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May 8, 2020 Blog 2 min read
The April jobs report might not have been as bad as the forecast, but still reflected the worst single-month decline in payrolls since record-keeping began.

Chart for employment situation data dated May 2020

The April employment report was expected to be incredibly poor. It was. The fact that it wasn’t as bad as many had anticipated is no solace. “Better than expected” doesn’t matter when the range of expectations was incredibly broad. The labor market just experienced its greatest single-month shock since record-keeping began in 1939.

The effects of the rapid economic shutdown on the labor market had been readily apparent in soaring weekly jobless claims since March. Today’s report simply slices and summarizes the data that was already known to be very poor in a different way, confirming the aggregate impact of those job losses. The jobless rate soared to 14.7% a deterioration of more than 10.0% in a single month to reach its highest point since the Great Depression. That sizable increase reflects over 22 million leaving the ranks of the employed, with 16 million joining the ranks of the unemployed and another 6.5 million individuals leaving the labor force.

Not surprisingly, job losses were widespread across all industries, but with some hit harder than others. Leisure and hospitality workers accounted for over 7.6 million jobs lost nearly half of those employed in the industry.

Beyond the magnitude of the job losses, the speed of deterioration was jaw-dropping. Just two months ago, the unemployment rate was at 3.5%, near a half-century low. That reflected an economy that was actually showing signs of accelerating, building on an expansion that was historically significant as the longest in U.S. history. That economy was shut down virtually overnight, sending many Americans home from their schools and workplaces indefinitely.

Weekly jobless claims since mid-March have pointed to a dire result, as more than 30 million Americans filed for new applications for unemployment benefits during this time. The extent of job losses in the last two months alone has all but wiped out the job gains experienced since 2009.

The increase in the headline jobless rate is without precedent and historically noteworthy, but it doesn’t tell the full story. Not everyone whose job situation has been impacted in the past month is reflected in that 14.7% unemployment rate. Many remain employed but may have had their hours cut. A broader unemployment estimate, which includes those individuals who are working part-time for economic reasons, soared to 22.4%.

The question ultimately is how long will this last? How many additional jobs will be lost? How high will the unemployment rate rise? Initial jobless claims remain elevated, as indicated by another 3+ million claims last week.

However, as parts of the country begin to lighten restrictions, it’s possible that the economy could show signs of stabilization over the next few months. Job losses tend to lag the broad economy to some degree, and unemployment is likely to rise for some period before it begins to recede. Much will hinge on the success of efforts to arrest the spread of COVID-19, and the risk posed by a second wave when restrictions are lifted.

Still, the economy will not be returning to the pre-recession jobless any time soon. Recessions are generally accompanied by the rapid slashing of payrolls by employers; the path back to pre-recession job market conditions can take several years.

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