US Payrolls Fall by Most on Record

Economic Blog

Economists had braced market participants for massive job losses in today’s employment report, but that does not make the numbers any less eye-popping.

The US Bureau of Labor Statistics released its monthly employment report this morning, revealing that the domestic economy lost 20.5 million jobs in April. This is by far the largest contraction in the history of the data series, which goes back to 1939. To put that in perspective, prior to this month the largest monthly contraction came in September 1945, when the economy lost 1.96 million jobs.

This report is the first one to have a survey window fully capturing the impact of COVID-19. As we noted previously, the economic shutdown only impacted about half of the March report’s survey period, but that was still enough to end a 113-month streak of jobs gains. The full impact of a month of containment efforts came through in April. As seen in the LPL Chart of the Day, the unemployment rate rose to 14.7% last month, climbing to a level we have never seen in the post-war economy.

View enlarged chart.

“This recession is unique, but that might not be all bad news,” said LPL Financial Senior Market Strategist Ryan Detrick. “We’ve had to flip a switch on the economy, essentially frontloading an entire recession’s worth of damage into a couple months, creating some all-time dismal data. But that means we’ll eventually be able to flip it back on, supporting a robust recovery.”

The good news is that it may be hard for data to get too much worse from here, and we believe finding a bottom quicker may also mean we can start the recovery sooner. So far, job losses have been fairly localized in the hospitality and leisure industries, though all industries have been impacted. Furthermore, as LPL Chief Investment Officer Burt White noted on Twitter (link), the nature of the job losses demonstrates that most newly unemployed workers expect their situation to be temporary. If we are able to stop the damage from seeping too heavily into other segments of the economy, there is a real possibility of quickly regaining a majority of lost jobs and embarking on a strong economic recovery in the second half of 2020.

Unprecedentedly robust and swift monetary and fiscal stimulus measures bolster this belief, along with some optimism surrounding the prospects for new virus treatments and vaccines. States are also beginning to gradually reopen their economies in an attempt at economic self-preservation. Taken together, these factors may signal progress in the economic bottoming process. We will be watching closely to see how consumers respond, and whether gradually lifting shelter-in-place orders keeps new cases at manageable levels.


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