Thursday's spike in weekly jobless claims signals just the start of a crush of coronavirus-induced layoffs that could more than double the unemployment rate.
Unemployment claims filed with the states last week jumped to 281,000 from 211,000 the week earlier. Economists had expected about 220,000 claims for the week ended March 14, with a bigger spike in the coming week. It was the highest number since Sept. 2, 2017.
"It's more than double anything we saw on a percentage basis during the height of the Great Recession, and it's going to get exponentially worse, much as the testing reveals the virus is spreading," said Diane Swonk, chief economist at Grant Thornton.
Swonk said the 33% jump in weekly claims is the biggest one week increase ever, aside from temporary disruptions from hurricanes and other natural disasters. It dwarfs the one-week 14% jump during the 2008 financial crisis. Swonk said she now expects unemployment to rapidly rise to 8% from the current half-century low 3.5%.
"We're talking about it going up by multiples of the level in weeks to come. We're talking about it doubling, tripling. We could see it up to 600,000 by next week," she said, adding some states are already seeing new claims activity for this week of as high as 40,000.
JPMorgan economists expect a swift recession that will take unemployment rate to 6.5% by the middle of the year.
Economists have been reassessing their forecasts for the economy and labor market as the U.S. and individual states respond to the outbreak of the coronavirus. New York and other states have shut down all bars and restaurants except for takeouts and deliveries, and many teachers and other employees are out of work as schools and public buildings have closed.
Small businesses have been hit hard by the ripple effect, as the sporting games and other activity they support have been shutdown.
The White House has proposed a stimulus program of more than $1 trillion that aims to help individuals and businesses. It includes two payments to individuals to help them get by during the spring, expected to be the worst time for the spread of the virus.
"This will mark the week the recession began, March 7," said Swonk. "It's only the tip of the iceberg."
California, Texas and Washington state saw the largest increases, but other states took action this week to limit social interaction. "It underscores the unique nature of a health-induced crisis where we shut the whole economy down in a matter of weeks, not months or years," Swonk said.