United States: Labor market endures record 20.5 million job losses; unemployment hits record high in April
May 8, 2020
Total non-farm payrolls fell by 20.5 million in April, plunging at the sharpest rate since the series began in 1939 as the labor market reels from the Covid-19 pandemic and measures to halt its spread. This follows March’s downwardly revised 870,000 payroll cuts (previously reported: -701,000); however, the figure was better than market expectations of 22.0 million job losses in the month. April’s losses essentially reversed the over 10 years of job gains since the Great Recession, although it is unknown how many payrolls will be recovered once the economy reopens. In the meantime, the labor market collapse will likely extend into May as the data catches up with the true economic damage of the pandemic.
The services and hospitality sectors were devastated by the containment measures, hemorrhaging 17.2 million payrolls in the month. Leisure and hospitality; retail trade; and health care and social assistance services jobs were all cut at a stark rate in the month. Sharp losses also occurred in professional and business services and temporary help services. Meanwhile, manufacturing and construction experienced massive drops in employment, while transportation and warehousing also recorded deep job cuts.
The unemployment rate skyrocketed to 14.7% in April from 4.4% in March. This is the highest unemployment rate in the series' history, with the only comparable result occurring during the Great Depression in 1933, before official data collection began, when the unemployment rate struck roughly 25%. Meanwhile, the labor force participation rate dropped to 60.2% in April from 62.7% in March.
Hourly earnings rose 4.7% month-on-month in April (March: +0.5% month-on-month), while annual wage growth accelerated to 7.9% in April from 3.3% in March. Earnings figures, however, were distorted by the uneven composition of jobs as employees in lower earning sectors were disproportionally affected by the impact of the virus.
Commenting on Berenberg’s outlook for the labor market, Chief U.S. Economist Dr. Mickey Levy and Economist Roiana Reid, noted:
“High initial jobless claims through early May point to further significant increases in the unemployment rate. History suggests that it will take several years for employment to return to its pre-recession level. We expect an unemployment rate of 9% at the end of 2021, more-than-double the 3.5% pre-crisis rate.”