New York: The longest stretch of job creation in US history came to a halt last month, the Labor Department reported Friday, another reflection of the coronavirus pandemic that has brought the economy to a virtual standstill.
Compared with the astounding numbers of people recently applying for unemployment benefits - nearly 10 million in the previous two weeks - the figure announced Friday was less striking: a loss of 701,000 jobs. But the data was mostly collected in the first half of the month, before stay-at-home orders began to cover much of the nation. With that, what had been a drip, drip, drip of job losses turned into a deluge.
“As bad as this report is, next month will be many orders of magnitude worse,” said Michael Gapen, chief U.S. economist at Barclays. “This is the initial slippage of the labor market.” He said the March unemployment rate of 4.4% could rise to 13% in April.
Biggest monthly drop
The decline in employment last month was the biggest monthly drop since the depths of the Great Recession in 2008-09. It was paced by a net loss of 459,000 jobs in the leisure and hospitality sector.
The tally marks a stunningly abrupt end to a landmark stretch of job creation - 113 months in a row, more than twice the previous record. The gains began in late 2010 and totaled 22.2 million in an expansion that was steady, if not always spectacular.
The near-decade of resurgent hiring more than recouped the 8.7 million jobs wiped out in the recession that came just before.
For corporations, the last 10 years were a golden age. With interest rates low, many companies binged on debt even as they used excess cash to buy back stock. For workers, the results were mixed, with only modest increases in wages, especially for those in lower-paid jobs.
In the last few years, monthly hiring picked up, pushing the unemployment rate to a half-century low, including a 3.5% reading in February.
Pandemic changed everything
The closing of everything from restaurants and barbershops to retail stores and movie theaters eliminated broad swaths of employment in one blow, a loss only partly mitigated by vast government aid programs hurriedly enacted last month.
Hiring virtually stopped in March, and nonessential businesses laid off staff as stay-at-home orders spread throughout the country. If anything, the picture has grown bleaker since the Labor Department collected the March data.
“April will be markedly worse,” said Ellen Zentner, chief U.S. economist at Morgan Stanley. “Job losses will be in the millions and will make March’s losses look tiny.”
She expects the unemployment rate to peak at 16.4% in May, the highest level since the Labor Department began keeping track after the Great Depression. The record is 10.8% in November and December 1982.
Zentner expects the unemployment rate to begin coming down in June but said the recovery would be slow. “The unemployment rate went up by elevator and will come down by escalator,” she said.
During the long expansion, corporations were confident enough to run their operations with low inventories, lots of debt, little cash and supply lines that stretched across the globe. Without that cash cushion and that confidence, getting back to robust employment levels will not be easy, said Stephanie Pomboy, president of independent research firm MacroMavens.
“Companies saved nothing for a rainy day,” she said. “They will have a much more conservative approach to running their businesses in the future.”
With most workplaces shut down, laid-off workers confront a bleak landscape, with little prospect of being hired until the pandemic lifts.
One exception is in shipping and delivery, with companies staffing up to get goods to millions of customers who cannot leave home. Amazon is in the midst of hiring 100,000 warehouse and delivery workers, and said Thursday that it had already added 80,000. Walmart and Lowe’s are filling tens of thousands of new positions.
But those are rare opportunities in an economy largely frozen.
“We’re in a delicate period in which a mild recession could turn into something more damaging,” said Carl Tannenbaum, chief economist for Northern Trust. “Government policy must continue to be aggressive if we hope to put a floor under the current economic retreat.”
The March report “represents the interruption of a very long winning streak and sadder still, this is only the tip of the iceberg,” he said. “It’s clear from the data that those with more modest levels of education remain the most vulnerable members of our labor force. They are often the first to be laid off and often take a long time to get back to work.”
The seasonally adjusted unemployment rate for workers without a high school diploma rose to 6.8% in March from 5.7% in February, according to the Labor Department. Among those with at least a bachelor’s degree, joblessness rose to 2.5% from 1.9%.
Tannenbaum noted that restaurants and other food service establishments, which rely more heavily on less-educated workers, were among the businesses hit hardest as the shutdown progressed. What’s more, many of those workers cannot afford an interruption in their paychecks.