The Grand Central Market in Los Angeles at lunchtime Monday. Layoffs grew earlier this spring as the coronavirus led states to shut down or restrict service at restaurants, hotels and more.
Photo: Frederic j. brown/Agence France-Presse/Getty ImagesWASHINGTON—The number of U.S. workers filing for unemployment benefits weekly during the coronavirus pandemic has remained in record territory, but in recent weeks has dropped to about half the peak of 6.9 million touched in late March.
Weekly jobless claims—though still numbering in the millions, well above the prior weekly record of 695,000, set in 1982—suggest the wave of unemployment caused by the pandemic could crest as soon as this month. Still, the layoffs that already occurred are likely to cause the unemployment rate, at a 50-year low as recently as February, to jump to a record high with April’s number, due out Friday. The figures go back to 1948.
“The decline has been sharp, which raises the possibility that we reached the bottom quickly,” Michael Moran, an economist at Daiwa Capital Markets, said. He said he expects the peak of unemployment triggered by the pandemic to occur in April or May, noting that most nonessential businesses have already closed and there are signs the virus’s spread is easing in some areas. “Parts of the economy are already starting to reopen,” he said.
Layoffs grew at a pace not seen on records dating back to 1967 earlier this spring, when states mandated shutdowns of large parts of the economy. The orders swiftly closed restaurants, hotels and sports stadiums, then spilled over to nonessential medical offices, construction sites, government operations and white-collar jobs.
Economists say it could still be many months before the labor market returns to a point when U.S. employers consistently add more jobs than they subtract. And it probably will take years for the economy to fully replace the millions of jobs lost in March and April.
But recent claims data hints that the flood of layoffs is starting to abate.
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Companies including online retailers, delivery services and grocery stores have increased hiring, and others are placing workers back on payrolls to qualify for loan forgiveness from the government. Other businesses are bringing employees back as they see some increase in demand. Businesses are being allowed to reopen in South Carolina, Georgia, Texas and elsewhere, though often with restrictions.
Those actions should put downward pressure on new claims and the number of workers on unemployment rolls in the coming weeks.
Famous Dave’s of America Inc., a restaurant chain that operates in 31 states, furloughed 2,700 workers in March—about 85% of the staff, Chief Executive Jeff Crivello said. Doing so allowed workers to tap unemployment benefits, including an additional $600 in weekly federal relief included in the stimulus package, he said.
The restaurant chain has recalled some of those workers in recent weeks, first to assist with delivery and takeout services and now to reopen restaurants in Tennessee and Oklahoma. Mr. Crivello said he expects most workers to return, even those whose unemployment benefits exceed their forgone wages. “People are interested and willing to come back,” he said.
Economists expect 3.1 million claims were filed last week, about half the number at the national late-March peak. Claims have declined from top levels in nearly every state, with some states seeing sharp declines.
In Michigan, around 81,000 workers filed for unemployment benefits in the week ended April 25, down 79% from a peak of 389,000 the week ended April 4, as layoffs in manufacturing, retail and hotels and restaurants eased. The number of people filing claims is likely to remain elevated, however, said Patrick L. Anderson, chief executive of Anderson Economic Group, an East Lansing-based consulting firm.
“We have some uncharted territory coming up in May and June, where employers are going to start insisting that workers come back and some won’t come back,” he said, since some workers would prefer to collect unemployment benefits and limit their risk of illness by staying home.
He said another challenge for Michigan is the role of the auto industry, which employs about one in 25 workers in the state. Restarting auto manufacturing will require coordination across supply chains that span states, Canada and Mexico. “You need not one plant but 10 plants to open up in order for industry to regain its footing,” he said.
Idaho, California, Pennsylvania and New Jersey are among the states where the level of claims declined more than 65% from recent peaks.
Some states have seen smaller drops. In Texas, unemployment claims have fallen by 20% since the peak week. The oil and airline industries are a factor, said Robert Dye, chief economist at Comerica, a Dallas-based bank.
He said the energy sector is about 10% of the state’s economy and the decline in oil demand is still rippling through the labor market. “There’s no way to get around the big accelerator effect of oil—and now the braking effect—on the Texas economy,” he said, adding, “We will see some leveling amongst the nonenergy part of the Texas economy in weeks ahead.”
Dallas also is the headquarters for American Airlines Inc. and Southwest Airlines Co., and the airline industry expects a slow turnaround amid uncertainty around the coronavirus.
One risk is that the record increase in unemployment will have follow-on effects in the form of lower consumer spending. That could cause an acceleration in job losses again later this year, or turn temporary furloughs into permanent layoffs. Already some retailers, such as J.Crew Group Inc. and J.C. Penney Co., are contemplating broader restructurings, which could include store closures, after first just shutting stores on a temporary basis.
Harvard University economist Raj Chetty said a sharp drop in job postings in late April makes him skeptical that the worst is behind us.
“If people are not hiring, that’s both a sign that lots of folks who are unemployed are obviously not going to get jobs very easily, but also that employers are not sanguine about the prospects going forward,” he said. “That could mean more layoffs and retraction coming down the road.”
Write to Eric Morath at eric.morath@wsj.com
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