After four weeks of record-shattering initial unemployment insurance claims, the most recent jobs report revealed what most Americans already knew: the current U.S. employment situation is dire. Total nonfarm employment fell by 20.5 million in April, wiping out a decade of employment gains in a single month as the domestic economy ground to a halt in an effort to curb the spread of the coronavirus.
The speed and magnitude of the job losses were shocking. To put the April data in perspective, consider that during the worst month of the 2008-2009 Great Recession, the U.S. lost 800,000 jobs. In fact, to approximate the scale of the current losses, labor economists had to go all the way back to September 1945 when demobilization in the U.S. at the end of World War II shed 2 million jobs from the workforce and drove the unemployment rate to nearly 25 percent.
No Industry Was Spared
Job losses in April were broad-based, but as expected the biggest losses were felt by the leisure and hospitality industry which lost 7.7 million workers. Almost three-quarters of that decline occurred in food services and drinking establishments alone.
No industry was spared: education, business and professional services, retail, manufacturing, construction, government, transportation, trade, financial services, and information services all posted significant declines. Even employment in healthcare services contracted, led by job losses in dental and physician offices.
The Unemployment Rate Soars
The official unemployment rate in April jumped from 4.4 to 14.7 percent, topping the post-war record of 10.8 percent, but short of the Great Depression high of nearly 25 percent. The April numbers represent a stark reversal for a jobs market that had been very robust only two months ago.
The jobs data also illustrate how the economic effects of the pandemic have not been felt equally. Women became unemployed at higher rates than men. Hispanics were hit harder than whites, blacks, and Asians. Those without high school diplomas fared the worst as their unemployment rate tripled, and nearly one-third of teenagers are now out of work. These disparities reflect the industries in which minorities, young people, women, and those with less education, tend to be employed — blue collar service jobs that quickly disappeared under mandatory shutdown orders.
Top economic advisors to the president believe the unemployment rate will continue to climb, reaching ever closer to that mid-century record after World War II. Larry Kudlow, head of the president’s Council of Economic Advisors, told ABC News “I don’t want to sugarcoat it because I think the numbers for May are going to be also very difficult.” During an interview on the April jobs report, Trump advisor and economist Kevin Hassett said the unemployment rate will “probably” be “close to 20 percent” next month – and some economists believe we’re already there.
A potential silver lining to the otherwise miserable jobs report: almost 80 percent of the unemployed persons in April were temporary layoffs, suggesting many workers could quickly return to gainful employment as soon as it is safe to do so.
One attribute the jobs report did not assess was the potential influence of the temporary $600 per week pandemic unemployment insurance “bonus” payment on the number of unemployed. For some low-income workers, the combination of traditional weekly unemployment benefits and the temporary pandemic bonus exceeds their income from work, creating (in theory) a perverse incentive for benevolent employers to temporarily layoff their staff during government-imposed lockdowns. The bonus payments will expire at the end of July unless extended by Congress. Lawmakers should ask the Bureau of Labor Statistics to add a question to next month’s household survey and attempt to measure this effect, or at least determine if it exists, before considering legislation to extend the payment.