The April employment report Friday represented the full effect of the COVID-19 shutdown, with payrolls posting the largest decline on record and the unemployment rate rising to the highest level in the series back to 1948.
While employment conditions will not drastically improve until the crisis is over, it is possible that the federal government’s Payroll Protection Plan has encouraged some business to hold off further on layoffs, and in some case rehire released workers in states that are on the verge of reopening.
Nonfarm payrolls fell by 20.5 million in April, slightly better than the 21.5 million decline expected. This followed a large 214,000 downward revision to payrolls in the previous two months. The actual payrolls level has lost nine years of gains over the last two months and sits at the lowest point since February 2011.
Private payrolls fell by 19.5 million after a decrease of 980,000 in government payrolls is excluded. Analysts had expected private payrolls to decline by 20.9 million.
While job losses were widespread, the leisure and hospitality sector, which includes hotels and restaurants, stood out. That sector lost 7.7 million jobs in April, while retail trade jobs fell by 2.1 million. These two sectors were the hardest hit by the mandated shutdowns.
The healthcare sector also shed 2.1 million jobs as social distancing and a ban on elective procedures temporarily closed doctor and dentist offices. There were also smaller job declines at hospitals and nursing home facilities, as nonessential employees were temporarily furloughed.
Manufacturing jobs fell by 1.3 million and construction jobs fell by 1.0 million. The goods sector lost a total of 2.4 million jobs, much smaller than the 17.2 million jobs lost in the services sector.
Hourly earnings surged by 4.7% after a 0.5% gain in March, putting the year-on-year rate at 7.9%. Most job losses occurred in lower-income hourly wage positions, so the average wage was lifted significantly when those jobs are removed from the count.
The unemployment rate jumped to 14.7% from 4.4% in March, below expectations for an increase to 16.4% – and it could have been worse.
The BLS noted that a large surge in workers labeled as “employed but absent from work”, a designation for workers who are currently not working (or getting paid) but expect to get their jobs back when the crisis ends. If those workers were counted as fully unemployed, the unemployment rate would have been 5 percentage points higher, according to the BLS.
The labour force participation rate fell to 60.2% from 62.7% in March, as many laid-off workers did not immediately re-enter the labour force as unemployed.
The wider U-6 rate, which represents those underemployed and those working part-time rather than full-time, jumped to 22.8% from 8.7% in March. Some businesses, particularly restaurants, cut back hours, but kept employees on staff to facilitate carry out and delivery.