The unemployment rate for March rose to 4.4% from 3.5% in February. It was the largest one-month increase in the rate since January 1975. The data doesn’t yet fully reflect the millions of unemployment-insurance claims individuals filed in the last two weeks of March due to the coronavirus pandemic.
The monthly decline in payrolls was the largest drop since March 2009, the worst month for job loss during the 2007-2009 recession. The Labor Department said Friday’s data reflect the effects of the coronavirus and efforts to contain it.
Employment in leisure and hospitality fell by 459,000, mainly at restaurants and bars. Declines also occurred in health care and social assistance, professional and business services, retail and construction.
The near shutdown of swaths of the U.S. economy due to the new coronavirus pandemic—from corner restaurants to manufacturing plants to international tourism—is inflicting damage on the labor market that economists say dwarfs the most significant economic downturns of the post-World War II era. And it is playing out in a matter of weeks, rather than years.
Forecasting firm Oxford Economics projects that by May, the U.S. will have lost 27.9 million jobs and have a 16% unemployment rate, erasing all the jobs gained since 2010 during the record-setting 113-month stretch of employment gains through February. That job loss would be more than double the 8.7 million positions cut from payrolls during the 2007-2009 recession and its aftermath. And those jobs were lost over 25 months.
The nonpartisan Congressional Budget Office said Thursday that the unemployment rate would exceed 10% in the second quarter. Economists from S&P Global, KPMG LLP and Bank of the West are projecting a similar rapid rise in unemployment. The highest monthly unemployment rate on record, going back to 1948, is 10.8%, set in late 1982 during the deep recession under President Reagan.
The data is likely only the start of much more severe job-loss figures in the coming months.
If shutdowns continue, the April jobs report, due out May 8, could show the largest ever one-month decline in the labor market.
“There’s no comparison to this shock,” said Gregory Daco, Oxford’s chief U.S. economist. “The sudden drop in economic activity is like what you’d see in an area after a natural disaster or a terrorist attack, but it’s occurring across the entire country.”
Laury Hammel said he furloughed 600 employees at six health clubs in New England and Utah on March 16.
“It was the darkest day of my career,” said Mr. Hammel, the chief executive of Longfellow Health Clubs. “I had to shut down the clubs, it was too risky for everyone involved.” Mr. Hammel closed his businesses before mandated to do so by states, but the layoffs occurred too late to be reflected in Friday’s data.
Normally, he said, the clubs are filled with the sounds of clanging weights, bouncing tennis balls and shouting fitness instructors. When reached on Thursday, Mr. Hammel said he was the only person inside a 100,000 square foot building in Massachusetts. “It’s dead in here,” he said.
Longfellow employees were paid for their final week of work, Mr. Hammel said, and donations from members will allow the company to pay for employee health insurance through April. He said he hopes government loans will allow him to keep up with insurance and maintenance payments—including keeping domes over the tennis courts inflated to avoid damage—until he can reopen.
Other businesses have announced mass layoffs in recent weeks—all too late for the March report.
Las Vegas casinos shut on March 18—and 10% of Nevada’s workforce has since sought unemployment assistance. That same day, Detroit auto makers laid off 150,000 workers. Marriott International said on March 22 that tens of thousands of hotel staff would be furloughed. Macy’s Inc., Gap Inc. and Kohl’s Corp. let workers go this week.
Beth Ann Bovino, S&P Global’s chief U.S. economist, projects 17 million jobs will be shed in the coming months and the unemployment rate will touch 13.5%. She expects it will take the economy until late 2022 to recover those lost jobs, and, given population growth, the unemployment rate won’t return to recent lows until 2023.
Such a recovery would be fast relative to recent recessions, but shows that the impact of the pandemic, even if lasts for a few months, will stay with the labor market for years.
“Business balance sheets are damaged, and we don’t know how many businesses will not survive,” she said.
Other economists have somewhat more positive—though still dire—forecasts for the labor market.
Forecasting firm IHS Markit projects 14 million jobs will be lost by December, based on the expectation that employment will fall sharply this spring and edge lower for the remainder of the year. The firm expects the unemployment rate to peak near 10%, or close to previous records.
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Joel Prakken, IHS Markit chief U.S. economist, said the firm’s forecast assumes a pickup in hiring among other businesses.
“I think there will be more of an offset than some realize,” he said, pointing to hiring announcements by grocery stores, online retailers, warehouses and pharmacies. Mr. Prakken projects employment will return to early 2020 levels by fall 2022. Next year, he said, it won’t be unusual for monthly jobs reports to show 700,000 or more jobs added.
“The recovery will be much faster than from past downturns,” he said.