COVID-19 related
job losses continue
to mount

Job losses have formally erased nearly all the gains of the previous expansion, with services industries hit exceptionally hard. Unemployment figures also reached record rates with women and lesser-educated workers taking the greatest brunt of the impact.

May 12, 2020
Massive net job loss dwarves previous record

Net job loss in April totaled 20.5 million, an unprecedented figure, but lower than the consensus expectation of 22 million. Job losses in March and April of 21.4 million formally eliminated almost all net jobs created during the previous expansion (22.2 million) and greatly eclipsed the former monthly record loss of roughly 2 million set in September 1945 at the end of World War II. A potential silver lining, 18.1 million of the losses fell into the “on temporary layoff” category, unlike most recessions which typically contain permanent job losses. Employers avoid paying severance by classifying layoffs as temporary (which can help given significant revenue declines). But the longer the recession lasts the greater the probability that temporary losses become permanent. The participation rate plummeted from 62.7% in March to 60.2% in April. 

Services industries hit particularly hard

No industry came through the last two months unscathed, but the industries in the services sector suffered the most. Leisure and hospitality lost roughly 7.7 million net jobs. Combined with net losses from March the industry lost a staggering 48% of peak employment from February. The majority occurred in food services and drinking establishments, but amusements and recreation lost over 1 million net jobs while accommodation lost over 800,000 net jobs. Other hard-hit industries over the last two months include:

  1. Education and healthcare lost roughly 2.6 million net jobs (down 10% from February’s peak) due to losses at dentists’ and physicians’ offices and child day care services.
  2. Professional and business services lost 2.2 million net jobs (down 10% from February’s peak) due to losses in temporary help services and services to buildings and dwellings.
  3. Retail trade lost 2.2 million net jobs (down roughly 14% from February’s peak) with large losses in clothing- and automotive- related retailers. 
Unemployment figures hit record rates

The headline U-3 unemployment rate generated both its largest monthly increase and highest level in the history of the series, rising 1030 basis points (bps) to an astounding 14.7%. Estimates of the unemployment rate during the Great Depression usually tally about 25%, but the official series did not exist then. The broader U-6 unemployment/underemployment rate, which includes marginally attached workers and those working part-time involuntarily, increased by 1410 bps to 22.8%, also a record. Yet the numbers understate the severity: the BLS admitted that misreporting by households understated the unemployment rates by roughly 500 bps. 

Average hourly earnings and weekly payroll numbers show significant variances

Average hourly earnings registered what seems like a massive 7.9% year-over-year increase. But that data misleads because the composition of the employment base changed dramatically in one month: essentially, low-wage industries endured most of the job losses while high-wage industries experienced far smaller job losses. Other measures of income, such as the aggregate weekly payrolls, show a dramatic year-over-year decline of 10% to 12%.

Unemployment rates rise for women, and lesser educated individuals

Unusual for this recession, the unemployment rate for women increased more than men, rising to 16.2% versus 13.5%. That had not occurred since the recession of the mid-1970s, which had a much lower rate of women’s participation in the labor force. This development could hold serious ramifications for the economy due to the increase in one-parent households (typically led by mothers) relative to the 1970s. Unemployment rates by education look more typical of a recession with the better-educated segments of the labor market experiencing smaller increases in unemployment rates while less-educated segments of the labor market are experiencing larger increases.