April 3, 2020
Executive Summary: US payrolls shed 701,000 workers in March, while the unemployment rate jumped to 4.4%. Although most industries were impacted, nearly 60% of the total job losses during March were by restaurants. Sadly, this report only captured a sliver of the coming pain as the data for this report was collected prior to most of the state-level shutdowns for the coronavirus (COVID-19), which began later in March.

Longer-Term Trend

US nonfarm payrolls declined by 701,000 in March. The first monthly job losses since September 2010, snapping an impressive 113-month streak. Revisions to the prior two months sliced off 57,000 jobs from the previously reported totals. The January figure was revised down by 59,000 to 214,000 from 273,000, but the February tally was revised up by 2,000 to 275,000 from 273,000. The six-month average plunged to 69,700 from 230,700.

The March increase of 0.9% is the biggest one-month jump in the unemployment rate since October 1949 when it spiked 1.3%.

Labor Force and Unemployment

The unemployment rate jumped by 0.9 percentage points to 4.4% from 3.5% in February, the largest one-month increase since October 1949. The all-in unemployment rate (U-6) also soared, up 1.7 percentage points to 8.7% from 7.0% in February. The labor force lost 1.63 million workers, pushing the total workforce down to 162.9 million. The labor force participation rate slipped to 62.7% in March from 63.4%.

Industry Trends

Both service-providing industries and goods producers lost workers, down 659,000 and 54,000, respectively. Just two segments were positive during March: government and information.

60% of the total job losses during March were by restaurants
Government added 12,000 workers, although 14,000 state-level job losses masked some hiring. The federal payrolls grew by 18,000, but 17,000 were temporary workers for the 2020 Census. Local-level education also added 8,000 positions in March.

The information segment added 2,000 workers, although the subindustries are unknown since these details are reported on a one-month lag.

On the downside, the leisure and hospitality segment was battered, losing 459,000 workers. Of those, 417,400 were restaurant employees.

Despite a remarkable record of job creation over the past two decades, even the education & health services segment shed workers. Prior to March, it had just five monthly job losses since January 1, 2000. Most of the March declines came within health care, with big chunks carved out of dental offices, rehabilitation services, and child day care.

Construction shed 29,000 workers, while manufacturing lost 18,000 jobs.

Wage & Worktime Trends

The average workweek for private employees slipped by 0.2 to 34.2 hours. Average hourly earnings for all employees rose 11 cents to $28.62, up 3.1% from a year ago, which was a touch above the February pace.

The average workweek for production and nonsupervisory workers—representing more than 80% of the US labor force—rose by 0.1 to 33.7 hours. Average hourly earnings for these workers rose 10 cents to $24.07, which is up 3.4% from a year ago. The average workweek in manufacturing fell 0.3 to 40.3 hours and overtime edged down 0.2 to 3.0 hours.

Although somewhat counterintuitive, we would not be surprised to see wage and worktime increases in the coming months for those workers who remain on the job since these workers are considered essential.

Bottom Line

As awful as the March jobs report appeared, it will be the first of many painful employment reports. We anticipate the massive wave of job losses associated with a typical recession to be concentrated in the next few months. For example, there were nearly 10 million initial jobless claims in the past two weeks. It took 29 weeks during late 2007 and mid-2008 to amass that many jobless claims. Similarly, we expect an eye-popping spike in the unemployment rate, which could triple or quadruple from here.

That said, we are hopeful that most US consumers and companies will have the wherewithal to weather the COVID-19 outbreak, especially with the assistance from the various recently-passed fiscal programs by the federal government.

Lastly, while this report enumerates the economic damage, it does not touch the personal devastation. Please reach out to your friends, colleagues and loved ones, offering comfort, compassion and support.

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