The coronavirus pandemic has brought wave after wave of catastrophic economic data: The worst decline in gross domestic product in a decade. The worst retail sales report on record. The worst week ever for unemployment claims, and then two more twice as bad as that.
But even by those recent standards, the April jobs numbers could stand out.
Economists surveyed by MarketWatch expect the report, which the Labor Department will release on Friday, to show that U.S. payrolls fell by 22 million jobs last month — a decade’s worth of job gains, wiped out in weeks. The payroll processing company ADP said on Wednesday that the private sector lost more than 20 million jobs in April, with the cuts spread across every sector and size of employer.
To put that in perspective: In the worst month of the last recession, the U.S. lost 800,000 jobs. The worst monthly loss on record was nearly two million jobs in September 1945, when the country was demobilizing after World War II. (The population has grown since then, but not enough to account for the difference.)
The April unemployment rate is likely to hit 15 percent or higher, by far the worst since the Great Depression. And the deterioration has happened with almost unfathomable swiftness: Two months earlier, the rate was 3.5 percent, a 50-year low.
“It’s not just the magnitude of these numbers; it’s the speed with which they’re happening that’s really stunning,” said Nick Bunker, who leads North American economic research at the Indeed Hiring Lab.
Friday’s report will paint the clearest picture yet of the economic devastation, and could provide some important hints about the eventual recovery. But it will also bring complications that will make the numbers difficult to interpret.
The numbers will be more complete — but less timely.
It’s no surprise that employers have cut millions of jobs; weekly data on filings for unemployment benefits have tracked the destruction. The most recent report, covering the last full week of April, showed that roughly 30 million Americans had filed jobless claims since the new coronavirus began to shut down the economy. The next weekly report, due Thursday, will probably add millions more.
Those figures are more up to date than the monthly jobs report coming Friday, which will cover hiring and firing through mid-April. But the monthly numbers are more comprehensive than the weekly ones, which almost certainly understate the damage. Not everyone who has lost a job qualifies for benefits, and many who do qualify have not yet filed a claim because the flood of applicants has overwhelmed state unemployment offices.
The monthly data, based on surveys of businesses and households, should provide a more complete estimate of job losses. It will also reflect the extent to which hiring at companies like Amazon and Walmart has offset them. And unlike the weekly data, which mostly counts losses, the monthly report includes data on working hours, which will help quantify the millions of people who have held on to their jobs but had their hours cut.
Look beyond restaurants.
Friday’s report will also provide the most detailed breakdown yet of job losses by industry. That could help answer a question that could be crucial to the eventual recovery: How far has the damage spread?
The last jobs report, based on data from early March, showed large losses in restaurants, hotels and other industries hit hardest by the first wave of shutdowns. Those cuts were no doubt even larger in April, and the report will also show large losses in retail, which has seen a tidal wave of business closings and bankruptcies.
If the losses are concentrated in sectors that have been directly affected by the virus, that could bode well for the recovery, because it suggests the damage has been contained, at least so far. But if it has spread to industries like finance and professional services, that could suggest a cascade effect is underway, with laid-off workers pulling back on spending, leading to lost revenues and still more layoffs. It could take much longer to climb out of that kind of hole.
The unemployment rate could be misleading.
In the 70-plus years that the government has been keeping track, the unemployment rate has never exceeded 10.8 percent. It will almost certainly pass that level on Friday, and some economists think the rate could be twice as high. That would rival the worst periods of the Great Depression, when economic historians estimate unemployment reached 25 percent.
But the rate probably should be even higher.
To be considered unemployed in the government’s official measure, people generally must be actively looking for a job. (Or else they can be on a temporary layoff — more on that in a bit.) But during severe recessions, people often stop looking for work because they don’t believe jobs are available, leading the unemployment rate to understate joblessness.
That issue could be particularly significant now, when not only are jobs scarce but people are also being urged to stay home to avoid spreading the virus. In fact, the government is easing the pressure to search for work by offering more generous unemployment benefits, and many states are waiving work-search requirements to qualify. And with schools and day care centers closed, many parents can’t work because of child care responsibilities.
The Labor Department publishes several broader measures of unemployment and underemployment that address some of these issues by including people who aren’t looking for work or whose hours have been cut back. But the government’s employment survey wasn’t designed for a pandemic, and it is unclear how well it will capture all the unusual nuances that the current crisis presents.
“There’s not one number about the labor market that’s going to tell you everything you want to know,” said Erica Groshen, a Cornell University economist who led the Bureau of Labor Statistics in the Obama administration.
Some economists recommend looking at a simpler measure: the share of the population that is working. That is subject to fewer definitional challenges, and should provide a clearer picture of the damage. Expect it to show the biggest one-month drop on record.
How many job losses are permanent?
Perhaps the single most important factor that will decide the speed of the recovery is how many people can go back to their jobs when businesses reopen.
Friday’s report won’t answer that question. But it could provide a hint. The monthly numbers distinguish between people who have lost their jobs permanently and those on a temporary layoff or furlough. The larger the share of workers in the second category, the faster the recovery could be.
The problem is that many temporary layoffs could turn into permanent job losses as the shutdowns drag on.
“One thing I’ve been worried about is that temporary layoffs will not remain temporary,” said Martha Gimbel, an economist and labor market expert at Schmidt Futures, a philanthropic initiative.
It might make sense to think of these numbers as a benchmark: Workers who were temporarily laid off won’t necessarily get their old jobs back, but they might, if the recovery goes smoothly. Permanently laid-off workers will in most cases need to start their job searches from scratch.
“Temporary layoffs are a measure of what could happen if we do this right,” Ms. Gimbel said.
There is more uncertainty than usual.
The monthly jobs figures are a preliminary estimate, and are always subject to revision. But this month, there is extra reason for caution.
For one thing, the pandemic has made it difficult to collect the data that the numbers rely on. The call centers where workers conduct the surveys are closed. In-person interviews have been suspended. And households and businesses have been disrupted in ways that might make them less likely to respond to surveys.
The widespread business disruptions could also skew the data in another way. Government statisticians use a model to estimate how many businesses have opened or closed in a month. But when economic conditions deteriorate rapidly, the model can struggle to keep up. In the last recession, the Labor Department initially underestimated job losses, and this collapse has been much faster.
The Labor Department said last week that it would modify the model to better account for the current situation, but it has released no details.
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