The US economy lost 701,000 jobs in March, even before the worst of the coronavirus shutdown

• The Bureau of Labor Statistics said nonfarm payrolls contracted by 701,000 in March as the coronavirus forced a widespread US economic shutdown.
• That marked a sharp decline from the revised number for February and was far deeper than the 100,000 job losses forecasted by economists. It's the first time that the monthly report has shown jobs lost since 2010.
• The report likely doesn't show the full extent of coronavirus-driven damage. Friday's report only includes data through March 14, meaning it does not count the last two weeks of the month, a period that saw 10 million Americans filed for unemployment insurance.
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The US labor market contracted in March for the first time since 2010 as the coronavirus forced a widespread US economic shutdown.

The Bureau of Labor Statistics said the US lost 701,000 nonfarm payroll jobs in March. That marked a sharp decline from the revised number for February and was far deeper than the 100,000 job losses forecasted by economists.

In addition, the US unemployment rate rose to 4.4% from 3.5% in February.

The report comes amid economic uncertainty due to the coronavirus pandemic. Throughout the month of March, the situation in the US rapidly deteriorated as the number of cases of COVID-19, the illness caused by the virus, spiked. On Thursday, global cases of COVID-19 passed 1 million, with more than 50,000 deaths.

"There's a psychological barrier that crossing or ending the positive job streak will have," Glassdoor economist Daniel Zhao told Business Insider.

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While the contraction is jarring, Friday's report likely doesn't show the full extent of coronavirus-driven damage. The report includes the week and pay period that ends March 14, so anyone that worked during that week is counted as employed, even if they were laid off mid-week.

Economic freeze

Since mid-March, a number of changes have been made that have sent the labor market and overall economy into a deep freeze. On March 16, President Donald Trump recommended strict guidelines to slow the spread of coronavirus that included closing schools, avoiding large groups, banning nonessential travel, and staying away from bars and restaurants. Initially, the measures were to last 15 days, but on Sunday were extended through April 30 by Trump.

The strict guidelines majorly slowed parts of the economy by encouraging consumers to stay at home and practice social-distancing. That led to massive spikes in unemployment insurance filings as non-essential businesses laid off workers. Over the last two weeks ending March 28, a record 10 million Americans filed for unemployment insurance as coronavirus layoffs spiked.

Hiring slowed at the start of March due to coronavirus

While Pantheon Macroeconomics economist Ian Sherperdson thinks the payroll number is "completely irrelevant" because of the time period it covers, the economy had already started showing signs of a slowdown in the first half of March.

It was then that some firms were beginning to send workers home to avoid spreading COVID-19. Those who work in service or close proximity to customers seem to be hit particularly hard, such as waiters, bartenders, entertainers, and those in hospitality and travel industries.

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In mid-March, Tom Gimbel, founder & CEO of LaSalle Network, a national staffing and recruiting firm in Chicago, Illinois, decided to shut his office and have his employees work from home because of coronavirus.

"It's changed our business in a couple of ways in the short term," Gimbel told Business Insider. He's seen a challenge in the administrative and clerical side of his temping business, where some companies are not immediately prepared to have employees work from home.

"You could get a client that says we need people. And then two days later, somebody tests positive in the office for coronavirus and they send all the people home," he said. If those workers aren't set up to do the job at home, they're out of luck, he said.

Some help is on the way

To combat the economic fallout of the pandemic, President Trump signed a historic $2.2 trillion fiscal stimulus package on March 27. The bill includes direct payment to many American households, relief for distressed businesses, and expands unemployment by adding as much as $600 a week to state benefits.

The bill will give consumers and businesses the ability to pay bills until it can reopen. Because of the expansion, many workers are now eligible for aid that would've previously been left out.

Economists aren't sure how the stimulus package coupled with coronavirus guidelines will impact the labor market over the coming months. Because people have been encouraged to avoid public places, workers may be sitting on the sidelines until the public health crisis passes. In addition, when expanded benefits actually reach people, they might be an incentive to wait to look for a job.

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Molly Surber, 25, was recently laid off from her waitressing position at Prime Quarter Steak House in Janesville, Wisconsin, when the restaurant closed due to the coronavirus outbreak. She filed for unemployment, but is waiting on approval, which could take about three weeks, she said. At the same time, her welding classes at a local technical college have been postponed as it's not possible to take them online.

She knows some local businesses are hiring, but is hesitant to apply for a job that would put her out in contact with others. As of Thursday, Rock County, Wisconsin, which includes Janesville, had 19 COVID-19 cases and one death.

"Do I want to expose myself to the public when I don't have to?" she told Business Insider. "It's a catch -22."

A future US recession and recovery

Many economists forecast further pain and an inevitable recession ahead. A majority are forecasting negative US gross domestic product in the second quarter, showing a contracting economy. As layoffs continue, the percent without jobs could spike into the teens: Bank of America is forecasting as many as 20 million job losses and a 15.6% unemployment rate in the "deepest recession on record."

Much of the economy's future also hinges on public health policy and how well social-distancing measures work to flatten the curve and slow the spread of disease.

"This is a shock no one could have anticipated, it is not a reflection on people's business models, and we just need to hold everything in place until people get better," Martha Gimbel, an economist at Schmidt Futures, told Business Insider.

She continued: "the best economic policy right now, it's public health policy. The best thing for the economy is for hospitals and doctors and nurses to feel like they have the resources they need to treat this disease," she said.

Going forward, economists are expecting that the US economy will see a gradual recovery that could be aided by more government stimulus.

"We can have a pretty strong surge back," Elise Gould, an economist at the Economic Policy Institute, told Business Insider. But she says that would require more aid.

She continued: "We should have aid flowing. It should end when the labor market data tells us that it no longer needs help."

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