Understanding the devastating numbers
The U.S. economy lost a staggering 20.5 million jobs in April and the unemployment rate surged to 14.7%.
To understand just how devastating the pandemic has been to the labor market, consider this: 20.5 million is more than double the total decline in employment during and after the Great Recession. It is 10 times more than the single worst month on record, which occurred in September 1945, when nearly 2 million Americans were out of work after WW II.
As for the unemployment rate, in February, it matched a half-century low of 3.5% and now two months later, the rate is more than 3.5 times that pace. The highest rate during the last recession was a single month (October 2009) at 10% and before that, it was 10.8% (December 1982). Official records don’t go back to the Great Depression, but it’s estimated that unemployment hit about 25% in the summer of 1933.
Economists fear that the government’s report may understate the severity of the situation. Millions of Americans are not actively looking for work, which means they are not considered part of the labor force and not counted as unemployed. The labor force participation rate, which measures the share of workers working or actively seeking employment, fell to 60.2%, its lowest level since January 1973, just before women entered the labor force in large numbers.
Additionally, there may have been confusion among respondents to the household survey, which is the basis for the unemployment rate. The Bureau of Labor Statistics noted: “If the workers who were recorded as employed but absent from work due to ‘other reasons’ had been classified as unemployed on temporary layoff, the overall unemployment rate would have been almost 5 percentage points higher than reported (on a not seasonally adjusted basis).”
According to economist Joel Naroff: “Simply put, the 14.7% rate is a lower bound and the ‘real’ number is probably close to 20%,” which is close to the broader unemployment rate (U-6), which includes those working part-time and want full time and those who are not looking at all — that rate jumped to 22.8%, the highest on record.
No industry was spared from the damage: leisure and hospitality, retail, professional and business services and education and health. Naroff notes: “The declines were so broad-based that fewer than 5% of the 258 private industries posted a payroll gain. Even at the worst point in the Great Recession, over 15% of the industries posted gains.”
Big questions loom for the U.S. economy, including how many of the temporary layoffs will become permanent and how many small businesses will survive. A survey of small businesses by the Society for Human Resource Management found that about 60% of business owners surveyed said they’ve lost revenue as a result of the coronavirus and related stay-at-home orders. If the pandemic lockdown continues, 12% said their businesses could not last another month and 52% said they would fold within six months.
Naroff said that while government efforts have created “a temporary lifeboat for many businesses and households, when funds begin to run out, they will have to stand on their own.”
Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jill onmoney.com. Check her website at www.jillonmoney.com.