The US Bureau of Labor Statistics released its monthly employment report this morning, showing the US jobs market posted its first month-over-month decline in March since September 2010. As seen in the chart below, total nonfarm payrolls fell by 701,000 during the March survey period, a sharp drop-off from what had been a sanguine trend. This ends one of the most impressive streaks of jobs gains in history at 113 months, one that weathered numerous economic shocks along the way.
The leisure and hospitality businesses were hardest hit. Social distancing orders, restaurant and bar closures, and a standstill in travel among other factors resulted in 459,000 net lost jobs for the industry. The overall unemployment rate jumped to 4.4% versus 3.5% the prior month. Average hourly earnings actually rose 0.4% month over month and 3.1% year over year, better than consensus estimates, but economists warn this may actually be a negative sign as it reflects the mass layoff of lower-wage workers.
A unique feature of this month’s employment survey is the emphasis being placed on the data collection window. The survey data actually only covers the first half of the month, when initial jobless claims were still relatively benign. In the final two weeks of March, which were not included in the employment survey, initial claims spiked and will add roughly 10 million additional unemployed workers to next month’s report. Unfortunately, this means the jobs data will get worse before they get better.
This economic downturn is the first of its kind in that the appropriate policy response has been to close the economy temporarily. This means that history likely will not provide us much of a reliable guide as to what a recovery might look like, but we still see reason for optimism that economic growth and trends in the job market could improve in the back half of 2020.
“The unprecedented pace with which economic fundamentals have deteriorated, while alarming, has the potential to set up a very powerful recovery,” said LPL Financial Senior Market Strategist Ryan Detrick. “If the COVID-19 virus can run its course over the next month or two and government stimulus measures take hold, we can put a lot of these people back to work quickly and limit longer-term economic fallout.”
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