APRIL’S JOBS PICTURE MAY SHOW 15% UNEMPLOYMENT

Monthly report will provide a more complete estimate

The coronavirus pandemic has brought wave after wave of catastrophic economic data: the worst decline in gross domestic product in a decade. The worst retail sales report on record. The worst week ever for unemployment claims, and then two more twice as bad as that.

But even by those recent standards, the April jobs numbers could stand out.

Economists surveyed by Marketwatch expect the report, which the Labor Department will release Friday, to show that U.S. payrolls fell by 22 million jobs last month — a decade’s worth of job gains, wiped out in weeks. ADP, the payroll processing company, said Wednesday that the private sector lost more than 20 million jobs in April, with the cuts spread across every sector and size of employer.

To put that in perspective: In the worst month of the last recession, the United States lost 800,000 jobs. The worst monthly loss on record was nearly 2 million jobs in September 1945, when the country was demobilizing after World War II. (The population has grown since then, but not enough to account for the difference.)

The April unemployment rate is likely to hit 15 percent or higher, by far the worst since the Great Depression. And the deterioration has happened with almost unfathomable swiftness: Two months earlier, the rate was 3.5 percent, a 50-year low.

“It’s not just the magnitude of these numbers; it’s the speed with which they’re happening that’s really stunning,” said Nick Bunker, who leads North American economic research at the Indeed Hiring Lab.

Friday’s report will paint the clearest picture yet of the economic devastation and could provide some important hints about the eventual recovery. But it will also bring complications that will make the numbers difficult to interpret.

The numbers will be more complete — but less timely

It’s no surprise that employers have cut millions of jobs; weekly data on filings for unemployment benefits have tracked the destruction. The most recent report, covering the last full week of April, showed that roughly 30 million Americans had filed jobless claims since the new coronavirus began to shut down the economy. The next weekly report, due Thursday, will probably add millions more.

Those figures are more up-to-date than the monthly jobs report coming Friday, which will cover hiring and firing through mid-april. But the monthly numbers are more comprehensive than the weekly ones, which almost certainly understate the damage. Not everyone who has lost a job qualifies for benefits, and many who do qualify have not yet filed a claim because the flood of applicants has overwhelmed state unemployment offices.

The monthly data, based on surveys of businesses and households, should provide a more complete estimate of job losses. It will also reflect the extent to which hiring at companies like Amazon and Walmart has offset them. And unlike the weekly data, which mostly counts losses, the monthly report includes data on working hours, which will help quantify the millions of people who have held onto their jobs but had their hours cut.

Look beyond restaurants

Friday’s report will also provide the most detailed breakdown yet of job losses by industry. That could help answer a question that could be crucial to the eventual recovery: How far has the damage spread?

The last jobs report, based on data from early March, showed large losses in restaurants, hotels and other industries hit hardest by the first wave of shutdowns. Those cuts were no doubt even larger in April, and the report will also show large losses in retail, which has seen a tidal wave of business closings and bankruptcies.

If the losses are concentrated in sectors that have been directly affected by the virus, that could bode well for the recovery, because it suggests the damage has been contained, at least so far. But if it has spread to industries like finance and professional services, that could suggest a cascade effect is underway, with laidoff workers pulling back on spending, leading to lost revenues and still more layoffs. It could take much longer to climb out of that kind of hole.

The unemployment rate could be misleading

In the 70-plus years that the government has been keeping track, the unemployment rate has never exceeded 10.8 percent. It will almost certainly pass that level Friday, and some economists think the rate could be twice as high. That would rival the worst periods of the Great Depression, when economic historians estimate unemployment reached around 25 percent.

But the rate probably should be even higher.

To be considered unemployed in the government’s official measure, people generally must be actively looking for a job. (Or else they can be on a temporary layoff.) But during severe recessions, people often stop looking for work because they don’t believe jobs are available, leading the unemployment rate to understate joblessness.

That issue could be particularly significant now, when not only are jobs scarce but people are also being urged to stay home to avoid spreading the virus. In fact, the government is easing the pressure to search for work by offering more generous unemployment benefits, and many states are waiving work-search requirements to qualify.

The Labor Department publishes several broader measures of unemployment and underemployment that address some of these issues by including people who aren’t looking for work or who have had their hours cut back. But the government’s employment survey wasn’t designed for a pandemic, and it is unclear how well it will capture all the unusual nuances that the current crisis presents.

How many are permanent?

Perhaps the single most important factor that will decide the speed of the recovery is how many people can go back to their jobs when businesses reopen.

Friday’s report won’t answer that question. But it could provide a hint. The monthly numbers distinguish between people who have lost their jobs permanently and those on a temporary layoff or furlough. The larger the share of workers in the second category, the faster the recovery could be. The problem is that many temporary layoffs could turn into permanent job losses as the shutdowns drag on.

Casselman writes for New York Times.