US unemployment applications nearly five times higher than previous record

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Nearly 3.3 million Americans applied for unemployment benefits last week amid a widespread economic shutdown caused by the coronavirus outbreak.

The surge in weekly applications – almost five times the previous record set in 1982 — was a reflection of the damage the Covid-19 outbreak is inflicting on the economy.

Redundancies are sure to accelerate as the US economy sinks into a recession. Revenue has collapsed at restaurants, hotels, cinemas, gyms and airlines. Car sales are plummeting and manufacturers have closed factories. Most such employers face loan payments and other fixed costs, so they are cutting jobs to save money.

Visitors to the Department of Labour are turned away at the door by personnel due to closures over coronavirus concerns  in New York
Visitors to the Department of Labour are turned away at the door by personnel due to closures over coronavirus concerns in New York (AP/John Minchillo)

Nancy Vanden Houten, an economist at consulting firm Oxford Economics, said: “What seemed impossible just two weeks ago is now reality. The US economy will experience the largest economic contraction on record with the most severe surge in unemployment ever.”

The economic deterioration has been swift. As recently as February, the unemployment rate was at a 50-year low of 3.5%. And the economy was growing steadily if modestly. Yet by the April-June quarter of the year, some economists think the economy will shrink at its steepest annual pace ever – a contraction that could reach 30%.

In its report, the US Labour Department said 3.283 million people applied for unemployment benefits last week, up from 282,000 during the previous week. Many people who have lost jobs in recent weeks, though, have been unable to file for unemployment aid because state websites and phone systems have been overwhelmed by a crush of applicants and have frozen up.

That logjam suggests that Thursday’s report actually understates the magnitude of job cuts last week. So does the fact that workers who are not on company payrolls – gig workers, freelancers, the self-employed – are not currently eligible for unemployment benefits even though in many cases they are no longer able to earn money.

With job losses surging, a significant expansion of unemployment benefits was included in an economic relief bill nearing final approval in Congress. One provision in the bill would provide an extra 600 dollars (£493) a week on top of the unemployment aid that states provide. Another provision would supply 13 additional weeks of benefits beyond the six months of jobless aid that most states offer.

The new legislation would also extend unemployment benefits, for the first time, to gig workers and others who are not on company payrolls.

Separate legislation passed last week provides up to 1 billion dollars to states to enhance their ability to process claims. But that money will take time to be paid out.

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