The U.S. economy shed 701,000 jobs in March, abruptly ending a historic 113 straight months of employment growth as stringent measures to control the novel coronavirus outbreak shuttered businesses and factories, confirming a recession is underway.
The Labor Department’s closely watched employment report on Friday did not fully reflect the economic carnage being inflicted by the highly contagious virus. The government surveyed businesses and households for the report in mid-March, before a large section of the population was under some form of a lockdown, throwing millions out of work.
“It is important to keep in mind that the March survey reference periods for the establishment and household surveys predated many business and school closures that occurred in the second half of the month,” William Beach, commissioner of the Labor Department’s Bureau of Labor Statistics said in a statement.
“In addition, data collection for the two surveys was affected by the coronavirus. Although response rates for both surveys were adversely affected by pandemic-related issues, we still were able to obtain estimates from our two surveys that met BLS standards for accuracy and reliability.”
The government said the plunge in payrolls, which snapped a record streak of employment gains dating to October 2010, reflected 459,000 job losses in the leisure and hospitality industry, mainly in food services and drinking places. There were also decreases in health care and social assistance, professional and business services, retail trade, and construction payrolls.
Economists polled by Reuters had forecast nonfarm payrolls decreasing by 100,000 jobs last month. Adding a sting to the report, the economy created 57,000 fewer jobs in January and February than previously reported.
The report could sharpen criticism of the Trump administration’s handling of the public health crisis, with President Donald Trump himself facing criticism for playing down the threat of the pandemic in its initial phases. Already, data has shown a record 10 million Americans filed claims for unemployment benefits in the last two weeks of March.
The United States has the highest number of confirmed cases of COVID-19, the respiratory illness caused by the virus, with more than 243,000 people infected. Nearly 6,000 people in the country have died from the illness, according to a Reuters tally.
WORSE TO COME With jobless claims, the most timely indicator of labor market health, breaking records over the last couple of weeks and a majority of Americans now under “stay-at-home” or “shelter-in-place” orders, Oxford Economics is predicting payrolls could plunge by at least 20 million jobs in April, which would blow away the record 800,000 tumble in March 2009.
Economists also worry the rapid closure of businesses could make it difficult for the Labor Department to accurately capture the magnitude of layoffs. There are also perceptions that a $2.3 trillion fiscal package signed by Trump last week, which makes generous provisions for the unemployed, and the federal government’s easing of requirements for workers to seek benefits could also be driving the jobless claims numbers higher.
The unemployment rate rose to 4.4% in March from 3.5% in February. With the ranks of the unemployed ballooning, economists say the jobless rate could top 10% in April. Mounting job losses spell disaster for gross domestic product, and economists say the government and the Federal Reserve will need to provide additional stimulus.
Some also argued a portion of cash payments to American families was likely to be saved, not spent, pointing to similar patterns in the early 2000s. Economists believe GDP contracted sharply in the first quarter and that the economy slipped into recession in March.
The National Bureau of Economic Research, the private research institute regarded as the arbiter of U.S. recessions, does not define a recession as two consecutive quarters of decline in real gross domestic product, as is the rule of thumb in many countries. Instead, it looks for a drop in activity, spread across the economy and lasting more than a few months.
Wage growth remained steady in March, but that is all in the rearview mirror. Average hourly earnings increased 0.4% in March after increasing 0.3% in February. That raised the annual increase in wages to 3.1% last month from 3.0% in February. The average workweek fell to 34.2 hours last month from 34.4 hours in February.
The job losses in March were spread across all industries, with deep cuts in the leisure and hospitality sector, which has seen restaurants and bars, movie theaters and other social gathering venues closed.
But federal government employment rose by 18,000 in March. The gain largely reflects the hiring of 17,000 temporary workers for the 2020 Census.