March was the worst month the U.S. economy has seen in more than a decade as payrolls fell by 701,000 jobs, according to the Bureau of Labor Statistics.
Heavy job loss occurred amid the escalating number of the COVID-19 cases, as measures to slow the spread of the novel coronavirus shuttered many of the nation’s restaurants and retail stores and drastically reduced activity in many other industries.
The last time the U.S. logged monthly job loss was September 2010, and the last time job loss was quite this severe was in March 2009, at the worst moment of the Great Recession. But the U.S. labor market has never seen a single event cause such a shock in what is most certainly the fastest and strongest reduction in economic activity in history. About 3.3 million initial jobless claims were recorded in mid-March, followed by another 6.6 million in the last week of March. If the typical ratio of jobless claims to total unemployed continues to hold true, then between 12 million and 18 million U.S. workers could be unemployed within the next three to six months, resulting in an unemployment rate of from 12% to 15%.
The good news is that most economists are expecting a bounce back after the pandemic concerns pass and the economy reopens. When exactly that will happen and how steep the recovery is anyone’s guess.
Almost two-thirds of the 701,000 jobs lost in March occurred in the Leisure and Hospitality industry, primarily food services and drinking places. The national unemployment rate from the household survey shot up 90 basis points (bps) to 4.4% in March from 3.5% in February. This was the largest one month jump in the rate since 1975. Both surveys were conducted in mid-March, before more widespread closures of businesses and schools were mandated.
March broke the monthly positive gain streak, which lasted 113 consecutive months, or more than nine years. This was one of the longest periods of economic expansion for the U.S. economy. With this month’s sharp loss, the 12-month average for monthly job gain through March 2020 was only 127,000 jobs per month, down from 181,000 last month.
Average hourly earnings growth for all employees was 3.1% in March and has averaged 3.2% for the past 12 months. The monthly wage figure increased $0.11 between February and March, and was up $0.86 from March 2019, to $28.62. Wage growth had been slowly creeping up, averaging 2.2% from 2014 to 2015 and 2.6% from 2016 to 2017, before averaging 3.0% in 2018 and 3.3% in 2019. So far in 2020, the average increase is 3.1% and it remains to be seen what effect the current employment crisis will have on wage growth overall.
With the steep loss in jobs this month, annual job gains dropped to a little more than 1.5 million in the 12-months ending in March 2020, compared to about 2 million for the same period one year ago. This annual growth expanded the job base by just 1%, well below the previous 12-month average of 1.4%.
The civilian labor force (CLF) participation rate was 62.7% in March, down 70 bps from February and down 30 bps from last year. The CLF itself fell by 1.6 million from February. The employment-population ratio of 60% was down 60 bps from March 2019. The total number of unemployed (7.140 million) is up about 1.4 million from last month. The number of people not in the labor force who currently want a job has shot up from 4.96 million last month to 5.51 million currently. The 1.4 million increase in unemployed increased the unemployment rate to 4.4%, but the rate could reach double digits within a few months.
The number of voluntary job leavers was down slightly from February, but the number of workers on temporary layoff shot up by more than one million to 1.85 million in March. The number of part-time workers for economic reasons (5.77 million in March) increased by 1.25 million from March 2019 and was up 1.45 million from last month. The U6 unemployment rate, which includes part-timers for economic reasons and marginally attached workers, jumped 170 bps to 8.7% from February, its highest level since March 2017. The U6 peaked at more than 17% at the height of the Great Recession in 2010.
The number of long-term unemployed workers out of work for 27 weeks or more was up 60,000 workers from last month to 1.16 million, and the average duration of unemployment fell to 17.1 weeks from 22.2 last year. The number of multiple jobholders decreased by 689,000 year-over-year to 7.36 million. Meanwhile, the number of discouraged workers not in the workforce (514,000) rose by 102,000 from one year ago.
The steep monthly loss in employment was felt across virtually every industry, but none more so than in the Leisure and Hospitality (-459,000) segment, as restaurants and bars across the nation were closed to on-site service. Monthly job losses were also strong in the Education and Health Services (-76,000), Professional and Business Services (-52,000) and Trade, Transportation and Utilities (-49,000) industries.
• The food services and drinking places subsector (-417,400), together with the accommodation subsector (-28,900) accounted for 97% of the Leisure and Hospitality industry’s loss of 459,000 jobs in March. Arts, entertainment, and recreation lost a lesser 13,200 jobs for the month, but the entire industry is likely to lose many more jobs in the coming months.
• The Education and Health Services industry’s loss of 76,000 jobs were spread across most sectors and subsectors, with ambulatory health care services losing more than 40,000 jobs for the month. The social assistance sector lost 18,700 jobs in March, all of it in child day care services, as younger children joined their older siblings at home when schools closed. Meanwhile, hospital employment was virtually unchanged.
• The Professional and Business Services industry lost 52,000 jobs in March, primarily in the lower-paying administrative and waste services sector with 95% of the industry loss in the temporary help services subsector (-49,500). The higher-paying professional and technical services sector gained 6,500 jobs for the month as many in this category were able to transition to a work-from-home situation.
• The Trade, Transportation and Utilities industry lost jobs (-49,000) in two of its three main industries. Retail trade was the hardest hit with over 94% of the industry’s losses (-46,200). The only retail subsectors to gain jobs were the “essential businesses” in the food and beverage (+1,100) and general merchandise stores (+10,300) groups, which includes warehouse stores. Wholesale trade was mostly unchanged, but transportation and warehousing lost 4,900 jobs, despite a jump of 8,200 jobs in warehousing and storage, as consumers turned to internet shopping in March.
• Although residential construction is considered an essential business by the U.S. Department of Homeland Security during this pandemic, the Construction industry still lost 29,000 jobs in March. Construction of nonresidential buildings (-10,700), heavy and civil engineering construction (-10,200), and both residential and nonresidential specialty trade contractors (-10,200) lost jobs this month.
• The Other Services sector lost 24,000 jobs in March with a steep loss of 13,100 jobs in personal and laundry services as barbers, hair salons, and other nonessential personal services were ordered closed to minimize public contact.
• Manufacturing (-18,000) was also hard hit by the COVID-19 shutdowns with nondurable goods manufacturing (-11,000) bearing the brunt. Plastics and rubber products (+1,600) and computers and electronics products (+1,800) were the only subsectors to see significant gains for the month.
• The Mining and Logging industry lost 7,000 jobs in March as the support activities for mining subsector lost 5,400 jobs.
• The Financial Activities industry lost only 1,000 jobs for the month, with gains in the finance and insurance sector (+2,500) offset by losses in the rental and leasing services subsector (-3,800).
• The Information industry was one of only two to gain jobs in March. The 2,000 jobs gained for the industry were in the data processing, hosting and related services (+1,900) and other information services (+2,700) subsectors, cancelling losses in the motion picture and sound recording (-2,500) and telecommunications (-1,700) categories.
• The Government sector gained 12,000 jobs in March, all at the Federal level (+18,000). State government shed 14,000 jobs, while local governments added 8,000 jobs for the month.