US: Unemployment to peak at 18% – ABN Amro

Bill Diviney, a Senior Economist at ABN Amro, expect the US unemployment rate to peak at 18%, before rapidly easing as most newly unemployed appear to be furloughs.

Key quotes 

“Our bottom-up analysis of the labour market suggests a further 7-8mn could be filing new jobless claims over the coming weeks, which would lead to a peak in the unemployment rate of 18% in April or May (depending on how quickly new claims are made or processed).” 

“After peaking, we expect unemployment to decline almost as rapidly as it rose for a time, but settling at a level well above the pre-pandemic low, we expect it to end the year at 9.4%, almost 5pp higher than February’s 3.5%.”

“Almost all of the 1 million layoffs in the March nonpayrolls data were ‘furloughed’. This suggests employers are seeing this downturn as very much temporary in nature, and that workers can quickly return to their previous jobs once restrictions are lifted.”