The US economy lost a staggering 20.5 million jobs in April, the steepest plunge in payrolls since the Great Depression and the starkest sign yet of how the coronavirus pandemic is battering the world’s biggest economy.
- US jobless rate surged to an historic 14.7 per cent, up from just 4 per cent in a month
- 5 million Americans had their hours reduced as underemployment reached a record high
- President Donald Trump said job losses were not surprising and they would be back “very soon”
The Department of Labor’s closely watched monthly employment report also showed the unemployment rate surging to 14.7 per cent last month, shattering the post-World War II record of 10.8 per cent touched in November 1982.
The bleak numbers strengthen analysts’ expectations of a slow recovery from the recession caused by the pandemic, adding to a pile of dismal data on consumer spending, business investment, trade, productivity and the housing market.Coronavirus questions answeredBreaking down the latest news and research to understand how the world is living through an epidemic, this is the ABC’s Coronacast podcast.Read more
The report underscores the devastation unleashed by lockdowns imposed by states and local governments in mid-March to slow the spread of COVID-19, the respiratory illness caused by the virus.
“Our economy is on life support now,” said Erica Groshen, a former commissioner of the Bureau of Labor Statistics and now a senior extension faculty member at the Cornell University School of Industrial and Labor Relations.
“We will be testing the waters in the next few months to see if it can emerge safely from our policy-induced coma.”
Lost jobs will be ‘back very soon’, Trump says
After the Trump administration was criticised for its initial reaction to the pandemic, President Donald Trump has been eager to reopen the economy, despite a continued rise in COVID-19 infections and dire projections of deaths.
“It’s fully expected, there’s no surprise … even the Democrats aren’t blaming me for that,” Mr Trump said when asked about the “terrible” job figures in an interview with Fox News.
“Those jobs will all be back, and they’ll be back very soon.”
The collapse of the job market has occurred with stunning speed. As recently as February, the unemployment rate was a five-decade low of 3.5 per cent, and employers had added jobs for a record 113 months. In March, the unemployment rate was just 4.4 per cent.
The Government’s report noted that many people who lost jobs in April but did not look for another one were not even counted in the unemployment rate.
The impact of those losses was reflected in the drop in the proportion of working-age Americans who have jobs — just 51.3 per cent, the lowest on record.
In addition to the millions of newly unemployed, 5.1 million others had their hours reduced in April.
That trend, too, means less income and less spending, perpetuating the economic downturn. A measure of underemployment — which counts the unemployed plus full-time workers who were reduced to part-time work — reached 22.8 per cent, a record high.
Stock market more optimistic
However, major US stock indexes jumped on Friday and logged solid gains for the week, with all 11 S&P 500 sectors positive, led by the beaten-up energy sector, which gained 4.3 per cent.
A 2.4 per cent gain in Apple shares also lifted the indexes after the iPhone maker said it would reopen a handful of US stores starting next week.
“It’s tough to call the jobs report, which is what everybody was waiting for, anything but a complete calamity, but relative to expectations you can see some silver linings in there,” said Brian Nick, chief investment strategist at Nuveen, pointing to the large number of temporary layoffs.
“Except for the initial panic in the month of March, in general the markets are ignoring economic data for the most part and are looking more at data related to COVID-19,” Mr Nick said.
The Dow Jones Industrial Average rose 455.43 points, or 1.91 per cent, to 24,331.32, the S&P 500 gained 48.61 points, or 1.69 per cent, to 2,929.8 and the Nasdaq Composite about added 141.66 points, or 1.58 per cent, to 9,121.32.
The Nasdaq posted its fifth straight daily gain, its longest such streak since December 2019.
The Cboe Volatility Index, known as Wall Street’s fear gauge, fell 3.46 points to 27.98, its first close below 30 since February 26.
Financial markets on Thursday began pricing in a negative US interest rate environment for the first time.
Stocks have staged a sharp rebound since late March from the coronavirus-fuelled sell-off, helped by massive monetary and fiscal stimulus.
“People are watching closely to just see how this reopening process works,” said Keith Lerner, chief market strategist at Truist/SunTrust Advisory Services.
“On the margin, you are starting to hear businesses say that things are starting to look better from a depressed level.”
Economists warn of slow rebound in labour market
Though millions of Americans continue to file claims for unemployment benefits, April could mark the trough in job losses.
More small businesses are accessing their portion of an almost $US3 trillion ($3.6 trillion) fiscal package, which made provisions for them to get loans that could be partially forgiven if they were used for employee salaries.
020406080100Days since 100th case1001k10k100k1MCumulative known casessince 100th caseAustraliaChinaItalyJapanSingaporeUSS. KoreaTaiwanUKThis chart uses a logarithmic scale to highlight coronavirus growth rates. Read our explainer to understand what that means — and what we can learn from countries that have slowed the spread.
The Federal Reserve has also thrown businesses credit lifelines and many states are also partially reopening.
Companies like Walmart and Amazon are hiring workers to meet the huge demand in online shopping.
Truck drivers are also in demand, while supermarkets, pharmacies and courier companies need workers. Still, economists do not expect a quick rebound in the labour market.
“Given the expected shift in consumer behaviour reflecting insecurities regarding health, wealth, income, and employment, many of these firms will not reopen or, if they do reopen, hire fewer people,” said Steve Blitz, chief economist at TS Lombard in New York.
“This is one reason why we see the underlying recession extending through the third quarter.”
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Economists say the economy entered recession in late March when nearly the whole country went into COVID-19 lockdowns.
The National Bureau of Economic Research, the private research institute regarded as the arbiter of US recessions, does not define a recession as two consecutive quarters of decline in real gross domestic product, as is the rule of thumb in many countries. Instead, it looks for a drop in activity, spread across the economy and lasting more than a few months.