The U.S. economy lost 20.5 million jobs in April and the unemployment rate soared to 14.7% — both record highs — laying bare the starkest picture yet of the crippling gut-punch delivered by the coronavirus pandemic.
In just a month, the historically dismal performance abruptly wiped away nearly all the nation’s job gains since the Great Recession of 2007-09. The reversal has been head-spinning: The jobless rate had touched a 50-year low of 3.5% in February before rising to 4.4% the following month amid the early effects of the crisis.
“A cataclysm has hit the U.S. labor market, and the destruction is still ongoing,” says Nick Bunker, economic research director for Indeed, the job posting site.
Few corners of the economy or country were spared, although some groups felt the impact more than others. Women, the young and people of color, were especially hard hit by layoffs. And businesses where people gather to eat, drink and shop suffered the brunt of social distancing requirements.
Every state sustained record job cuts, though tourism and manufacturing havens are among those hurt most, other studies show.
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Yet while the payroll losses are Great Depression-like, the reality is more nuanced. The government took the unprecedented step of placing the economy into a kind of induced coma to contain th
e spread of the virus. While that could mean a swift rebound as businesses reopen, a significant portion of the damage is expected to last years.
In April, the share of Americans working or looking for jobs — which together make up the labor force — tumbled from 62.7% to 60.2%, lowest since 1973, the Labor Department said. Many people who lost jobs didn’t look for work because of fears of catching the virus while job hunting, caring for sick relatives or watching kids who were home now that schools are closed. Also, with much of the economy shuttered, there were few jobs available.
That decline kept the unemployment rate from rising even further. Also, many workers incorrectly said they were employed but absent from work, Labor said. If they had been properly classified, the unemployment rate would have shot up to 20%.
A hopeful sign: Of the 20.6 million workers who lost jobs in April, 18 million said they were on temporary layoff, indicating the lion’s share of the positions could come back when businesses open their doors or restart their assembly lines, helping the economy snap back more quickly.
“The fact that so many of the job losses are temporary is encouraging, and suggests businesses will have an easier time re-opening once they are confident doing so,” says economist Leslie Preston of TD Economics. “However, the millions of workers who have left the labor force will need to be drawn back in, and this process could take time.”Get the The Daily Money newsletter in your inbox.
‘I was starting to gain steam’
Michael Hurley, 33, of Havertown, Pennsylvania, temporarily lost his job as a quality standards manager for a marketing company in late March when the firm’s door-to-door consumer surveys were shut down.
He has applied for unemployment benefits but is still awaiting approval. Hurley’s fiancee, Shannon, is still working as a second-grade teacher, but the couple has taken a big hit to their income. They’re buying lots of pasta and rice to stretch their food dollar and keeping the thermostat at 67 degrees.
If Hurley doesn’t receive jobless benefits by next week, he says he’ll have to look for a manual-labor job so the couple can pay rent and other bills.
“I am getting to the point where my funds are critically low,” he says.
Hurley graduated from college during the Great Recession in 2009, forcing him to take a job as a claims adjuster for an insurance company despite his business management degree. He says he worked hard to rise to a manager’s job at Walmart before landing his current position.
“I feel like I was starting to gain steam,” he says. Now, he worries another downturn could undo much of his accomplishments.
Hurley’s company has told him they expect to rehire him when the economy reopens. “They say they’re coming back but are they?” he says. “It’s a level of the unknown.”
Wall Street investors, meanwhile, looked beyond the grim toll last month and focused on the possibility that the economy could return to growth as states reopen for business. Stocks jumped Friday as hopes rose that the worst has passed for the U.S. economy. The Dow Jones industrial average climbed 455 points, capping a six-week rally built on the government’s massive relief packages.
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In April, job losses were broad-based across industries but particularly hammered restaurants and bars, and retail.
Every state also has been battered by massive layoffs but those that rely heavily on tourism were hit worse, including Hawaii, Nevada, Florida, South Carolina and Louisiana, according to an analysis of jobless claims by the Economic Policy Institute.
Manufacturing strongholds like Michigan also have been affected, the EPI study shows, because many factories are shut down and employees can’t do those jobs from home.
Most states shut down nonessential businesses and issued stay-at-home orders starting in mid-March to curtail the spread of the virus, closing restaurants, malls, movie theaters, offices and sports venues, and idling tens of millions of workers. Combined with a travel and tourism industry that largely ground to a halt, some 30% of America’s economy has evaporated, and the effects have rippled to white-collar businesses and their employees.
A ghastly employment report was widely anticipated after 22 million Americans filed initial claims for unemployment insurance in the weeks leading up to the mid-April jobs survey. Since then, another nine million workers have sought benefits, though they’ll likely be counted among May’s job losses.
Yet while first-time jobless claims represent the best real-time gauge of layoffs, the employment report offers a more accurate reading. Many people seeking jobless benefits during this crisis have been furloughed while others have had their hours reduced.
April’s net payroll losses reflect not just layoffs but also a plunge in hiring amid pervasive business uneasiness. Job openings have fallen 28% since early March, according to Glassdoor, the job search site.
While the numbers are staggering, the economy’s outlook is uncertain. More than 40 states have started allowing businesses to partially reopen despite a still-rising number of coronavirus cases. Assuming the pandemic eases by summer, economists expect a solid recovery in the second half of the year.
Meanwhile, another 10 million or so jobs could vanish this month before the labor market begins to rebound, economist Ian Shepherdson of Pantheon Macroeconomics expects.
Lingering consumer caution and a possible second wave of the virus is likely to continue to crimp economic activity at least until a vaccine is available, possibly by early next year, economists say. Unemployment will close out 2020 at a still-elevated 9%, Moody’s Analytics forecasts.
“While we are hopeful many (of the unemployed) will get back to work in the coming months, there will be severe scarring effects on the labor market for years to come,” says economist Paul Ashworth of Capital Economics.
Industries that are slashing jobs
Leisure and hospitality was hit hardest in April, with 7.7 million job losses, or nearly half its total employment, mostly in restaurants and bars. Professional and business services shed 2.1 million positions in a sign that layoffs that largely began in retail and restaurants have spread to white-collar fields. Healthcare and retail each lost 2.1 million jobs; manufacturing, 1.3 million; construction, 975,000 and financial activities, 262,000.
Local government lost 801,000 jobs as schools closed and state governments, 180,000. The federal government, which has rolled out unprecedented programs to respond to the crisis, added 1,000 jobs.
Broader jobless measure soars
The 14.7% unemployment rate highlights only part of the economic carnage set off by the COVID-19 outbreak. A broader measure of unemployment — that includes Americans working part-time even though they want full-time jobs, discouraged workers who have stopped looking and the unemployed – leaped from 8.7% to 22.8%, the highest on record.
Disadvantaged workers hurt most
Minorities and less-educated workers were especially hard hit as most of the job losses affected low-wage service industries. Unemployment jumped to 16.7% for blacks and 18.9% for Hispanics. And the jobless rate climbed to 12.9% for high school graduates and 14.4% for those without a high school diploma, compared to 5.9% for workers with a bachelors degree.
Contributing: Jessica Menton