New Unemployment Claims Soar to 3.28 Million

Roy Maurer By Roy Maurer March 26, 2020
unemployed worker

The number of U.S. workers filing for new unemployment benefits for the week ending March 21 shot up to 3.28 million, rocketing past the previous week's revised total of 282,000.

Resulting from a nationwide shutdown tied to the coronavirus pandemic, the week's tally is more than quadruple the record of 695,000 initial jobless claims set in 1982, according to the Department of Labor (DOL). The weekly jobless claims are the most-timely economic indicator for measuring the impact of the virus on the U.S. economy.

"The coronavirus outbreak is a truly unprecedented event in American economic history," said Daniel Zhao, Glassdoor senior economist. "Unlike past economic slowdowns, the outbreak's sudden onset is flash freezing the economy by forcing businesses to shut down and putting millions of American workers out of jobs."

The jump in weekly claims is breathtaking, said Heidi Shierholz, senior economist at the Economic Policy Institute in Washington, D.C., and former chief economist at the DOL. "It's not like anything I've ever seen before in any labor market data. We're facing a crisis that came on us suddenly and it is huge."

While the numbers are alarming, they're not surprising, said Christy Whitehead, chief data scientist and talent economist at Workforce Logiq, a workforce intelligence and management company in Orlando, Fla. "We knew we were going to see an obvious spike in unemployment, and that spike hasn't reached its peak yet. This is an unprecedented shock and it's having the biggest impact on sectors that rely heavily on lower-income, hourly workers and small businesses that may not be prepared to weather this type of near-complete shutdown."

Layoffs have begun to surge in the services industries broadly, and particularly in the travel, food services and hospitality sectors as the coronavirus spreads across the country and nonessential businesses have been ordered to close.

Zhao said that the closest historical comparison to the spike in claims would be following natural disasters like major hurricanes, but those comparisons are considerably inadequate. Claims rose by 96,000 after Hurricane Katrina made landfall, for example. "The coronavirus outbreak is akin to a major hurricane occurring in every state around the country for weeks on end," he said.

Nick Bunker, an economist at the Indeed Hiring Lab, said that the national unemployment rate went up by about 2 percentage points last week. "That would put the unemployment rate at about 5.5 percent, where it was in early 2015," he said. "These numbers are a sign of just how much damage the labor market has quickly taken. Further worsening the picture …many of these workers were employed in industries that may have to remain shuttered for quite some time. We're also seeing a general decline in the trend of job postings. All signs point to these numbers being merely the beginning of a rough road ahead."

Josh Wright, chief economist for recruitment software firm iCIMS in Holmdel, N.J., said to expect last week's staggering number of jobless claims to be revised upwards due to the reports from states that unemployment insurance offices were overwhelmed, and websites crashed due to demand. "Some people tried to apply for benefits but gave up, while others didn't get around to applying this past week," he said. "I wouldn't expect a big drop-off in claims over the next couple of weeks, because there will be progressive rounds of layoffs and progressive rounds of applying for unemployment benefits, taking into account the operational hurdles at state UI offices."

For a sense of the magnitude of the new unemployment claims, the economy created 2.1 million net new jobs in all of 2019, said Julia Pollak, labor economist at employment marketplace ZipRecruiter. "The losses sustained last week alone are 2.5 times as large."

Pollak added that the weekly claims are actually an undercount of economic pain, because not everyone who is unemployed can claim benefits, and the number doesn't include self-employed workers, workers who have had hours cut due to the slowdown, and furloughed workers who may not be aware that they are eligible for unemployment insurance benefits.

Other laid off workers won't apply for unemployment for a variety of reasons, including those who expect that their jobs will return once the social distancing lockdown is lifted.

Experts generally believe that the national unemployment rate could go north of 10 percent by the summer. "This is just the tip of the iceberg—we estimate that 14 million workers will lose their jobs due to the coronavirus shock by the summer, with significant losses in every state," Shierholz said. "Unemployment could hit 12-13 percent."

Recruiting and talent sourcing functions are most likely going to be among the hardest-hit professional occupations during this pandemic, Whitehead said. "These functions were also hit the hardest in the 2008 financial crisis. When companies aren't growing, they don't need recruiters. Even in the best of times, recruiters have the highest worker volatility levels and feel the most insecure about the stability of their role. So now, when crisis hits, they're even more vulnerable."

State Data

Jobless claims in Pennsylvania increased by twenty times, from 15,439 to 378,908. New York saw its number more than quintuple, rising to 80,334, while California tripled to 186,809.

"We knew the workforces in states like California, Washington, Massachusetts, Illinois and Texas were going to be hit hard by COVID-19," Whitehead said. "These states typically rank the highest in terms of worker volatility, as they have dense populations and high concentrations of Fortune 500 companies. Highly volatile areas are going to continue to see the biggest impacts on their workforces."

Pollak said that there is only a loose connection between the rate at which states are losing jobs and the rate at which they are creating new ones. "California, Washington, and Nevada saw the steepest increases in initial jobless claims, which is no surprise given their COVID-19 caseloads, the containment measures they have taken, and especially in the case of Nevada, their reliance on tourism. These states have also seen sharp declines in job posting volumes. But other places, like Pennsylvania and Massachusetts, saw large increases in jobless claims, while new hiring continued at a fairly robust pace."

Wright found it interesting that some states with the largest number of coronavirus cases like New York, didn't produce the largest number of claims. "Minnesota, with 116,000 new claims, is about 50 percent more than the new claims in New York," he said.

Zhao said that next week's jobless claims report is likely to continue to show a similar number of initial claims as more cities and states require business to shut down and more workers are furloughed or laid off. He added that last week's newly unemployed workers won't show up in the March Employment Situation Report from the Bureau of Labor Statistics on April 3 because the survey reference period had already passed. "We'll have to wait until the April jobs report, scheduled for May 8, to see the full impact of this surge in unemployment claims," he said.

$2 Trillion Rescue

The unprecedented spike in unemployment claims come as the largest economic stimulus package in U.S. history makes its way to President Donald Trump's desk. The legislation would enhance unemployment benefits by expanding eligibility and offering recipients an additional $600 a week—beyond what state unemployment programs pay—for four months.

"It includes a $250 billion expansion of unemployment insurance, including an increase in the level of benefits and the creation of a Pandemic Unemployment Assistance program which would be available to many workers who are not eligible for regular unemployment insurance, like independent contractors," Shierholz said. "These provisions will help millions."

Wright said that the defining questions going forward are whether "the aid will reach businesses fast enough and last long enough to prevent this sudden shock from damaging household balance sheets and morphing into another sluggish recovery. The critical window has officially opened up."

HR Should Remain Resilient

Wright said that hiring typically doesn't stop, even in the depths of a severe recession. "During the Great Recession, when job openings declined, there were still millions of new hires every month. Businesses are adapting and there is a lot of resilience out there. We see that employers are actively recruiting and finding ways to get creative with furloughing. To the extent that they are capable, they are investing in keeping those workers. The question is how much cash on hand do businesses have to be able to sustain the wait."

Shierholz recommended employers try to keep workers onboard—whether on payrolls or on furlough—as much as possible. "That would be ideal. That means that once we are out from under lockdown, employers can get back on track quickly."

Whitehead said that companies should move to identify at-risk talent and deploy targeted retention strategies to hold onto these workers. "Talent acquisition leadership should start thinking about their processes and technology stack implications of moving from a tight job market across the board to a market that is loosening up significantly in some segments. Items like efficient screening, handling of an influx of job applicants, and other automation techniques should start to be top of mind.

She said she expects to see a higher reliance on contingent labor and a greater openness to remote workers following the COVID-19 crisis. "Back to work may still mean remote work, which means a new approach to hiring and onboarding."



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