The U.S. economy lost 20.5 million jobs in April and the unemployment rate soared to 14.7% -- both record highs -- laying bare the starkest picture yet of the crippling gut punch delivered by the coronavirus pandemic.
In just a month, the historically dismal performance abruptly wipes nearly all the nation’s job gains since the Great Recession of 2007-09.
Economists surveyed by Bloomberg forecast 22 million job losses and a 16% unemployment rate.
The reversal has been head-spinning: The jobless rate had touched a 50-year low of 3.5% in February before rising to 4.4% the following month amid the early effects of the crisis.
The share of Americans working or looking for jobs -- which together make up the labor force -- tumbled from 62.7% to 60.2%, lowest since 1973, the Labor Department said. Many people who lost jobs didn’t look for work because of fears of catching the virus while job hunting, caring for sick relatives or watching kids who were home now that schools are closed. Also, with much of the economy shuttered, there were few jobs available.
The decline kept the unemployment rate from rising even further.
Also, many workers incorrectly said they were employed but absent from work, Labor said. If they had been properly classified, the unemployment rate would have shot up to 20%.
A hopeful sign: Of the 20.6 million workers who lost jobs in April, 18 million said they were on temporary layoff, indicating the lion’s share of the positions could come back when businesses reopen and helping the economy snap back more quickly.
"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," says economist Leslie Preston of TD Economics. "However, the millions of workers who have left the labor force will need to be drawn back in, and this process could take time."
Economist Ian Shepherdson of Pantheon Macroeconomics expects another 10 million or so job losses in May before the labor market begins to rebound in the second half of the year.
In April, job losses were broad-based across industries but particularly hammered restaurants and bars, and retail.
April’s outsize numbers reflect the nation’s emergency response to its worst health crisis in a century.
Most states shut down nonessential businesses and issued stay-at-home orders starting in mid-March to curtail the spread of the virus, closing restaurants, malls, movie theaters, offices and sports venues, and idling tens of millions of workers. Combined with a travel and tourism industry that largely ground to a halt, some 30% of America’s economy has evaporated, and the effects have rippled to white-collar businesses and their employees.
A ghastly employment report was widely anticipated after 22 million Americans filed initial claims for unemployment insurance in the weeks leading up to the mid-April jobs survey. Since then, another nine million workers have sought benefits, though they’ll likely be counted among May’s job losses.
Yet while first-time jobless claims represent the best real-time gauge of layoffs, the employment report offers a more accurate reading. Many people seeking jobless benefits during this crisis have been furloughed while others have had their hours reduced.
April's net payroll losses reflect not just layoffs but also a plunge in hiring. Job openings have fallen 28% since early March, according to Glassdoor, the job search site.
While the numbers are staggering, the economy’s medium-term outlook is uncertain. More than 40 states have started allowing businesses to partially reopen despite a still-rising number of coronavirus cases. Assuming the pandemic eases by summer, economists expect a solid recovery in the second half of the year.
But lingering consumer caution and a possible second wave of the virus is likely to continue to crimp economic activity at least until a vaccine is available, possibly by early next year, economists say. Moody’s Analytics forecasts that unemployment will end 2020 at a still-elevated 9%.
"While we are hopeful many (of the unemployed) will get back to work in the coming months, there will be severe scarring effects on the labor market for years to come," says economist Paul Ashworth of Capital Economics.
Michael Hurley, 33, of Havertown, Pennsylvania, temporarily lost his job as a quality standards manager for a marketing company in late March when the firm’s door-to-door consumer surveys were shut down.
He has applied for unemployment benefits but is still awaiting approval. Hurley’s fiancee, Shannon, is still working a second-grade teacher, but the couple has taken a big hit to their income. They’re buying lots of pasta and rice to stretch their food dollar and keeping the thermostat at 67 degrees.
If Hurley doesn’t receive jobless benefits by next week, he says he’ll have to look for a manual-labor job so the couple can pay rent and other bills.
“I am getting to the point where my funds are critically low,” he says.
Hurley graduated from college during the Great Recession in 2009, forcing him to take a job as a claims adjuster for an insurance company despite his business management degree. He says he worked hard to rise to a manager’s job at Walmart before landing his current position.
“I feel like I was starting to gain steam,” he says. Now, he worries another downturn could undo much of his accomplishments. “Did I just lose all the steam I was gaining?”
Hurley’s company has told him they expect to rehire him when the economy reopens. “They say they’re coming back but are they?” he says. “It’s a level of the unknown.”
Industries that are slashing jobs
Leisure and hospitality was hit hardest, with 7.7 million job losses, or nearly half its total employment, mostly in restaurants and bars. Professional and business services shed 2.1 million positions in a sign that layoffs that largely began in retail and restaurants have spread to white-collar fields. Healthcare and retail each lost 2.1 million jobs; manufacturing, 1.3 million; construction, 975,000 and financial activities, 262,000.
Local government lost 801,000 jobs and state governments, 180,000, as the federal government, which has rolled out unprecedented programs to respond to the crisis, added 1000 jobs.
Broader jobless measure soars
The 14.7% unemployment rate highlights only part of the economic carnage set offf by the outbreak. A broader measure of unemployment -- that includes Americans working part-time even though they want full-time jobs, discouraged workers who have stopped looking and the unemployed – leaped from 8.7% to 22.8%, highest on record.
Disadvantaged workers hurt most
Minorities and less educated workers were especially hard hit as most of the job losses affected low-wage service industries. Unemployment jumped to 16.7% for blacks and 18.9% for Hispanics. And the jobless rate climbed to 12.9% for high school graduates and 14.4% for those without a high school diploma, compared to 5.9% for workers with a bachelors degree.
Wages spike, with big caveat
Average hourly earnings increased $1.34 to $30.01, bumping up the annual gain from 3.3% to 7.9%.
The increase, however, wasn’t because of any good reasons. Rather, most of the workers who have lost jobs in industries such as retail, restaurants and hotels are low-paid, increasing average pay increases for American still working.
In coming months, the drop in demand for labor is expected to dampen wage gains.