How Bad Is Unemployment? 'Literally Off the Charts'
The nation’s economic distress came into greater focus Friday, offering a snapshot unseen since the Great Depression.
The Labor Department said the U.S. economy shed more than 20.5 million jobs in April, sending the unemployment rate to 14.7% as the coronavirus pandemic took a devastating toll.
The monthly data underscores the speed and depth of the labor market’s collapse. In February, the unemployment rate was 3.5%, a half-century low.
And the damage has only grown since then: Millions more people have filed claims for unemployment benefits since the monthly data was collected in mid-April.
“It’s literally off the charts,” said Michelle Meyer, head of U.S. economics at Bank of America. “What would typically take months or quarters to play out in a recession happened in a matter of weeks this time.”
Indeed, last month’s job losses alone far exceed the 8.7 million in the last recession, when unemployment peaked at 10% in October 2009.
The only comparable period is when unemployment reached about 25% in 1933, before the government began publishing official statistics. Then as now, workers from a variety of backgrounds found themselves with few prospects for quickly landing a new job.
If anything, the unemployment rate understates the extent of the damage to the labor market. The government’s official definition of unemployment typically requires people to be actively looking for work, making the measure ill suited to a crisis in which the government is encouraging people to stay 亚洲游国际集团home. Some 6.4 million people left the labor force entirely in April, meaning they were neither working nor looking for work.
The share of the population with a job, at 51.3%, was the lowest on record.
The unemployment rate also doesn’t reflect the millions of workers who have kept their jobs but with their hours slashed or pay cut. Nearly 11 million people reported working part time because they couldn’t find full-time work, up from about 4 million before the pandemic hit.
Some experts hold out hope that the crisis will recede as swiftly as it arrived — and that as the pandemic retreats, businesses that were fundamentally healthy before the virus will reopen, rehire and return more or less to normal. Nearly 80% of the unemployed said they had been temporarily laid off and expected to return to their jobs in the coming months.
President Donald Trump endorsed this view in an interview Friday morning on Fox News.
“Those jobs will all be back, and they’ll be back very soon,” Trump said, “and next year we’re going to have a phenomenal year.”
But the longer the crisis, the less likely that “V-shaped” recovery. The joblessness that began with layoffs in the leisure and hospitality industry has extended throughout the economy, from manufacturing and retail industries to white-collar redoubts like business services. Every major sector cut jobs in April.
The broad nature of the cuts means it will take longer for the labor market to recover than if the losses were confined to one or two areas.
“There is no safe place in the labor market right now,” said Martha Gimbel, an economist and labor market expert at Schmidt Futures, a philanthropic initiative. “Once people are unemployed, once they’ve lost their jobs, once their spending has been sucked out of the economy, it takes so long to come back from that.”
Carrie Hines, a managing director at an advertising firm in Austin, Texas, had the kind of professional job — adaptable to working from 亚洲游国际集团home — that seemed insulated from the pandemic’s effects. But her firm worked closely with companies in the airline, hotel and amusement park industries. When their business evaporated as a result of the outbreak, it was only a matter of time before Hines’ firm felt the impact. She was laid off April 20.
“I was shocked,” she said. “I’ve never had a gap in work since college.”
Hines and her husband are cutting back where they can, and they have canceled plans to send their three children to summer camp.
“I never imagined this kind of job market where the entire advertising industry has been crushed,” she said.
The last recession reached deep into the economy, hitting families who had never had to worry about a lost job or a foreclosed 亚洲游国际集团home. But there were bastions of safety, like the health care industry, which added jobs throughout the downturn. Not this time: Health care lost more than 2 million jobs in April as dentists’ offices closed and patients canceled elective procedures.
“I thought the Great Recession was once in a lifetime, but this is much worse,” said Beth Ann Bovino, chief U.S. economist at S&P Global.
The speed of the collapse has tested the ability of economists to track it. The Labor Department on Friday said it had adjusted its procedures to reflect the rapidly changing job market but said uncertainty was nonetheless greater than usual. Large revisions are likely as more complete data becomes available, economists said.
In particular, the department said there were signs that some unemployed workers were erroneously classified as employed but absent from work. Had they been recorded accurately, the unemployment rate would have been as much as 5 points higher, or nearly 20%.
Joblessness — by any measure — could be even higher in the report for May, which will reflect conditions next week. But some economists say the unemployment rate should fall over the summer as people begin to return to work. Some states have begun to reopen their economies, and others are expected to do so in coming weeks.
But with the virus untamed, it’s not clear how quickly customers will return to businesses. And epidemiologists and economists warn that if states move too quickly, they could risk a second wave of infections, imperiling public health and the economy.
“That would stop people from shopping and cause austerity,” Bovino said.
For businesses, the uncertainty about the path of the pandemic and about consumers’ response to it is making planning difficult.
When Austin Ramirez heard about the new coronavirus earlier this year, his initial concern was for his supply chain. Ramirez runs Husco International, a manufacturer of hydraulic and electromechanical components for cars and other equipment. The company has a factory in China and receives parts from suppliers there and around the world.
By April, virtually the entire U.S. auto industry was shut down, Husco included. (The company’s nonautomotive production continued at a reduced rate.) Ramirez said he didn’t know when business would bounce back. His goal is to weather the storm.
“There’s no visibility or certainty on what the future demand is going to look like,” he said. “We can’t build a business model that relies on there being a big recovery six months from now.”
While most of Husco’s roughly 750 North American workers have been furloughed during the crisis, the company has mostly avoided large-scale, permanent job cuts. Ramirez said he expected that most of his workers would come back when he needs them.
But particularly in industries like retail and hospitality, layoffs that were initially temporary might not remain so as bankruptcies mount and business owners confront shifts in consumer behavior.
“We are starting to see signs that many of those layoffs will be permanent,” said Julia Pollak, a labor economist at the employment marketplace ZipRecruiter. “There is going to be a very, very dramatic acceleration in the deaths of businesses.”
Most forecasters expect the unemployment rate to remain elevated at least through 2021, and probably longer. That means that it will be years before workers enjoy the bargaining power that was beginning to bring them faster wage gains and better benefits before the crisis.
“Job seekers are going to have less leverage,” Pollak said. “We’re no longer going to see mostly employed job seekers browsing and looking for better matches and higher pay. You’re going to see job seekers desperate to pay the bills.”
Low-wage workers, including many women and members of racial and ethnic minorities, have been hit especially hard. Many service jobs are impossible to do remotely and have been eliminated, and some workers have risked their health by staying on the job.
People with the least education have been hardest hit in the downturn, according to the new Labor Department data. The unemployment rate for workers without a high school diploma stood at 21.2% in April, compared with 8.4% for those with a college degree.
Research this week from economists at the ADP Research Institute, the University of Chicago and the Federal Reserve found that workers earning less than $15 an hour account for more than one-third of job losses, far beyond their share of the workforce.
“Recessions always tend to affect employment for low-wage, low-skilled workers, but the magnitude of the difference between low-wage and high-wage workers, that’s remarkable,” said Ahu Yildirmaz, an of the study.
Ibelis Gonzalez worked as a server for Ruth’s Chris Steak House in Jersey City, New Jersey, until she was let go in March. She is hoping her job will return when the chain reopens, but she knows there are no guarantees, as patrons may be hesitant to dine out at first.
“We don’t know if they will have a skeleton staff,” said Gonzalez, who earned $600 to $800 a week, nearly all of it from tips. “People may not have the money to go out and have a $100 steak.”
She has been trying to file for unemployment insurance but hasn’t been able to reach the state’s Department of Labor and Workforce Development.
“I’m not looking for a handout; I’m just looking for these benefits,” she said. “I don’t have a dollar to my name.”
This article originally appeared in The New York Times.