Market-watchers who expected Friday’s job report from the Bureau of Labor Statistics to be a rough read were not disappointed. The U.S. economy lost 701,000 jobs in March, ending a decade-long run of record unemployment. After resting at just over 3% for the past ten years, unemployment in the country surged to 4.4%.
According to the report, the number of people who claimed to be temporarily laid off doubled in March to 1.8 million. Of the 1.5 million workers who claimed permanent job losses, 177,000 were added in March alone. The forced reduction in hours many employees have had to agree to in the wake of COVID-19 added 1.4 million members to the ranks of the country’s part-time workers, which now number 5.8 million.
As a lagging indicator, the Bureau’s job figures only shed light on what can already be seen. They also “very likely represent a gross understatement of the true damage that’s already been done in the labor market and are probably only a prelude to much worse reports to come,” said Zillow in a report that followed the Bureau’s release.
A record-setting 6.6 million Americans filed unemployment claims last week, almost double the already stunning amount who filed the week prior. Based on the current levels of joblessness and the number of people already reaching out for assistance, some economists, like those at the Federal Reserve Bank in St. Louis, have projected that 47 million people will ultimately be forced from their jobs by the pandemic.
Service industries hit hard by COVID-19
Most of the job losses occurred in the leisure and hospitality sectors, where 459,000 Americans – 28.2% of all employment in the industry – are now out of work. While workers in professional services have been able to shift to a work-from-home model, those who require direct contact with customers in public spaces, such as waiters and kitchen staff, have received no quarter from the coronavirus’ effects. The St. Louis Fed estimates 66.8 million people are working in occupations that are at high risk for layoffs.
More than 80% of the job losses experienced in March occurred in lower-paying sectors of the economy, a cohort that is no stranger to the challenges of meeting its monthly financial obligations. As those obligations are dropped at the lowest level of the economy, they have the potential to pile up and, depending on the severity of the current crisis and the inability of Americans to start paying their rents, mortgages and bills again, calcify, effectively entombing the U.S. economy in unpayable debt.
That’s not a scenario Eric Fox, vice-president of statistical and economic modelling at Veros, envisions. While Fox sees the COVID-19 fallout as more than a bump in the road, he doesn’t see a catastrophic collapse ahead for either the US job or housing markets.
“Those service sectors are going to come back, clearly, because what’s going to happen at some point is the stay-in-place or social distancing guidelines are going to be softened, and restaurants and hotels will open and people will start travelling for business again,” he says.
No one is expecting any of the hardest-hit sectors to experience a 100% recovery, but Fox feels it is inevitable that once Americans are allowed back to work a wave of hotel workers, food preppers and wait staff will find themselves back on level ground.
“The unemployment rate will plummet at that point,” Fox says. “It will still be high, but it’s not going to be the huge number we’re seeing now.”