U.S. Loses 700K Jobs in March, Unemployment Rate Rises to 4.4 Percent

 

Roy Maurer By Roy Maurer April 3, 2020
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woman being laid off

U.S. employers reported cutting 701,000 jobs in March, while the nation's unemployment rate rose to 4.4 percent from 3.5 percent in February. The worst employment report in a decade is the tip of the iceberg, however.

The Bureau of Labor Statistics (BLS) survey was conducted in mid-March, before many states issued stay-at-home orders and 10 million people filed for unemployment benefits. Economists expect a much worse labor market in the months ahead as the economic damage wrought by the coronavirus crisis becomes clearer.

"The longest streak of monthly jobs growth in American history has ended," said Daniel Zhao, senior economist at Glassdoor. "After 113 months of solid jobs growth, the labor market is coming to a screeching halt."

The job losses were the first decline in payrolls since September 2010 and approached the peak reached in May 2009 of 800,000.

"The March jobs report was grim, but the reality is already much worse," said Julia Pollak, a labor economist at online employment marketplace ZipRecruiter. That's because the BLS survey was fielded as employers were only just beginning to cut payrolls ahead of social distancing mandates that have shut down large portions of the U.S. economy in order to stop the spread of the virus. In addition, the BLS said that figures may be less reliable than usual because survey response rates were significantly below usual levels.

"As the coronavirus pandemic ripples through the economy, the monthly employment numbers released today show just the leading edge of the deep recession we are certainly now in," said Elise Gould, senior economist at the Economic Policy Institute based in Washington, D.C.  "We won't see the devastating job losses or large reductions in hours from COVID-19 in the employment data until the next report on May 8."

Mark Zandi, chief economist at Moody's Analytics, said that he expects the April data released in May to show that the economy will lose "somewhere between 10 and 15 million jobs" by the middle of next month. "That would be consistent with the initial claims for unemployment insurance data that we're getting," he said.

Gregory Daco, the chief U.S. economist at Oxford Economics, forecast a deeper cut of 20 million job losses by mid-April, and experts predict the unemployment rate could reach as high as 30 percent by midyear.

"We need to brace ourselves for what future reports will show," said Nick Bunker, an economist at the Indeed Hiring Lab. "This report understates the pain inflicted upon the U.S. economy. The data in coming months will certainly be worse."

Prior to the coronavirus outbreak, the economy had been rolling along with an unemployment rate of 3.5 percent, the lowest in more than 50 years, and employers were having difficulties filling open positions.

Hospitality Hit Hard

Employment in leisure and hospitality was hit particularly hard in March, mostly in bars and restaurants, falling by 459,000 and wiping out two years of job gains. "Nearly two-thirds of the job losses were in leisure and hospitality alone, where social distancing and lockdowns have hit hardest, with shuttered businesses, canceled events and travel," said Josh Wright, chief economist for recruitment software firm iCIMS.

Employment in hotels and motels declined by 29,000 jobs.

Wright added that health care employment declined by 43,000 jobs, "mostly due to fewer visits to doctor's offices and dentists."

"While the coronavirus outbreak does demand more health care workers, there are many health care workers not directly involved with the virus response who have been laid off," Zhao said.

Pollak added that business services, mostly temporary services (-52,000) and retail (-46,000 jobs) also reported large losses. Construction dropped 29,000 jobs and manufacturers lost 18,000 jobs. One of the few areas to gain in employment was government, which added 18,000 to payrolls, due mostly to the hiring of 17,000 Census workers.

Unemployment Undercounted

The unemployment rate jumped by almost a full percentage point, but even that is certainly an understatement, experts agreed.

"The unemployment rate is not capturing the full impact of the coronavirus outbreak," Zhao said. "The number of Americans working part-time for economic reasons surged by 1.45 million and an additional 1.76 million workers dropped out of the labor force, workers who would not be counted in the unemployment rate."

Pollak pointed out that the unemployment rate has risen fastest for Hispanics, increasing from 4.4 percent to 6 percent. Hispanic workers make up 17.6 percent of those employed overall, but 27.1 percent of those working in restaurants.

The number of people classified as unemployed on temporary layoff totaled 1.85 million, up from 801,000 in February, for the biggest one-month increase in records going back to the 1960s.

Distinguishing temporary layoffs from true separations and how many people end up returning to their jobs after state and city lockdowns are lifted is a critical question, Wright said.

"The BLS said that there was an extremely large increase in the number of persons classified as unemployed on temporary layoff and still that might have been an understatement," he added. "As a point of comparison, the unemployment rate quickly doubled in Louisiana after Hurricane Katrina, then dropped after a few months, but amid a lower level of total jobs. Many people moved away and some just gave up. In our current situation, the moving away part won't happen at the national level, so more people will give up, unless employers and the government act to preserve the employment relationship."

He added that "many larger employers are already thinking about how to maintain relationships with their workforce—through furloughs, reduced hours and candidate marketing campaigns—but small firms that go out of business won't have any relationships to maintain."

Wages Likely to Slow Soon

Average hourly earnings rose 0.4 percent from February and up 3.1 percent year-over-year, primarily due to lower-wage workers losing their jobs, Gould said.

"Since many of the workers who had already lost their jobs by mid-March are in lower-wage sectors, stronger wage growth reflects the dropping of lower-wage jobs from the total, which results in higher average wages for the remaining jobs, and what appears to be faster overall growth," she explained.

"But wages are a lagging indicator," Wright said. "They're likely to slow in the months ahead, but it depends on the length of the recession."

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