As the economic data catches up with the COVID-19 pandemic, we’re poised to start seeing many economic indicators at historic levels or levels we haven’t seen since the Great Depression. One example of this is jobless claims, also referred to as unemployment claims, which set a new record the week ending March 28, 2020, when 6.6 million people filed for unemployment.
While the number of jobless claims set a record at the federal level, the impact at the state level has also been unprecedented. In the coming weeks, many states will surpass the number of claims filed throughout the entirety of 2019—and that’s if they haven’t already.
The automotive sector has played a role in the jobless claims number, but due to self-isolation policies, leisure, hospitality, and retail have had the largest impact. A turnaround will happen though. When the self-isolation guidance from the federal and state levels ends, Americans will resurface and go out once again. Demand for services and goods (like vehicles) will return and the jobs will follow, but it might take some time before we reach a new normal.
How jobless claims impact the automotive industry
The increase in jobless claims has two different impacts on the automotive market:
- People who are filing claims after being laid off or placed on furlough are likely putting any plans to buy a vehicle on hold. Without employment, they’re likely to buy a vehicle only out of necessity.
- Consumer confidence may decline among employed consumers as a result of the 10 million jobless claims filed over the past two weeks. As confidence wanes, they too may be less likely to purchase a vehicle.
In either case, consumers who are purchasing vehicles are likely to turn to the used vehicle market or look to lease a vehicle to keep monthly payments as low as possible.
Why continuing to track jobless claims is important
Historically, jobless claims have trended upward several months prior to the start of the last six recessions. In this case, though, jobless claims aren’t a leading indicator because it’s the COVID-19 pandemic causing a recession. What we can learn from the record number of claims filed last week instead is just how widespread the pandemic’s impact is. Jobless claims also indicate which states have the largest percentage of its labor force impacted and which areas may take longer to recover.
I’ll continue to track jobless claims as a key indicator as we exit the COVID-19 crisis. A plateau or decline in jobless claims will signal a turning point and be a good sign for the economy. Recovery will come, and possibly sooner than most expect.
If you have specific questions about economic trends and their impact on your business, please reach out to me at email@example.com, so I can address them in future posts.