The US economy shed 701,000 jobs in March, abruptly ending a historic 113 straight months of employment growth as stringent measures to control the novel coronavirus outbreak shuttered businesses and factories, confirming a recession is underway.
The Labor Department’s closely watched employment report on Friday did not fully reflect the economic carnage being inflicted by the highly contagious virus. The government surveyed businesses and households for the report in mid-March, before a large section of the population was under some form of a lockdown, throwing millions out of work.
William Beach, commissioner of the Labor Department’s Bureau of Labor Statistics acknowledged this short-coming in a statement and also noted that data collection for the employment report was adversely affected by the coronavirus. But Beach also said, “we still were able to obtain estimates from our two surveys that met BLS standards for accuracy and reliability.”
The plunge in payrolls, which was the steepest since March 2009 and snapped a record streak of employment gains dating to September 2010, was led by 459,000 job losses in the leisure and hospitality industry, mainly in food services and drinking places. There were also decreases in health care and social assistance, professional and business services, retail trade, manufacturing and construction payrolls.
Economists polled by Reuters had forecast nonfarm payrolls falling by 100,000 jobs last month. Adding a sting to the report, the economy created 57,000 fewer jobs in January and February than previously reported.
The worst is still to come
The worst is still to come, with a majority of Americans now under “stay-at-home” or “shelter-in-place” orders. A record 10 million Americans filed claims for unemployment benefits in the last two weeks of March. Economists expect payrolls will sink by at least 20 million jobs in April, which would blow away the record 800,000 tumble during the Great Recession.
“We are just seeing the tip of the iceberg when it comes to the collapse of the labor market,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania.
Stocks on Wall Street fell, while U.S. Treasury prices rose. The dollar was up against a basket of currencies.
The report could sharpen criticism of the Trump administration’s handling of the public health crisis, with President Donald Trump himself faulted for playing down the threat of the pandemic in its initial phases.
Economists said the jobs bloodbath underscored the urgency for the U.S. Congress to consider additional fiscal stimulus following a historic $2.3 trillion package signed last week by Trump, which made provisions for companies and the unemployed. Both Trump and U.S. House of Representatives Speaker Nancy Pelosi have floated an infrastructure stimulus.
Separately, the Federal Reserve has undertaken extraordinary measures to help companies weather the virus. The United States has the highest number of confirmed cases of COVID-19, the respiratory illness caused by the virus, with more than 243,000 people infected. Nearly 6,000 people in the country have died from the illness, according to a Reuters tally.
Marshall plan needed?
“Once the peak of the mountain in the virus infection is in sight, businesses will slowly return,” said Sung Won Sohn, a business economics professor at Loyola Marymount University in Los Angeles.
“But a V-shaped recovery is not likely. A Marshall Plan for the U.S. economy will be necessary,” he said, referring to the huge U.S. economic aid program to rebuild Europe after World War Two.
There are also perceptions that the recent fiscal package, which makes generous provisions for the unemployed, and the federal government’s easing of requirements for workers to seek benefits could encourage some not to work.
The unemployment rate rose 0.9 percentage point, the largest single-month change since January 1975, to 4.4 percent in March. The BLS said the rate could have been 5.4 percent if it were not for a misclassification error during the survey of households.
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