US faces unemployment crisis amid record trade drop

More than 42 million people have been laid off since the coronavirus lockdowns began in the United States, and the May unemployment rate is set to rise even further

In further signs of the crisis facing the world's largest economy amid the coronavirus pandemic, new data Thursday showed a record plunge in US exports as layoffs exceeded 42 million.

The two key reports on economic health indicate that even as Wall Street regains its strength and some industries show signs of recovery as virus lockdowns ease, the United States is not out of the woods yet.

The Labor Department said 1.87 million workers filed new jobless claims last week, 249,000 less than the week prior but still a grievous figure nearly three times higher than the weekly record in the pre-pandemic economy.

"This and other indicators suggest not that the job market is improving but that it's getting bad less quickly," Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities think tank, said on Twitter.

The decline in initial claims means the wave of layoffs caused by businesses closures ordered in mid-March to stop the spread of COVID-19 are slowing.

More than 42 million workers lost their jobs, at least temporarily, since mid-March, but the new data showed 21.5 million people were receiving benefits in the week ended May 23, an indication that millions either had their benefit claims rejected or have since been rehired, or more likely a combination of the two.

After falling last week, the insured unemployment rate ticked up half a point to 14.8 percent -- a huge number of Americans not working, but that only reflects those with unemployment benefits.

That is a grim omen for Friday, when the Labor Department releases the all-important May jobs report and likely show national unemployment increasing to closer to 20 percent from 14.7 percent in April, which was the highest unemployment rate in 90 years.

Despite the grim economic picture, Wall Street indices opened lower but were trending upwards by mid-morning, continuing a rally that had the tech-rich Nasdaq nearing its all-time high at the close of trading on Wednesday as investors are optimistic about the reopening of the economy.

But Bernstein warned high unemployment is here to stay.

"(The) National unemployment rate is likely at or above 20 percent, twice that of the Great Recession peak, and full employment years away," he said.

However, Labor Secretary Eugene Scalia said he remains confident the unemployment rate will fall below 10 percent by year end.

In an interview with Fox News, Scalia said "many of these jobs will come back quickly because they were still there."

Trade slammed

Meanwhile, the Commerce Department reported that US exports and imports dropped by a record amount in April and the trade deficit jumped more than $7 billion to $49.5 billion and the coronavirus forced shuttered businesses and closed down transportation worldwide.

Compared to March, exports of US goods and services fell more than 20 percent or $39 billion to $151.3 billion, the lowest level in 10 years.

Imports in the month dropped to $200.7 billion, a more modest 13.7 percent or $32 billion decrease.

"Trade activity slowed again, this time nearly to the worst of the contraction in the financial crisis," Oxford Economics said in an analysis.

"We think trade activity will see its worst year on record in 2020."

For the year to date, the US trade gap swelled by $26 billion, or more than 13 percent, compared to the same period of last year, according to the report.

The impact of the COVID-19 shutdowns were widespread throughout the data and in all industries and products, including aircrafts, air travel, oil, auto parts and clothing.

Travel alone fell nearly $3 billion in the month, the report said.

Although the collapse of trade in most cases meant the US deficit in goods alone narrowed with most countries, the deficit with China jumped to nearly $26 billion from $17 billion in March.

"Exports and imports will continue to be restrained by weaker global growth and falling demand at home and abroad in the aftermath of the virus outbreak," Rubeela Farooqi of High Frequency Economics said in an analysis.