While each week since the coronavirus crisis took hold has brought new, devastating data revealing how more than 33 million of workers have filed for unemployment as the pandemic forces business closures and layoffs on a catastrophic scale, Friday’s numbers paint a much fuller picture of the staggering toll the coronavirus has taken on the American labor market—here’s what we learned, and what it tells us about how the economy will recover.
- In the month of April, the unemployment rate shot up to an eye-watering 14.7% as the American economy ground to a halt, with 20.5 million jobs eliminated—that’s nearly every job created over the past decade, gone in a single month.
- This revelation came as no surprise to economists: most were anticipating an unemployment rate of 16%, with some 22 million jobs lost.
- It’s a staggering blow, especially given that just two months ago, the unemployment rate was sitting at a 50-year low and the United States had been adding jobs every month for nearly a decade.
- The leisure and hospitality sectors saw the biggest losses, with 7.7 million jobs lost; as in March, the restaurant and hotel industries bore the brunt of the impact.
- The retail industry, which has seen a number of high profile bankruptcies this month, saw 2.1 million losses.
- Overall, 18.1 million people were laid off temporarily (a tenfold increase from last month), while 2 million layoffs were permanent.
"The American people are having their livelihoods ripped out from under them at a scale not seen since the Great Depression,” said Josh Lipsky, Director of Policy & Programs at the Atlantic Council's Global Business & Economics Program. “Today’s jobs report shows that shutting down the U.S. economy will create deep and long-lasting scars for America’s labor force. It is clear there will be no ‘V’ shaped bounce back from the depths of this shock.”
Prior to April, the largest monthly job loss on record was 1.9 million jobs in September 1945, at the end of World War II. The worst losses during the height of the Great Recession came in March 2009, when 800,000 jobs were eliminated. The highest unemployment rate ever recorded (since record-keeping began in 1948) was 10.8% in 1982 during the recession in the early years of that decade. During the Great Depression in the 1930s, jobless rates rose well above 20%, peaking at almost 25% in 1933 (the Bureau of Labor Statistics estimates data for this period).
The unemployment rate in March ticked up to 4.4% from 3.5% in February, but that data didn’t yet reflect the full magnitude of the millions of job losses in the United States because data was collected in the middle of the month, before most of the shutdown began.
WHAT TO WATCH FOR
The New York Times points out that losses in the finance and professional services sectors—which indicate that stress on the labor market is bleeding beyond the businesses that are most directly impacted by the shutdown—point to a long, slow recovery. Friday’s report showed that those sectors lost more than 2 million jobs, which could suggest a more painful recovery. The manufacturing and construction industries also saw significant losses.
The report also provides a breakdown of temporary layoffs and permanent ones, which sheds some light on whether workers are planning on returning to their jobs. More temporary layoffs means that many workers are planning to return to the jobs they lost—a hopeful sign. In April, 88% of layoffs were temporary. In March, that number was 47%, and in February temporary layoffs accounted for 29% of losses.
There’s more to the story than just layoffs, say researchers at the Federal Reserve Bank of Atlanta. According to a new report this month, the coronavirus crisis has caused three new hires for every 10 layoffs. The researchers say this result lines up with reports of mass hiring at Amazon, Walmart, CVS Healthcare, Dominos Pizza, and other companies in the sectors that have seen a bump in demand because of the pandemic.
WHAT WE DON’T KNOW
As states like Georgia, Texas, and California take their first tentative steps toward reopening, we can’t say for sure what the new economic normal will look like. Plus, emergency government initiatives like the Paycheck Protection Program for small businesses are still underway, and it's too early to say how effective they have been (thought one recent report from UBS suggests the PPP may have prevented the loss of several million jobs).
And government numbers themselves don’t always tell the full story. Even though total claims have declined from week to week, for example, the unemployment situation is likely more dire than the data reflect. A study two weeks ago from the Economic Policy Institute found that for every ten people who successfully filed an unemployment claim over the last month, another three to four people attempted to make a claim but were unable to get through states’ overburdened systems.
Friday’s data also understates the magnitude of the damage to the labor market. Because the government only counts those who are actively looking for work in its unemployment numbers, the data doesn’t take into account discouraged workers who have stopped looking.