But even by these recent standards, the number of jobs in April could stand out.
Economists polled by MarketWatch expect the report, which the Department of Labor released Friday, shows that wages in the United States fell by 22 million jobs last month – a decade of job gains, wiped out in a few weeks. Payroll company ADP said on Wednesday that the private sector had lost more than 20 million jobs in April, with cuts spread across each sector and employer size.
To put it in perspective: in the worst month of the last recession, the United States lost 800,000 jobs. The worst monthly loss ever recorded was nearly two million jobs in September 1945, when the country demobilized after the Second World War. (The population has grown since then, but not enough to explain the difference.)
Unemployment in April is expected to reach 15% or more, by far the worst since the Great Depression. And the deterioration happened with almost unfathomable speed: two months earlier, the rate was 3.5%, a 50-year low.
“It’s not just the magnitude of these numbers; it’s the speed at which they happen that is truly astounding, “said Nick Bunker, who directs North American economic research at the Indeed Hiring Lab.
Friday’s report will paint the clearest picture to date of economic devastation and could provide important clues to the eventual recovery. But it will also lead to complications that will make the figures difficult to interpret.
The figures will be more complete – but less timely.
It is not surprising that employers have cut millions of jobs; weekly data on unemployment benefit claims tracked the destruction. The most recent report, covering the last full week of April, showed that by and large 30 million Americans have filed for unemployment since the new coronavirus began to shut down the economy. The next weekly report, due Thursday, will likely add millions more.
These figures are more up-to-date than the monthly employment report released on Friday, which will cover hirings and layoffs until mid-April. But the monthly figures are more complete than the weekly ones, which certainly underestimate the damage. Not everyone who has lost a job is eligible for benefits, and many who fill a job have not yet applied because the flood of applicants has swamped state unemployment offices.
The monthly data, based on business and household surveys, should provide a more complete estimate of job losses. It will also reflect the extent to which hiring at companies like Amazon and Walmart has compensated them. And unlike the weekly data, which mainly counts losses, the monthly report includes data on hours of work, which will help quantify the millions of people who have kept their jobs but have seen their hours reduced.
Look beyond the restaurants.
Friday’s report will also provide the most detailed breakdown to date of job losses by sector. This could help answer a question that could be crucial for eventual recovery: to what extent has the damage spread?
the the latest employment report, based on data from early March, showed significant losses in restaurants, hotels and other industries hardest hit by the first wave of closings. These cuts were undoubtedly even larger in April, and the report will also show significant losses in retail, which has experienced a tidal wave of business closings and bankruptcies.
If the losses are concentrated in areas that have been directly affected by the virus, this could bode well for the recovery, as it suggests that the damage has been contained, at least so far. But if it has spread to sectors such as finance and professional services, this could suggest a cascading effect is underway, with laid-off workers pulling down on expenses, resulting in lost income and even more layoffs. . It could take much longer to get out of this type of hole.
The unemployment rate could be misleading.
For more than 70 years that the government has kept pace, the unemployment rate has never exceeded 10.8%. It will certainly exceed this level on Friday, and some economists believe the rate could be twice as high. This would rival the worst periods of the Great Depression, when economic historians estimate that unemployment has reached 25%.
But the rate should probably be even higher.
To be considered unemployed according to official government action, people must generally actively seek employment. (Or else they can be temporarily laid off – more on that in a bit.) But during severe recessions, people often stop looking for work because they don’t believe there are jobs available, which leads the unemployment rate to underestimate unemployment.
This problem could be particularly significant now, when not only are jobs scarce, but people are also advised to stay at home to avoid spreading the virus. In fact, the government is easing the pressure to look for work by offering more generous unemployment benefits, and many states are waiving job search requirements to qualify. And with the closure of schools and daycare centers, many parents cannot work due to their childcare responsibilities.
The Labor Department publishes several broader measures of unemployment and underemployment that address some of these problems by including people who are not looking for work or whose hours have been reduced. But the government’s job survey was not designed for a pandemic, and it is unclear to what extent it will capture all the unusual nuances of the current crisis.
“There is not a single number on the job market that will tell you everything you want to know,” said Erica Groshen, economist at Cornell University, who headed the Bureau of Labor Statistics for administration Obama.
Some economists recommend considering a simpler measure: the share of the population that East job. This is subject to fewer defining challenges and should provide a clearer picture of the damage. Expect it to show the largest one-month decline ever.
How many job losses are permanent?
Perhaps the most important factor determining the speed of recovery is the number of people who can resume their jobs when businesses reopen.
Friday’s report will not answer this question. But that could provide a clue. The monthly figures distinguish between those who have lost their jobs permanently and those who are temporarily laid off or on leave. The larger the share of workers in the second category, the faster the recovery could be.
The problem is that many temporary layoffs could turn into permanent job losses as the closings continue.
“One thing that worries me is that temporary layoffs won’t stay that way,” said Martha Gimbel, economist and labor market specialist at Schmidt Futures, a philanthropic initiative.
It might be wise to take these figures as a benchmark: workers who have been temporarily laid off may not necessarily return to their old jobs, but they could, if the recovery goes smoothly. In most cases, workers who are permanently laid off will have to start their job search from scratch.
“Temporary layoffs are a measure of what could happen if we act properly,” said Ms. Gimbel.
There is more uncertainty than usual.
The monthly employment figures are a preliminary estimate and are still subject to revision. But this month there is another reason to be careful.
For one thing, the pandemic has made it difficult to collect the data on which the numbers are based. The call centers where workers investigate are closed. The in-person interviews were suspended. And households and businesses have been disrupted to make them less likely to respond to surveys.
Widespread trade disruptions could also distort data in another way. Government statisticians use a model to estimate the number of businesses that opened or closed in a month. But when economic conditions deteriorate quickly, the model may have trouble keeping pace. During the last recession, the Labor Department initially underestimated job losses, and the collapse was much faster.
The Labor Department said last week that it would modify the model to better reflect the current situation, but has not released any details.