WASHINGTON (AP) – A gloomy glimpse of the sudden collapse of the US labor market appeared on Friday with a report that employers cut hundreds of thousands of jobs last month due to the viral epidemic that brought the economy almost stalled.
The loss of 701,000 jobs, reported by the Ministry of Labor, ended nearly a decade of uninterrupted job growth, the longest streak of its kind ever recorded. The unemployment rate jumped from a low of 3.5% to 4.4% in 50 years in March – the largest month-over-month increase in the unemployment rate since 1975.
And this is just a preview of what will happen.
Economists expect record 20 million losses and unemployment rate of around 15%, the highest in years, for April employment report to be released in early May 1930.
The sheer scale of the layoffs is wreaking havoc on the economies of the United States and abroad, which are said to be in deep recessions. As more and more people lose their jobs – or fear they will – their consumer spending will decrease. This drop in spending, which is the main driver of the economy, is putting pressure on businesses that are still in business.
Economists hope that an extraordinary series of congressional and Federal Reserve bailouts will help stabilize the US economy in the months to come. The main goals of the recently promulgated $ 2.2 trillion congressional rescue program are to quickly get money into people’s hands and to encourage companies to avoid job cuts or to quickly recall dismissed employees.
The package includes an additional $ 600 a week in unemployment benefits in addition to regular government payments and ideally will allow millions of new unemployed people to pay their rent and other bills. But that will not compensate for the wide range of expenses that Americans generally incur and that have now been lost – from dining out and paying gym memberships to buying new furniture, cars and electronic gadgets. Indeed, Oxford Economics says that for the April to June quarter, this decline will likely result in the largest quarterly drop in consumer spending ever recorded.
Katharine Abraham, an economist at the University of Maryland, said that if the extra help succeeds in helping many unemployed people avoid excessive debt, “when businesses reopen … they should be able to spend money.”
Yet even taking into account government intervention, Joel Prakken, chief economist of the United States at IHS Markit, predicts that the economy will contract sharply in the quarter from April to June – by 26.5% per year, the worst record ever since the First World War. II.
Many economists say additional government support will be needed, especially if the virus persists until the end of the summer.
Job losses in March were probably even greater than what was reported on Friday, as the government questioned employers before the biggest layoffs in the past two weeks. Almost 10 million Americans claimed unemployment benefits in the last two weeks of March, far exceeding the figure for any corresponding period recorded. These layoffs will be reflected in the April job report.
“This is an ugly jobs report, showing that the pain in the economy started in early March, long before the surge in initial weekly job demand data,” said Joseph Song, economist at Bank of America Securities. “It will get worse in future reports.”
Brad Hershbein, a senior economist at the Upjohn Institute for Job Research, said the job loss last month likely reflected the nervousness of companies that had cut hiring before the deluge of layoffs.
A sign of the painful scale of the job losses is likely to come to light: in its nearly decade-long recruiting streak, the US economy created 22.8 million jobs. Economists expect the April employment report released in early May to show that all of these jobs could have been lost.
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Low-income service workers were hit hard by job losses in March, with restaurants, hotels and casinos accounting for about two-thirds of them – a loss of 459,000 jobs. Retailers lost 46,000.
Yet layoffs have also started to infiltrate many other sectors of the economy. Doctors’ offices have cut 12,000 jobs, most according to records dating from 1972. Law firms have cut 1,700 jobs. Banks and real estate companies have also lost jobs.
Many employers have reduced the working hours of some employees. The number of part-time workers who would prefer full-time work jumped by a third in March to 5.8 million.
Bridget Hughes had her work hours cut in half before being forced to take two weeks off from Burger King and isolate herself after her aunt tested positive for COVID 19. She will be quarantined until next week. The restaurant where she worked in Kansas City, Missouri, has cut about two-thirds of its staff and offers only driving service. Hughes, 49, does not know when she can return to work.
She applied for unemployment benefits, but state officials told her it could take up to 30 days before her claim was processed and her first check was issued.
“We were already living paycheck to paycheck,” she said. “I don’t know if we’re going to make rent this month. We have a hard time putting food on the table. “
Yet layoffs have also started to infiltrate many other sectors of the economy. Doctors’ offices have cut 12,000 jobs, most according to records dating from 1972. Law firms have cut 1,700 jobs. Banks and real estate companies have also lost jobs.
Many employers have reduced the working hours of some employees. The number of part-time workers who would prefer full-time work jumped by a third in March to 5.8 million.
Bridget Hughes had her work hours cut in half before being forced to take two weeks off from Burger King and isolate herself after her aunt tested positive for COVID 19. She will be quarantined until next week. The restaurant where she worked in Kansas City, Missouri, has cut about two-thirds of its staff and offers only driving service. Hughes, 49, does not know when she can return to work.
She applied for unemployment benefits, but state officials told her it could take up to 30 days before her claim was processed and her first check was issued.
“We were already living paycheck to paycheck,” she said. “I don’t know if we’re going to make rent this month. We have a hard time putting food on the table. “
A key determinant of the future of the economy will be whether companies can survive the closure and quickly re-hire workers who consider themselves temporarily laid off. If so, it would help the economy to recede and avoid the kind of weak recovery that followed the last three slowdowns.
But if the virus epidemic forces businesses to remain closed until the end of the summer, many are at risk of going bankrupt or will not have the money to re-hire their former employees. This would mean that many workers who now consider themselves on temporary layoff could lose their jobs.
So far, some large and small businesses are still paying for health care benefits and staying in touch with their recently laid-off workers, a slightly optimistic sign amid the deluge of job cuts.
However, many are worried about the permanent disappearance of their jobs.
Megan-Claire Chase, 43, of Dunwoody, Georgia, was laid off a week ago from her job as a marketing manager in a recruiting company. Chase, a four-year-old cancer survivor, was laid off in 2008 and it took two years to find a job. This time, she is even more afraid.
“There is so much uncertainty,” she said. ″ How do you bounce? There is no calendar because there is no history. “
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AP Retail editor Anne D’Innocenzio contributed to this report from New York.
But if the virus epidemic forces businesses to remain closed until the end of the summer, many are at risk of going bankrupt or will not have the money to re-hire their former employees. This would mean that many workers who now consider themselves on temporary layoff could lose their jobs.
So far, some large and small businesses are still paying for health care benefits and staying in touch with their recently laid-off workers, a slightly optimistic sign amid the deluge of job cuts.
However, many are worried about the permanent disappearance of their jobs.
Megan-Claire Chase, 43, of Dunwoody, Georgia, was laid off a week ago from her job as a marketing manager in a recruiting company. Chase, a four-year-old cancer survivor, was laid off in 2008 and it took two years to find a job. This time, she is even more afraid.
“There is so much uncertainty,” she said. ″ How do you bounce? There is no calendar because there is no history. “
___
AP Retail editor Anne D’Innocenzio contributed to this report from New York.
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