Virus Vaporizes Jobs
The U.S. economy lost a staggering 20.5 million jobs in April and the unemployment rate surged to 14.7 percent. To understand just how devastating the pandemic has been to the labor market, consider this: 20.5 million is more than double the total decline in employment during and after the Great Recession; it is ten times more than the single worst month on record, which occurred in September 1945, when nearly 2 million Americans were out of work after WWII; and 25 times worse than the deepest monthly loss of the Great Recession. In one month, the virus vaporized enough jobs to slash employment levels to 20 year-ago levels.
As for the unemployment rate, in February, it matched a half-century low of 3.5 percent and now two months later, the rate is more than 3.5 times that pace. The highest rate during the last recession was a single month (Oct 2009) at 10 percent and before that, it was 10.8 percent (Dec 1982). Government records don't go back to Depression, but it's estimated that unemployment hit 25 percent in the summer of 1933.
Economists fear that the government’s report may UNDERSTATE the severity of the situation. The reason is that millions of Americans are not actively looking for work, which means they are not considered part of the labor force and not counted as unemployed. The labor force participation rate, which measures the share of workers working or actively seeking employment, fell to 60.2 percent, its lowest level since January 1973, just before women entered the labor force in large numbers.
Additionally, there may have been confusion among respondents to the household survey, which is the basis for the unemployment rate. The Bureau of Labor Statistics noted “If the workers who were recorded as employed but absent from work due to ‘other reasons’ had been classified as unemployed on temporary layoff, the overall unemployment rate would have been almost 5 percentage points higher than reported (on a not seasonally adjusted basis)”.
According to economist Joel Naroff, “Simply put, the 14.7 percent rate is a lower bound and the ‘real’ number is probably close to 20 percent,” which is close to the broader unemployment rate (U-6), which includes those working part-time and want full time and those who are not looking at all, that rate jumped to 22.8 percent, the highest on record. Other awful and historic highs were seen in the Hispanic unemployment rate (18.9 percent) and the black unemployment rate (16.7 percent).
No industry was spared from the damage: leisure and hospitality, retail, professional and business services and education and health. Naroff notes, “the declines were so broad based that fewer than five percent of the 258 private industries posted a payroll gain. Even at the worst point in the Great Recession, over fifteen percent of the industries posted gains.”
This past week saw even more dire announcements of what could come next: high-end retailer Neiman Marcus and once popular J. Crew both filed for chapter 11-bankruptcy protection; airlines, like Virgin Atlantic, United and manufacturer Boeing have announced cutbacks; and even in Silicon Valley job losses are piling up as Airbnb slashed a quarter of its staff; Uber cut 14 percent of staff; and Lyft is laying off or furloughing 17 percent of its workforce.
Big questions loom for the U.S. economy, like how many of the temporary layoffs will become permanent and how many small businesses will survive. A survey of small businesses by the Society for Human Resource Management (SHRM) found that about 60 percent of business owners surveyed said they've lost revenue as a result of the coronavirus and related stay-at-home orders. If the pandemic lockdown continues, 12 percent said their businesses could not last another month and 52 percent said they would fold within six months.
Naroff said that while government efforts have created “a temporary lifeboat for many businesses and households, when funds begin to run out, they will have to stand on their own.” Those lifeboats need to stay afloat for another three months, after that time, they could be remembered as ineffective and sink the fortunes of many Americans.
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