and then all of a sudden this hits. So we'll be helping Boeing."

Inside Delta's command center the week the coronavirus devastated the airline industry

Shortly after the president's comments, Boeing published a statement saying there should be a minimum of $60 billion in "public and private liquidity, including loan guarantees" for the aerospace manufacturing industry. The details of a potential bailout have not been announced.

"We appreciate the support of the President and the Administration for the 2.5 million jobs and 17,000 suppliers that Boeing relies on to remain the number one US exporter, and we look forward to working with the Administration and Congress as they consider legislation and the appropriate policies," Gordon Johndroe, vice president of communications at Boeing, said in a statement sent to reporters.

"Until global passenger traffic resumes to normal levels, these measures are needed to manage the pressure on the aviation sector and the economy as a whole," Johndroe wrote.

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The company confirmed Monday that it had been in discussions with "government leaders" about short-term access to public and private funds.

Boeing's request for public help underscores the dire financial straits the company finds itself in, as dual crises threaten to severely complicate its return to financial health. On March 13, the company drew out the full amount of its $13.8 billion private loan, citing concerns about whether it would have access to cash should the markets worsen. It also halted new hires.

Airline industry seeking more than $50 billion in government aid amid coronavirus crisis

The coronavirus pandemic and its related market volatility came at a time when Boeing's business was already vulnerable. The company has struggled to convince regulators that the 737 Max ― the newest version of its best-selling jet ― is safe to fly after two deadly crashes in Ethiopia and Indonesia killed hundreds of people. After Boeing leadership admitted that the jet's flight control systems played a role in both crashes, regulators have continued to find problems with the plane, repeatedly pushing back the jet's recertification timeline. Boeing shut down its 737 Max production lines late last year after experiencing the toughest year in company history.

Boeing has suffered along with the broader aviation industry as travel bans have slowed new bookings. Last week Goldman Sachs analysts predicted a 7 percent decline in air traffic this year that would prompt many airlines to defer purchases of new planes.


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U.S. auto giants to stop domestic production for now [feedly]

U.S. auto giants to stop domestic production for now
https://www.washingtonpost.com/business/2020/03/18/automakers-shutdown-coronavirus/

text only:
March 18, 2020 at 2:58 p.m. EDT

Ford Motor Co. and General Motors will halt production at all North American factories for at least two weeks to slow the spread of the coronavirus.

Reuters and CNBC separately reported that Chrysler, the third company that makes up the Big Three U.S. car manufacturers, would also cease production.

A Chrysler spokeswoman did not immediately respond to a request for comment. An earlier statement from the United Auto Workers said the company had agreed to a "rotating partial shutdown" that would allow for extensive deep cleaning of facilities between shifts and had staggered shifts to minimize workers' contact with one another.

How has the coronavirus outbreak disrupted your life? Share your life experience with The Post.

GM executives said shutting down production is "the right thing to do" to protect workers' health.

"GM and the UAW have always put the health and safety of the people entering GM plants first, and we have agreed to a systematic, orderly suspension of production to aid in fighting COVID-19/coronavirus," GM chairman and CEO Mary Barra said in a statement. "We have been taking extraordinary precautions around the world to keep our plant environments safe and recent developments in North America make it clear this is the right thing to do now."

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Coronavirus is shutting down American life as states try to battle outbreak

Ford described its production halt as a temporary measure to keep workers safe.

"UAW and Ford leaders will work together on how to best structure plant restart plans ― along with health and safety procedures," Ford said in a statement.

The virus prevention measures from the Big Three automakers came after extensive negotiation with the union, which had pushed to temporarily shut down factories, as Ford and GM have now agreed to do. Company leadership initially balked at halting production, instead asking for 48 hours to come up with an alternative plan.

"We spent hours tonight in talks with the leadership of the Big 3, demanding that they do the right thing for our members," the UAW said in a statement. "All three companies have agreed to new measures that will increase adherence to CDC recommendations on social distancing in the workplace."

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All three companies are struggling to prevent the virus from spreading throughout the workforce while also taking steps to maintain the long-term stability of their businesses. All three companies have seen their stock prices plummet by roughly 50 percent on fears that the pandemic could lead to a recession.

A lot is at stake for the U.S. economy and for workers across the country. The automotive manufacturing industry employed about a million people in the United States as of February 2019, according to the Bureau of Labor Statistics.

Federal Reserve launches special fund to keep credit flowing in U.S. economy during coronavirus scare

White House officials have been working with congressional Republicans on an emergency stimulus package that could add up to $1 trillion, with an estimated $50 billion for the aviation industry. A Treasury Department document outlining the parameters of a possible stimulus plan did not specifically mention automakers, although it did call for $150 billion for "secured lending or loan guarantees to assist other critical sectors of the U.S. economy experiencing severe financial distress due to the COVID-19 outbreak."

Rachel Siegel and Alice Crites contributed to this report.


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Estimates of the Implications of Public Option and Capped Provider Payment Rate Reforms [feedly]

Since Joe Biden's health care agenda supports a return to the "public option" feature of Obama's original ACA concept, the Urban League offers a review of what that would actually mean for coverage and costs.

Estimates of the Implications of Public Option and Capped Provider Payment Rate Reforms
https://www.urban.org/research/publication/estimates-implications-public-option-and-capped-provider-payment-rate-reforms

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Report: Estimating the Impact of a Public Option or Capping Provider Payment Rates Brief: Introducing a Public Option or Capped Provider Payment Rates into Private Insurance Markets In this report, Urban Institute researchers estimate the coverage and spending implications of various forms of a public health insurance option introduced as an alternative to private plans currently available to consumers. The public option would be a plan structured the same as private insurance plans currently available in the applicable markets, but it would also share some characteristics with the traditional Medicare fee-for-service plan. Its actuarial value, covered benefits, and cost-sharing structure would reflect the private options in the market in which it was introduced (e.g., a Marketplace qualified health plan in the nongroup market or a typical plan in the employer market). However, a public option would have a broad network, like the traditional Medicare plan, and would pay providers at Medicare rates or some multiple thereof that would set prices between Medicare's payment rates and those of commercial insurers today. A public plan is intended to provide a lower-cost insurance option that would reduce health care spending for consumers and government, lower overall spending growth, and potentially catalyze greater competition by private insurers. The option would be particularly attractive for people residing in insurance markets with higher-than-average commercial insurance premiums and/or few commercial insurers. The analysis also includes reforms that would cap all private insurers' payments to providers (in the nongroup market alone or in both the nongroup and employer insurance markets) at the same rates, either as an alternative to or in combination with a public option. Capping rates would also allow employers and their employees to lower the cost of their health coverage without changing their current benefit and cost-sharing structure. The capped rate approach follows the precedent of Medicare Advantage. The full report and brief present multiple reform scenarios because of the significant uncertainties inherent in a public option or capped payment rate reform, such as the size of the payment rate cuts achievable, the markets in which the new rates would apply, which employers (if allowed) would participate, and how providers would respond to lower payment rates.  

Senate coronavirus bill is crucial—but it’s a fraction of what’s needed [feedly]

Senate coronavirus bill is crucial—but it's a fraction of what's needed
https://www.epi.org/blog/senate-coronavirus-bill-is-crucial-but-its-a-fraction-of-whats-needed/

Family First Coronavirus Response Act is an important first step in the United States' response to the COVID-19 pandemic, and the Senate should pass it immediately. There are provisions for both health spending and paid sick leave, as well as income supports in the form of expanded food-assistance programs and unemployment insurance.

We summarize some of the bill's specific provisions below, but we first want to highlight a few important loopholes and talk about the important next steps.

The bill has some glaring exclusions. Perhaps the most problematic is the carve-out for large businesses; the bill exempts employers with more than 500 workers from its paid leave mandate. Bureau of Labor Statistics data show that 11% of workers at private-sector businesses with 500 workers or more do not have access to paid sick leave, and 48% of private-sector workers work in firms with 500 workers or more. Together, that means that 6.8 million private-sector workers in large firms will not have paid sick days as a result of the large-firm exemption. And this does not count the fact that workers at these firms that doprovide paid sick days often do not provide enough time for workers to self-quarantine for the recommended 14 days.

The bill also makes it possible for the Secretary of Labor to exempt certain health care providers and emergency responders from its paid leave provisions, and to exempt businesses with less than 50 people. The data show that 36% of workers at private-sector businesses with less than 50 workers do not have access to paid sick leave, and 27% of private-sector workers work in firms with 50 or fewer workers, together meaning that 12.8 million workers may not have access to paid sick days as a result of potential exemptions for small businesses. 

Together, that means that somewhere between 6.8 million and 19.6 million private-sector workers will be left without paid sick days as a result of the firm-size exemptions in the bill. The PAID Leave Act, which will be introduced by Senator Patty Murray (D-Wash.), Congresswoman Rosa DeLauro (D-Conn.), and Senator Kirsten Gillibrand (D-N.Y.), would go a long way toward closing these loopholes by providing 14 emergency paid sick days and 12 weeks emergency paid family and medical leave, reimbursed in full by the federal government.

Even with its weaknesses, the Family First Coronavirus Response Act includes key first steps, and should be passed immediately.

Recall the Center for Disease Control (CDC)'s initial recommendation to reduce the spread of COVID-19: Seek medical care and stay home. On the health care side, there are important provisions in the bill to provide coverage for free COVID-19 testing, and there is a temporary increase in the federal match for states' Medicaid programs. These are important first steps, but more needs to be done to ensure that patients not only have access to testing, but also have access to affordable medical care for treatment of the disease itself as well as secondary infections and potential complications

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