A record-long streak of U.S. job growth ended suddenly in March after nearly a decade as employers slashed hundreds of thousands of jobs because of the viral outbreak that has all but shut down the U.S. economy. The unemployment rate jumped to 4.4% from a 50-year low of 3.5%.
The job loss of 701,000 reported Friday by the government — the worst since the depths of the Great Recession in 2009 — is still just a small indication of what’s to come. For the April jobs report that will be released in early May, economists expect at least a record 20 million losses and an unemployment rate of around 15%, the highest since the 1930s.
The enormous magnitude of the job cuts is inflicting far-reaching damage on the economies in the United States and abroad, which are widely believed to be sinking into severe recessions. As rising numbers of people lose jobs — or fear they will — consumer spending is shrinking. That pullback in spending, which is the primary driver of the economy, is intensifying pressure on any businesses that are still operating.
Economists are holding out hope that an extraordinary series of rescue actions from Congress and the Federal Reserve will help stabilize the U.S. economy in the months ahead. The key goals of Congress’ just-enacted $2.2 trillion relief package are to quickly put cash in people’s hands and incentivize companies to avoid job cuts or to soon recall laid-off employees.
The job losses during March were likely even larger than what was reported Friday because the government surveyed employers before the heaviest layoffs hit in the past two weeks. Nearly 10 million Americans applied for unemployment benefits in the final two weeks of March, far exceeding the figure for any corresponding period on record.
Last month’s job loss was derived from surveys of employers that were conducted in mid-March. The enormous layoffs that were reported over the past two weeks occurred only after those surveys had been completed.
“This was an ugly jobs report, showing that the pain in the economy started in early March, well before the spike in the weekly initial jobless claims data,” said Joseph Song, an economist at Bank of America Securities. “It is going to get much worse in coming reports.”
The nearly full point increase in the unemployment rate from February to March was the sharpest monthly rise since 1975. Virus-induced shutdowns have forced widespread layoffs throughout the economy, from hotels, restaurants and movie theaters to auto factories, department stores and administrative offices.
One sign of how painfully deep the job losses will likely prove to be: During its nearly decade-long hiring streak, the U.S. economy added 22.8 million jobs. Economists expect the April jobs report being released in early May to show that nearly all those jobs will have been lost.
Lower-income service workers bore the brunt of the job cuts in March, with restaurants, hotels and casinos accounting for roughly two-thirds of the cuts — a loss of 459,000 jobs. Retailers shed 46,000.
Yet the layoffs have also begun to creep into many other corners of the economy. Doctor’s offices sliced 12,000 jobs, the most on records dating to 1972. Law firms cut 1,700. Banks and real estate companies also cut jobs.
There were some quirks in the jobs report that suggest it may be harder than usual for the government to track the impact of the virus. The government said the unemployment rate would have been nearly 1 percentage point higher if many workers who were told to stay home because of the coronavirus — most of whom aren’t being paid — had been properly classified as temporarily laid-off. Instead, many of those workers said they still had jobs.
Even with that quirk, the number of people who said they were on “temporary lay off” soared to 1.8 million, the highest since September 2009, in the immediate aftermath of the Great Recession.
A key determinant of the economy’s future will be whether businesses can survive the shutdown and quickly rehire those workers who consider themselves to be temporarily laid off. If so, that would help the economy snap back and avoid the type of weak recovery that followed the past three downturns.
But if the virus outbreak forces businesses to stay closed into the late summer, many may go bankrupt or won’t have the money to rehire their old employees. That would mean that many workers who now consider themselves on temporary layoff could lose their jobs.
So far, some large and small businesses are still paying for health care benefits and keeping in touch with their newly laid-off workers, a slightly hopeful sign amid the flood of job cuts.
More than 90% of the U.S. population is now living under some version of a shutdown order, which has forced the closure of bars, restaurants, movie theaters, factories, gyms and most other businesses. Some hotels are closed; others are largely empty. Fast-food chains are either closed or providing only drive-through service, costing thousands of jobs.
With business activity tightly restricted, analysts expect a stomach-churning recession. Economists at Goldman Sachs have forecast that the economy will shrink at an annual rate of 34% in the April-June quarter — the worse fall on records dating to World War II. Goldman expects the economy to rebound with 19% growth in the third quarter. But even by the end of next year, the economy will not have fully recovered from the damage, Goldman projects.