Jobless claims nearly doubled to 6.6 million for the week ending on March 28—an increase of 3.3 million and the largest claims report in the seasonally adjusted series, according to the U.S. Department of Labor.
The prior week’s report was revised from 3.28 million to 3.3 million. The four-week moving average for claims was 2.61 million, which is an increase of 1.6 million from the prior week’s average.
Additionally, the seasonally-adjusted insured employment rate was 2.1% for the week ending on March 21, which is an increase of 0.9 percentage points from the previous week’s unrevised rate.
Alaska had the highest insured unemployment rate for the week ending on March 14 was Alaska at 2.8%, followed by Connecticut (2.7%); New Jersey (2.6%); California (2.4%); and Massachusetts (2.3%).
Tendayi Kapfidze, Chief Economist at LendingTree, said Thursday’s claims came in higher than expected and emphasized that the nation is in “unknown territory” when it comes to the extent and duration of COVID-19’s impact on the economy.
Despite the passing of the $2.2 trillion CAREs Act, Kapfidze said these claims represent a significant loss of income to many Americans and disrupt their ability to meet financial obligations.
“This will be reflected in a surge in missed payments on mortgages and other consumer finance products. Many of these will be alleviated by programs such as forbearance so the increase in defaults may be muted in the near term,” he said.
The U.S. Department of Housing and Urban Development on Thursday announced additional measures to assist homeowners with FHA-insured mortgages who have been impacted by COVID-19.
HUD states, effective immediately for those who cannot make mortgage payments due to the virus, servicers must extend deferred or reduced mortgage payment options for up to six and also provide an additional six months of forbearance if requested by the borrower.
This measure implements provisions contained in the CAREs Act signed by President Donald Trump on March 27.
“The last thing any of us wants is for Americans to lose their homes unnecessarily while we continue to fight this invisible enemy. If you’re struggling, immediate help is now available. The FHA will continue to work with stakeholders to ensure that the loss mitigation options that are offered for both forward and reverse borrowers are appropriately tailored for the present situation,” said Dr. Benjamin Carson, Secretary of HUD.
Kapfidze added long-term risks will be building as the economy will return to its prior state once the crisis passes, but notes there is likely to be an “extended period of rising defaults.”
Kapfidze added the shelter-in-place guidelines will suppress the housing market as potential buyers have left the market.
NerdWallet's Home and Mortgage Specialist, Holden Lewis, said the rise in unemployment will cut into home sales, but "not necessarily disastrously."
"Plenty of people still have jobs and are still in the market to buy a home. Some first-time home buyers will look at this spike in unemployment and conclude that they'll face less competition while shopping for a home," Lewis said. "Those would-be buyers will feel motivated to buy if they believe they're less likely to get involved in bidding wars."
He said, though, this pandemic could impact housing "for years," as lingering effects of the Great Recession persist.
"We're still feeling the effects of the housing crash that began in 2008, because landlords ended up buying a lot of foreclosed homes, exacerbating the shortage of entry-level homes available for sale today," he said.
Sam Khater, Freddie Mac's Chief Economist, said nearly 10 million Americans have become unemployed over the past two weeks, with many unemployed working in retail, hospitality, and food services.
"The impact is already being felt in durables spending, as auto sales have fallen by a third and home showings data indicate that real estate activity is down significantly," Khater said. "However, the pending economic stimulus is on the way and should provide support for both consumers and businesses.”
For comparison, Danielle Hale, Chief Economist for realtor.com, said it took 16 weeks during the Great Recession—from January to May 2009—to hit 10 million jobs lost. She added there may be new highs set in the unemployment rate in April and June.
Doug Duncan, SVP and Cheif Economist at Fannie Mac, called the recent job losses "unprecedented." He added California led the week with unemployment claims, rising by 700,000 from the prior week.
Hale, in reference to housing, said people are buying homes for the long-run, meaning they need to have a job and feel secure about their prospects moving forward.