Unemployment surged to 14.7% in April as the US lost a record 20.5 million jobs
- The US Bureau of Labor Statistics on Friday said the US unemployment rate spiked to 14.7% in April as the coronavirus forced a widespread US economic shutdown. That's the highest level since the Great Depression.
- The data also showed nonfarm payrolls contracted by 20.5 million in April, by far the most on record.
- The dismal report shows just how rapidly the coronavirus pandemic has devastated the labor market and pushed the US economy into a recession.
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The coronavirus pandemic led to record jobs lost in April and sent the unemployment rate to its highest reading in nearly a century.
Employers cut 20.5 million payrolls in April, marking the largest-ever one-month contraction, according to a Friday report from the Labor Department. That's roughly 25 times the worst monthly decline seen during the last recession, from 2007 to 2009. It also dwarfs the previous record, set in 1945 around the end of World War II.
Meanwhile, the unemployment rate surged to 14.7%. That's the highest since the Great Depression of the 1930s, according to Labor Department data dating back to the 1940s, and National Bureau of Economic Research figures before that.
Just two months prior, in February, the unemployment rate was 3.5%, a roughly 50-year low.
The dismal report shows just how rapidly the coronavirus pandemic has devastated the labor market and pushed the US economy into a recession since states shuttered nonessential businesses, sent workers home, and told consumers to practice social distancing to curb the spread of COVID-19.
Amid the sudden downturn, the government has gone to tremendous lengths to curb economic fallout from such shutdowns. At the end of March, President Donald Trump signed the $2 trillion Cares Act into law, expanding unemployment benefits, sending direct checks to Americans, extending aid to beleaguered industries, and giving small businesses loans to protect payrolls.
However, the Paycheck Protection Program had problems with applications, and ran out of $350 billion of funding in just two weeks. An additional $320 billion was later sent to the program.
The Federal Reserve has also already gone beyond the playbook in deployed during the last recession, allocating trillions of dollars to help state and local governments and businesses across the country. The central bank has vowed to continue its stance to do whatever it takes to protect the economy.
A rapid deterioration
Despite these immense efforts, the labor market has still taken an extreme hit amid staggering layoffs vastly reduced hiring. In the seven weeks since massive coronavirus-induced layoffs began, more than 33 million Americans have filed for unemployment insurance, and about 25% of all job postings have evaporated, according to Glassdoor data.
"We saw shifts overnight," Becky Frankiewicz, president for North America of ManpowerGroup, an employment agency, told Business Insider. "It's the fastest reallocation of labor since World War II."
Jeff Crivello, CEO of Famous Dave's parent company, BBQ Holdings, had to make the "heartbreaking" decision to furlough 2,700 employees, roughly 85% of staff in mid-March, he told Business Insider.
"We believe that was the only solution to keep the company solvent," he said. He's hopeful that the company will be able to bring back as many of those workers as possible as the economy slowly opens up, but said some Famous Dave's locations will be closed permanently.
That will leave some workers on the sidelines in a rapid shift.
"Going into the pandemic,the restaurant industry was way understaffed," Crivello said. "If you talked to any restaurateur they would tell you their one problem was finding labor, and within 24 hours it became way overstaffed."
Actual unemployment is likely much higher than the print
As shocking as the headline unemployment number is, economists caution that it's likely an undercount of economic pain. That's at least partly because the Bureau of Labor Statistics doesn't include workers who are unemployed but not actively looking for a job in the headline unemployment rate.
Even though there are industries that are still hiring, such as grocery stores and warehouses, the health crisis has kept some would-be job seekers on the sidelines.
"I don't think many people want to try to find a new job during a pandemic," said Nick Bunker, an economist at Indeed.
It's also difficult to make plans, when there's still such widespread uncertainty. Colin Gold, a carpenter who makes sets for shows in New York, said he's contemplated pivoting some of his skills, just in case live theatre doesn't come roaring back. He began filing for unemployment in late March, but hasn't applied to any other jobs or actively looked for other work.
"For the past month I've more or less been dealing with my own anxiety," he said. "I haven't quite launched into preparing for the future."
Other measures of unemployment that might paint a more comprehensive picture, including the U-6 reading, which counts discouraged workers that have stopped looking for a job and part-time workers seeking full time employment.
During the Great Recession, economists focused on this measure because of its wider definition of unemployment, according to Ryan Sweet, a senior economist at Moody's analytics. He estimates that U-6 could reach 25% to 30% in the next few months.
"But, there are going to be some people that don't fall into any of the categories that will be captured by U-6, even though they're technically unemployed," he said.
As the economy reopens, people will begin going back to work. But will it ever be the same?
There are people who are ready to go back to work. As state economies begin to slowly reopen, businesses should bring workers back and hopefully resume hiring, bringing even more people back into the labor market.
Cliff Rankin is a mechanic with nearly three decades of experience currently managing a fleet of shuttle buses for Fast Park, an airport parking service, in its Austin, Texas location. He had his hours reduced to 10 per week from 40 after non-essential travel was banned and Fast Park's revenues plummeted, the company told Business Insider.
He now works one day per week, and has been able to collect unemployment benefits under the expanded offerings from the CARES Act — his employer, and other similar companies, have not been eligible to apply for federal aid such as the PPP program.
While he's enjoying the break, he misses work.
"It's strange," Rankin said. "I'm ready to get back to my buses and take care of my babies."
Still, reopening the economy is likely to be slow and careful, and there's a lot of uncertainty about when the US will return to normal — or if returning to a pre-coronavirus world is even possible.
The longer that Americans go without paychecks, the less likely they are to spend. While there is certainly pent up demand for things such as haircuts and manicures, it remains to be seen how long it will take for consumers to feel comfortable going to a movie theater or a sporting event.
Economists don't expect record high unemployment to return to pre-coronavirus lows anytime soon.
"What's more concerning is that this is not a temporary spike," Lindsey Piegza, chief economist at Stifel told Business Insider. "It's likely that we remain elevated at 9% to 10% through the end of the year."
The coronavirus pandemic has brought change to the labor market that could be permanent, according to Piegza.
"There's a lot of structural adjustments that are going to be made in the coming year and that is going to keep a lot of pressure on that, on the labor market," she said.