Well, it took 10 years, but the streak is over: There was a net loss of American jobs last month. That’s putting it mildly, actually. Today, the first jobs report encompassing the economic fallout from COVID-19 was released and, predictably, it paints a dire picture. Overall, 701,000 fewer people are employed now than last month — the first time in a decade that number has declined. The unemployment rate — which has remained below 4 percent since January 2019 — has risen to 4.4 percent.
But this is just a glimpse of what’s to come. Next month’s report will almost certainly be far worse, and this month’s will likely be revised down in the months to come.
But one thing we know with relative certainty: The situation will get worse before it gets better. The household survey, which the Bureau of Labor Statistics uses to estimate the unemployment rate, was in the field the second week of March. While some businesses had already shut down temporarily by then, plenty of areas — some of the most populated areas, in fact — hadn’t yet called for closures. Six counties in the Bay Area, for example, had yet to announce a shelter-in-place mandate, and New York Gov. Andrew Coumo had yet to “put New York on pause,” requiring all nonessential businesses to close down public-facing storefronts.
So, if you can, look beyond this month’s job report and ask yourself: Just how bad will the next report be? And what will an economic recovery look like?
Unemployment insurance claims, which are reported weekly, can help provide a sense of where we might be headed.
As the previous chart shows, there were 282,000 claims for the week the statistics bureau found an unemployment rate of 4.4 percent. After that, however, the number grew substantially. It stands to reason, then, that the true unemployment rate is much higher.
One piece of good news: Matt McDonald, a partner at the consulting firm Hamilton Place Strategies who writes a monthly analysis of the jobs report, says we have reason to believe that job growth will be as dramatic as the fall. A typical economic recession’s recovery takes a U shape. That is, job losses level off at the bottom for several months before the country eventually adds jobs again. He expects to see something closer to a V shape. “I would guess that after the business closures get lifted, you’re going to have a positive jobs report as a result of that — because you have to,” McDonald said, citing the nature of businesses reopening all at once.
If the $2 trillion stimulus package aimed at helping those economically hurt by the coronavirus can offer enough leeway for businesses to wait this out, shops could rehire their staff as quickly as they let them go.
There’s no guarantee that the current stimulus packages will be enough, however. For any businesses running on thin margins, forgoing a few months of profit can be catastrophic. Even if they are financially equipped to do so, fear that the market will stay dicey might cause employers to act cautiously. “You’ll have people moving into a defensive position in the economy, just assuming that this is going to be a longer fall,” McDonald said. “So, you’re going to have layoffs for that reason.”
But, ultimately, we are still too far out to have any true grip on what kind of economic fallout we’re facing. My former colleague Ben Casselman put it well on our politics podcast last week: “We’re kind of flying blind here for a while in terms of the real impact of this. It’s just faster than our economic data can keep up.”