Unemployment ‘literally off the charts’

‘NO SAFE PLACE IN THE LABOR MARKET’: Share of adults with a job hits lowest rate on record

The American economy plunged deeper into crisis last month, losing 20.5 million jobs as the unemployment rate jumped to 14.7 percent, the worst devastation since the Great Depression.

The Labor Department’s monthly report Friday provided the clearest picture yet of the breadth and depth of the economic damage — and how swiftly it spread — as the coronavirus pandemic swept the country.

Job losses have encompassed the entire economy, affecting every major industry. Areas like leisure and hospitality had the biggest losses in April, but even health care shed more than 1 million jobs. Low-wage workers, including many women and members of racial and ethnic minorities, have been hit especially hard.

“It’s literally off the charts,” said Michelle Meyer, head of U.S. economics at Bank of America. “What would typically take months or quarters to play out in a recession happened in a matter of weeks this time.”

From almost any vantage point, it was a bleak report. The share of the adult population

with a job, at 51.3 percent, was the lowest on record. Nearly 11 million people reported working part time because they couldn’t find full-time work, up from about 4 million before the pandemic.

If anything, the numbers probably understate the economic distress.

Millions more Americans have filed unemployment claims since the data was collected in mid-April. What’s more, because of issues with the way workers are classified, the Labor Department said the actual unemployment rate last month might have been closer to 20 percent.

It remains possible that the recovery, too, will be swift, and that as the pandemic retreats, businesses that were fundamentally healthy before the virus will reopen, rehire and return more or less to normal. The one bright spot in Friday’s report was that nearly 80 percent of the unemployed said they had been temporarily laid off and expected to return to their jobs in the coming months.

President Donald Trump endorsed this view in an interview Friday morning on Fox News. “Those jobs will all be back, and they’ll be back very soon,” Trump said, “and next year we’re going to have a phenomenal year.”

‘A hard reality’

But Diane Swonk, chief economist at Grant Thornton, said that such optimism was misplaced, and that many of the jobs could not be recovered.

“This is going to be a hard reality,” Swonk said. “These furloughs are permanent, not temporary.”

Many businesses have indicated that employees can work from home throughout the summer, hurting sales at downtown restaurants. Meetings and conferences have been put off as well, reducing demand at hotels and other gathering places. And the longer the pandemic lasts, the more businesses will fail, deepening the downturn.

The broad nature of the job cuts, too, means it will take longer for the labor market to recover than if the losses were confined to one or two areas.

“There is no safe place in the labor market right now,” said Martha Gimbel, an economist and labor market expert at Schmidt Futures, a philanthropic initiative. “Once people are unemployed, once they’ve lost their jobs, once their spending has been sucked out of the economy, it takes so long to come back from that.”

Carrie Hines, a managing director at an advertising firm in Austin had the kind of professional job — adaptable to working from home — that seemed insulated from the pandemic’s effects. But her firm worked closely with companies in the airline, hotel and amusement park industries. When their business evaporated as a result of the outbreak, it was only a matter of time before Hines’ firm felt the impact. She was laid off April 20.

“I was shocked,” she said. “I’ve never had a gap in work since college.”

Hines and her husband are cutting back where they can, and they have canceled plans to send their three children to summer camp. “I never imagined this kind of job market where the entire advertising industry has been crushed,” she said.

The scale of the job losses last month alone far exceed the 8.7 million lost in the last recession, when unemployment peaked at 10 percent in October 2009.

“I thought the Great Recession was once in a lifetime, but this is much worse,” said Beth Ann Bovino, chief U.S. economist at S&P Global.

The only comparable period is when unemployment reached about 25 percent in 1933, before the government began publishing official statistics. Then, as now, workers from a variety of backgrounds found themselves with few prospects for quickly landing a new job.

Difficulty planning

For businesses, the uncertainty about the path of the pandemic and about consumers’ response to it is making planning difficult.

When Austin Ramirez heard about the coronavirus earlier this year, his initial concern was for his supply chain. Ramirez runs Husco International, a manufacturer of hydraulic and electromechanical components for cars and other equipment. The company has a factory in China and receives parts from suppliers there and around the world.

By April, virtually the entire U.S. auto industry was shut down, Husco included. (The company’s nonautomotive production continued at a reduced rate.) Ramirez said he didn’t know when business would bounce back. His goal is to weather the storm.

“There’s no visibility or certainty on what the future demand is going to look like,” he said. “We can’t build a business model that relies on there being a big recovery six months from now.”

While most of Husco’s roughly 750 North American workers have been furloughed during the crisis, the company has mostly avoided large-scale, permanent job cuts. Ramirez said he expected that most of his workers would come back when he needs them.

But particularly in industries like retail and hospitality, layoffs that were initially temporary might not remain so as bankruptcies mount and business owners confront shifts in consumer behavior.

Most forecasters expect the unemployment rate to remain elevated at least through 2021, and probably longer. That means it will be years before workers enjoy the bargaining power that was beginning to bring them faster wage gains and better benefits before the crisis.