March was the worst month for unemployment claims since the Great Recession, and the scale of job losses in April is projected to be “unprecedented,” economists say.
The U.S. Bureau of Labor Statistics released its March jobs report on April 3, and the unemployment rate rose to 4.4%.
Commenting on the report, PNC Chief Economist Augustine Faucher noted this was the first month of job losses since September 2010 and the biggest month of job losses in exactly 11 years.
“The hit to the U.S. labor market in March from the viral recession was far larger than expected,” he said. “(Total nonfarm) employment fell by 701,000, according to the (BLS) survey of employers, compared to the consensus estimate of losses of around 100,000.”
In the prior 12 months, nonfarm employment growth had averaged 196,000 per month.
The changes reflect the effects of the COVID-19 pandemic and the efforts to contain it.
Employment in leisure and hospitality fell by 459,000 jobs, mainly in food and beverage establishments, the BLS said.
Notable declines also occurred in health care and social assistance, professional and business services, retail trade, and construction, although “most major industries lost jobs over the month,” Faucher said.
The jump in the unemployment rate was a 0.9-percentage point rise, up from 3.5% in February. This represents the highest unemployment rate since August 2017 and the biggest one-month increase in the unemployment rate since 1949, Faucher said.
The report presents statistics from two monthly surveys: The household survey (conducted March 8-14) measured labor force status, including unemployment, by demographic characteristics. The establishment survey (pertaining to the pay period that includes March 12) measured nonfarm employment, hours and earnings by industry.
As the March survey reference periods for both surveys predated many coronavirus-related business and school closures that occurred in the second half of the month — including Michigan Gov. Gretchen Whitmer’s “Stay Home, Stay Safe” order on March 23 — April numbers are expected to be much higher.
“As bad as the March job report was, April’s will be much, much worse,” Faucher said. “Unemployment insurance claims were somewhat higher (the week of March 8) but were up more than elevenfold the next week and doubled the week after that, indicating that staggering job losses will be reported next month.
“The stimulus bill may help somewhat, but the scale of job losses in April will be unprecedented.”
Kurt Rankin, vice president and economist for PNC, said the bank is forecasting a two-quarter recession (Q1 and Q2, 2020), with a rebound beginning in Q3 that gets stronger in Q4.
But this is dependent on the normal pace of economic activity resuming throughout May and June, and it’s hard to say whether this will happen based on the current medical realities, he said.
“May is likely to be slow at best, as caution reigns. I would say June is a safer assumption as far as when even the potential for normal activity could resume,” Rankin said.
“But that’s a best-case scenario that assumes that all the fiscal programs that have been passed go into effect — unemployment insurance benefits, the checks that will be going out to households, the $349 billion loan facility that will keep businesses from collapsing — and then the biggest assumption of all is that some sort of medical resolution is established and the all clear is sounded that people actually can get out and go back to work and go back to spending money.”
Rankin said the April jobs report will likely be an amplified version of the March report, with primarily the same industries seeing a continuing high number of unemployment claims.
“Anything that’s face-to-face services will be hard hit: the restaurant, leisure and hospitality industries; construction, to some degree transportation because there’s less demand for goods, so maybe that industry — warehousing/transportation — will be harder hit in April than one would expect it in March,” he said.
“Professional business services is most likely where you’ll see the work-from-home opportunities, so that should see relatively less damage, but we’ll still likely see job losses in that category because not everyone has the option to work from home, and even businesses that do have that option may have to scale back given demand has collapsed.
“Manufacturing is another industry where we would continue to expect to see losses given that demand for the goods being produced is down. Autos, for example, plummeted at 10 million units on an annualized basis. That’s almost cut in half. Anything that relies on discretionary spending, the manufacture of anything for discretionary spending has had the rug pulled out from under it.”
Rankin said since monetary policy is necessarily data-driven, it’s hard to know what to expect, as this pandemic is unlike anything that’s happened to date in U.S. history.
“Given there is no precedent for anything like this in the U.S. economy, and the U.S. economy is such a ‘Go out and spend your paycheck’-driven economy, there’s no way to extrapolate past recessions or past slowdowns in any sector to give us a confident sense of what is on the horizon.
“It will all be data-dependent, and if we get data that’s less dramatic than anticipated, then that would likely be accompanied by medical progress. If we get numbers that are worse, then that will just extend the expectation of duration of a recession.”
Household survey data
- The number of unemployed individuals rose by 1.4 million to 7.1 million in March.
- In March, unemployment rates rose among all major worker groups. The rate was 4% for adult men, 4% for adult women, 14.3% for teenagers, 4% for whites, 6.7% for Blacks, 4.1% for Asians and 6% for Hispanics.
- The number of unemployed people who reported being on temporary layoff more than doubled in March to 1.8 million. The number of permanent job losers increased by 177,000 to 1.5 million.
- The number of unemployed individuals who were jobless less than five weeks increased by 1.5 million in March to 3.5 million, accounting for almost half of the unemployed.
- The labor force participation rate, at 62.7%, decreased by 0.7 percentage points over the month. Total employment, as measured by the household survey, fell by 3 million to 155.8 million, and the employment-population ratio, at 60%, dropped by 1.1 percentage points over the month.
- The number of people employed part time for economic reasons, at 5.8 million, increased by 1.4 million in March. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.
Establishment survey data
- In March, employment in leisure and hospitality fell by 459,000. Most of the decline occurred in food services and drinking places (-417,000); this employment decline nearly offset gains over the previous two years. Employment in the accommodation (hotel) industry also declined in March (-29,000).
- Employment in health care and social assistance fell by 61,000 in March. Health care employment declined by 43,000, with job losses in offices of dentists (-17,000), offices of physicians (-12,000), and offices of other health care practitioners (-7,000). Over the prior 12 months, health care employment had grown by 374,000. In March, social assistance saw an employment decline of 19,000, reflecting a job loss in child care services (-19,000). Over the prior 12 months, social assistance added 193,000 jobs.
- Employment in professional and business services decreased by 52,000 in March, with the decline concentrated in temporary help services (-50,000). Employment also decreased in travel arrangement and reservation services (-7,000).
- Employment in retail trade declined by 46,000. Job losses occurred in clothing and clothing accessories stores (-16,000); furniture stores (-10,000); and sporting goods, hobby, book and music stores (-9,000). General merchandise stores gained 10,000 jobs.
- Employment decreased over the month in construction (-29,000). In March, nonresidential building (-11,000) and heavy and civil engineering construction (-10,000) lost jobs. Construction employment had increased by 211,000 over the prior 12 months.
- Employment in the other services industry declined by 24,000 in March, with about half of the loss occurring in personal and laundry services (-13,000). Over the prior 12 months, other services had added 89,000 jobs.
- Mining lost 6,000 jobs in March, with much of the decline occurring in support activities for mining (-5,000). Since a recent peak in January 2019, mining employment has declined by 42,000.
- Manufacturing employment edged down (-18,000). Over the past 12 months, employment in the industry has shown little net change.
- Federal government employment rose by 18,000 in March, reflecting the hiring of 17,000 workers for the 2020 Census.
- Employment in other major industries, including wholesale trade, transportation and warehousing, information and financial activities, changed little over the month.
The April jobs report is scheduled to be released on Friday, May 8.