US Unemployment Claims Jump, Highest Since September 2017

With layoffs on the rise due to the coronavirus pandemic, government data released Thursday showed claims for US unemployment insurance have surged, particularly for hotel and restaurant workers.

Meanwhile a separate report showed manufacturing activity in Philadelphia collapsed this month as the virus continued to force businesses to shut their doors.

For the week ending March 14, initial jobless claims jumped 70,000 to 281,000, seasonally adjusted, its highest level since September 2017, the report said. Economists expected a jump, but that was far higher than the consensus forecast.

The increase was "clearly attributable to impacts from the COVID-19 virus," the Labor Department said, noting that "many states reported increased layoffs in service related industries broadly and in the accommodation and food services industries specifically, as well as in the transportation and warehousing industry."

The biggest increases were seen in Washington, site of the first US outbreak, Nevada, home to Las Vegas, and California, according to the raw data, without seasonal adjustment.

In the same week of 2019, initial claims were 219,000, the report said, and economists expect the situation to grow worse.

"Several state labor agencies have reported a sharp jump in unemployment insurance applications this week, with some even experiencing website malfunctions because of the surge," said Mickey Levy of Berenberg Capital Markets.

Meanwhile, the Philadelphia Federal Reserve Bank's monthly survey of manufacturing showed activity "fell precipitously this month" with the index plunging from a three-year high of 36.7 to -12.7, its lowest reading since July 2012 and the biggest one month drop on record.

The index for new orders also turned negative in the latest survey showing the hit to manufacturing, which is a small but important component of the US economy and already in recession due to the US trade war with China.

"Manufacturers are facing an unprecedented drop in demand, on top of huge supply chain disruption and the deranged trade war. The sector will be in deep recession for the foreseeable future," Ian Shepherdson of Pantheon Macroeconomics warned in an analysis.