The unemployment rate rose by 0.9 percentage point in March to 4.4 percent. This was the highest unemployment rate since August 2017, and the biggest one-month increase in the rate since 1949.
As bad as the March employment report was, the April report will be much, much worse (to be released on Friday, May 8). Data for the March report were collected during the week including March 12, when initial claims for unemployment rose by about 70,000 from the prior week, to around 280,000. But they increased more than 11-fold the next week (week ending March 21) to 3.3 million, by far the greatest number of claims on record. And they doubled the week after that (ending March 28) to 6.6 million. Absent a huge and immediate business response to the new stimulus bill, which contains incentives for small businesses to keep workers on, the April jobs report will be the worst on record, in terms of both job losses and the increase in the unemployment rate.
The details of the March report were also horrific. The increase in the unemployment rate would have been even larger had not 1.6 million Americans dropped out of the labor force, pushing the labor force participation rate down to its lowest level since the summer of 2018. According to the household survey (different from the survey of employers), employment fell by an astounding 3.0 million in March; presumably that number includes self-employed workers who weren’t captured in the employer survey. The U-6 unemployment rate, which includes underemployment and discouraged workers, jumped to 8.7 percent in March from 7.0 percent in February, the biggest one-month increase in history (going back to 1949).
In addition to the enormous job losses, the number of people in the household survey reporting part-time work for economic reasons jumped from 4.3 million in February to 5.8 million in March, indicating the loss of income not just from fewer people working, but also from reduced hours.
Private-sector employment fell by 713,000 in March, with government employment up by 12,000. Goodsproducing industries dropped 54,000 jobs over the month, with losses of 29,000 in construction and 18,000 in manufacturing. Private-services providing industries shed 650,000 jobs in March. In addition to huge job losses in leisure/hospitality services, employment fell by 46,000 in retail trade, by 52,000 in business/professional services (almost entirely in temporary services), and by 61,000 in health care. The average workweek in the employer survey fell to 34.2 hours in March from 34.4 hours in February. This is despite enormous job losses in restaurants, which tend to have more part-time workers. Average hourly earnings rose 0.4 percent over the month, but the gain was illusionary; job losses were concentrated in low-wage industries, again primarily restaurants, skewing the results. Pay cuts are likely for many of those who have retained their jobs. Overall labor market earnings fell 0.7 percent in March from February.
The U.S. labor market is at the start of its worst contraction since the Great Recession, and perhaps the Great Depression. Job losses in March were far higher than expected, and those in April will be far higher, likely setting a record. The unemployment rate jumped precipitously and is headed much higher. Stimulus will help, but can only do so much if consumers can’t buy and workers can’t get to their jobs. If restrictions on movement are lifted soon and normal life can gradually resume over the next couple of months, the permanent damage to the economy may be limited. But the longer the labor market contraction persists, the more the underlying damage, and the slower the recovery and the greater the hit to long-run growth.
