United States: Payrolls tank by largest extent since March 2009 in the wake of the coronavirus crisis
U.S. employers cut 701,000 jobs in March, severely overshooting market expectations of a decline of 100,000 payrolls, and contrasting February’s revised 275,000 increase (previously reported: 273,000). As a result, the three-month moving average of non-farm payrolls fell 71,000 in March contrasting the 224,000-average rise in February. The coronavirus crisis took a swift blow to the labor market at the end of the first quarter; however, the damages are expected to be even greater in the April jobs report as initial jobless claims should surge further in the weeks ahead after a record 6.6 million claims in the week ending 28 March.
The services sector felt the sharpest pains in March. Nearly two-thirds of the job slashed—459,000 jobs— were in leisure and hospitality, mainly in food services and drinking places, as restaurants and bars across the country were forced to close as apart of containment measures to contain the virus. Retail trade payrolls shrank sharply, with consumers’ discretionary spending stymied by social distancing and confinement, and temporary help services jobs were also cut markedly. The education and health services sectors lost 76,000 employees as schools and medical offices also shut down. Job cuts were also deep in the construction and manufacturing sectors.
The unemployment rate shot up to an over two-year high of 4.4% in March from its near five-decade low of 3.5%. Meanwhile, the labor force participation rate dropped to 62.7% in March from 63.4% in February. Hourly earnings rose 0.4% month-on-month in March (February: +0.3% month-on-month), while annual wage growth accelerated to 3.4% in March from 3.0% in February. Earnings figures, however, were likely distorted by the uneven composition of jobs as employees in lower earning sectors were disproportionally affected by the impact of the virus.
Commenting on the impact of the virus on the labor market and its unemployment rate projections for this year, Scope Ratings noted:
“The Covid-19 shock will likely hit the weakest members of society the hardest and thus worsen the US’ most concerning social outcomes […] the historic rise in initial unemployment claims reported over the past two weeks of almost 10m people highlight the magnitude of the US’ social and labour market challenge, and underscore Scope’s expectation of an unemployment rate of above 10% this year.”