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Thursday, December 8, 2022

20.5 Million Jobs Lost in US Over Covid-19 Pandemic

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The U.S. economy lost a staggering 20.5 million jobs as many businesses shut down to slow the spread of COVID-19. April’s jobs report shatters records. Never before has so much economic activity come to a sudden, screeching halt.

The unemployment rate skyrocketed to 14.7% in April, from 4.4% in March – blowing away the previous 10.8% record, set in 1982. 15.9 million Americans became “unemployed” in April, bringing the total to 23.1 million. The majority of the unemployed – 18.1 million – reported to be on temporary layoff. Permanent job losses increased by 544k to 2.0 million.

However, the headline jobless rate undercounts the number of Americans who lost their jobs due to COVID-19. Employment fell by 22.4 million and the number of persons not in the labor force who currently want a job nearly doubled in April to 9.9 million. If these people were counted as unemployed the unemployment rate would be 21%.

Job losses were widespread in the payrolls survey. The largest declines were again in leisure and hospitality (-7.7 mn or 47% m/m), almost three quarters of which were at food services and drinking places (-5.5 mn). Employment also fell in arts, entertainment and recreation (-1.3 mn) and in accommodation (-839k). Notable declines also occurred in health care (-1.4 mn), as jobs were shed at shuttered doctor’s, dentist’s and other health care provider offices, and in social assistance (-651k), which was largely child care services.

Professional and business services shed 2.1 million jobs in April, matching the decline in retail trade. Notably, the component of general merchandise stores that includes warehouse clubs and supercenters gained 93,000 jobs.

On the goods-producing side of the US economy, manufacturing shed 1.3 million positions, construction fell 975k and mining lost 46k jobs.

Government employment fell 980k led by state and local losses in education.

Average hourly earnings was up 4.7% versus a year ago in April. However, the BLS noted that the increases in average hourly earnings largely reflect the substantial job loss among lower-paid workers.

As was the case in March, data collection for both surveys was affected by the coronavirus (COVID-19) pandemic. The household survey response rate was about 13 percentage points lower than usual, although the response rate in the establishment survey was essentially unchanged. Also, as in March, the BLS noted a large increase in the number of people who were employed but absent from work for “other reasons”. Had they been counted as unemployed, the rate would have been “almost 5 percentage point higher”. Though some of these absent employees may still be being paid by their employers.

Key Implications

April’s job losses were about as bad as analysts had expected after watching jobless claims grow by millions each week since COVID-19 led many businesses to close and lay off staff. We know that the April employment report will be the first of many record-setting data reports, in a quarter that is expected to contract at an eye-watering pace (forecast update). What we don’t know is how quickly economic activity will pick up again. This will largely depend on how well the virus is contained.

That is the biggest uncertainty for forecasters. Some states have started to gradually lift the restrictions on activity, but whether consumers and businesses are confident to resume their previous activities remains to be seen. That reticence could weigh on the pace of the rebound in the coming months.

The fact that so many of the job losses are temporary is encouraging, and suggests businesses will have an easier time re-opening once they are confident doing so. However, the millions of workers who have left the labor force will need to be drawn back in, and this process could take time. This means the economy could be operating at a lower capacity for some time.

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