Implications: Forget about housing starts for a minute. Workers filed 5.25 million new claims for unemployment insurance last week, continuing the trend of catastrophically high readings we've seen since government shutdowns of the economy to fight Coronavirus began a month ago. The (semi-)good news is that initial claims fell 1.37 million from the week prior and it looks like initial claims peaked two weeks ago at 6.87 million. Continuing claims, data for which lag initial claims by one week, hit a record high of 11.98 million and are likely to rise again in next week's report. In the past three weeks, the share of workers covered by the unemployment insurance system who are getting benefits has increased to 8.2% from record low of 1.2%. To put that 8.2% in perspective, the highest level in the past 50 years was 7.0% in 1975. The peak at the end of the 1981-82 recession was 5.4%; the peak at the end of the 2007-09 recession was 5.0%. And there are still two more weeks ahead of increasing continuing claims before we get to the week that included the Labor Department survey for the official unemployment rate for the month. As a result, the jobless rate for April will almost certainly be above 10% and even a 15%+ rate is possible. Switching focus to the housing sector, housing starts posted the largest monthly drop since 1984 as uncertainty surrounding future buyer demand, supply chain disruptions, and social distancing measures for work crews led to a fall in building activity. The large headline drop was caused by declines in both single-family and multi-unit construction. Keep in mind, only the second half of March was heavily affected by the Coronavirus, so in the months ahead the data are likely to get even worse. That said, residential construction has been classified as "essential" in most areas of the country, so crews are still able to work. Because of this we expect the housing sector to weather the current economic contraction better than most. Speaking of the future, permits for new construction fell 6.8%, driven entirely by a 12% drop in permits for single-family homes. Surprisingly, multi-family permits rose 4.9% in March. Going forward, look for continued weakness in the short-term followed by a robust rebound in construction when issues surrounding Coronavirus are resolved. Based on fundamentals like population growth and scrappage, the US needs to build about 1.5 million new housing units a year, a level that was only briefly reached before the pandemic hit our shores. In other news this morning, the Philly Fed Index, a measure of East Coast factory sentiment, plunged to -56.6 in April from -12.7 in March. This is the lowest reading since 1980 and echoes a recent decline in the Empire State Index, as the effects of Coronavirus make their way into the data.
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