Stocks Surge as Washington’s Aid Package Advances: Live Updates

The nearly 3.3 million new jobless claims filed last week dwarfed any previous weekly figure. Until now, the record occurred in the fall of 1982, when 695,000 Americans applied for benefits in one week. At that point, the United States was more than a year into a recession, and the unemployment rate had passed 10 percent.

In that case, the recession was caused not by a health crisis, but by a decision by political leaders and the Federal Reserve that raging inflation had to be shoved down, despite the cost to workers. The central bank sharply reduced the money supply while benchmark interest rates neared an astounding 20 percent.

Industries that relied heavily on borrowing like construction and manufacturing were hit hard. The jobless rate in construction reached 22 percent; among autoworkers, it was 24 percent.

Today, the circumstances are markedly different. Despite uneven rewards, the economy had achieved the longest expansion in history. The jobless rate had been below 4 percent for more than a year. A preoccupation of the Fed was raising the persistently low inflation rate toward 2 percent. Interest rates are near zero.

Efforts to slow the spread of the coronavirus meant the service industry bore the initial brunt of layoffs — workers at restaurants, bars, hotels, nail salons, gyms and more.

“This will probably be the world’s first recession that starts in the service sector,” said Gabriel Mathy, an assistant professor at American University.

Article source: https://www.nytimes.com/2020/03/26/business/stock-market-today-coronavirus.html