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A flood of bad news on the economy is about to pour in confirming what has become quite obvious: the U.S. is sinking into a deep recession.
Crumbling consumer confidence, slumping auto sales, a manufacturing funk and rising layoffs — we’ll see all of that this week.
What we might not see right away, however, is the full scope of the damage to the labor market.
See: MarketWatch Economic Calendar
The U.S. employment report for March, due Friday could show anything from a small gain in new jobs to a large decline. The range of predictions from economists polled by MarketWatch run from an increase of 100,000 to a loss of 700,000.
The astonishingly wide range of forecasts reflects the timing of the March jobs report. Businesses that responded to the government’s survey submitted their answers based on how many people they employed in the first two weeks of the month — just before all heck broke loose.
Read: Trump weighs whether coronavirus-induced shutdown doing ‘more harm than good’
As a result, the unemployment rate won’t reveal how badly the labor market has deteriorated. Most forecasters see the jobless rate climbing to around 4.5% from a 50-year low of 3.5%. It won’t be until the April employment report a little over a month from now that the really bad numbers show up.
The long delay means the weekly tally of new jobless claims — reflecting layoffs — is the best and most up-to-date measure of what’s going on. And what jobless claims is telling us is that the U.S. economy is in a world of hurt.
New claims skyrocketed by a record-shattering 3.28 million last week, almost five times the previous all-time high. And many economists think the number of new claims in Thursday’s report could reach as high as 5 million.
Read: Record surge in the number of Americans getting laid off is just getting underway
Also: New jobless claims surge the most in Pennsylvania—but barely rise in Utah
It’s always tough for anyone to lose a job, but as a salve of sorts the people laid off will receive extended and enhanced unemployment benefits. The $2 trillion financial-rescue package assembled in Washington makes many more Americans eligible and sharply increases benefits.
“As harrowing as these numbers are, it should be kept in mind that this is the system working, and with the added federal funds coming shortly, the unemployment checks will provide an important cushion for consumer spending,” said chief U.S. economist Michael Feroli of J.P. Morgan.
Still, Washington’s largesse can’t stop the mounting damage to the economy.
Auto sales in March, for example, are forecast to slow to a 13 million annual rate from nearly 17 million just a month ago. Some even think it could plunge to around 10 million. Similarly, the closely watched ISM index of manufacturing activity is seen tumbling to the lowest level since the end of the 2007-2009 Great Recession.
Worried about their health and their jobs, Americans are rapidly losing their confidence in the immediate future.
A daily survey by Morning Consult and the consumer sentiment index in March have both taken a plunge. The March survey on consumer confidence is likely to show a big dropoff.
The oncoming recession and crisis of confidence won’t fade quickly despite the best efforts of Congress and President Trump to keep the economy afloat with helicopter money. What matters most is how quickly the COVID-19 virus is contained, the answer to which won’t be known for at least a few more weeks, if not longer.
“There’s no doubt this massive package is a very important step in shoring up the U.S. economy, but none of the spending in it or in any subsequent bill will be a quick fix,” said Eric Winograd, senior economist at AllianceBernstein. “As long as the public health situation requires broad-based shutdowns and social distancing, it will be impossible to restart the economy.”
