The speed of the slowdown in the economy in recent weeks is without modern precedent, coming off of a period in which it was growing at a moderate pace — stopped in its tracks as efforts to slow the spread of the COVID-19 virus were implemented across the country.
The result was a jobs report that was, at best, going to be exceptionally murky in its portrayal of the state of the labor market. That led to a wide range of expectations for the decline in payrolls that would have been reported during the survey period.
For that reason alone, the actual result of over 700,000 easily exceeded expectations, as any estimate was effectively a dart throw — a guess as to how many of the reported job losses would be reflected in this report. That decline doesn’t begin to scratch the surface of the decline in payrolls that will be reported in April. With nearly 10 million claims for unemployment insurance in the last two weeks and millions more expected in the weeks ahead, the unemployment rate is going to rise significantly, and payrolls will fall much, much further in the coming months.
The March data shows some of the earliest signs of businesses laying off or furloughing workers in response to the coronavirus outbreak. The April report will be more telling as to extent of the damage.
Not clearly apparent in the headline jobless rate is underlying components of the report that provide some additional context. Respondents to the household survey indicated that over 1.6 million individuals left the labor force, blunting the rise in reported unemployment. If not for that, the decline of 3 million in the ranks of the employed reported by households would have pushed the unemployment rate well above 5.0%.
The sharply negative report brings an end to ten years of solid job creation and further reinforces the speed with which the longest expansion in the U.S. in the modern era came to a screeching halt.
The coronavirus pandemic has left millions of workers in the retail, leisure, and travel industries without work as many state and local governments have urged individuals to shelter in place, leading to large parts of the economy to shut down. It remains to be seen how long these orders will be in place, but the longer they are, the bigger the impact they will likely have on the American worker.
The narrative for the economy has quickly shifted in recent weeks. The speed and the magnitude of the economic impact of the pandemic — and even more specifically the policies intended to slow its spread — is without precedent. The path forward is murky and hinges largely on how aggressively the virus continues to spread and its cost in terms of human lives, and the extent of measures taken to protect communities across the country.
Life will gradually return to some semblance of normalcy, and the economy will shake off the sudden shock and find its footing, likely at some point this summer. The damage will take some time to repair though. In the meantime, economic data will remain resoundingly negative as the country settles into this near-term new normal.
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