March Jobs Report: Ugly Numbers, Ugly Foreshadowing

The Bureau of Labor Statistics (BLS) monthly jobs report showed the U.S. unemployment rate shooting up from 3.5% to 4.4% in March, and non-farm payroll employment falling by 701,000 workers. The 0.9 percentage point increase in the unemployment rate is the fastest increase for a single month since the 1973-75 recession. The drop in employment abruptly ends 113 months of consecutive employment gains, and is the worst monthly drop in employment since April 2009, in the depths of the Great Recession. The full BLS summary can be found here:

The report was simultaneously 1) much worse than expected and 2) a frightening indicator of how much worse things are going to get in the April report.

To the former point, the median private sector forecast for this report was 82,000 job losses and a much smaller uptick in the unemployment rate to 3.7%, as reported by MarketWatch. Job losses came in worse-than-expected by almost an order of magnitude.

To the latter point, there’s a big caveat to this report: The BLS surveys for this report were conducted the week of March 8—March 14. That predates the recent staggering deluge of initial unemployment insurance claims: 3.3 million initial UI claims were filed for the week ending March 21 and 6.6 million initial claims were filed for the week ending March 28 (both on a seasonally adjusted basis, just like the headline BLS number in today’s report). Broadly speaking, the March jobs report essentially predates social distancing and stay-at-home orders. California was the first state to issue such an order on Thursday, March 19. As of yesterday, all but five states had issued some kind of lockdown order (six had ordered only partial stay-at-home orders). Related reading:

From the BLS: “It is important to keep in mind that the March survey reference periods for both surveys predated many coronavirus-related business and school closures in the second half of the month.”

Nonetheless, there were plenty of signs in the March report reflecting early yet severe economic fallout from the coronavirus. The leisure and hospitality sector got walloped, with 459,000 job losses, heavily concentrated in food services and drinking places (417,000 jobs). And the abrupt drop in payroll employment is especially staggering given that it effectively predates the rollout of stay-at-home orders. Visualization via Heidi Shierholz at EPI:

The BLS conducts two surveys: The Current Population Survey (CPS, or the “household survey”) and the Current Employment Statistics survey (CES, or the “establishment survey”). The employment figures I’ve quoted so far all come from the establishment survey of firms. (Here’s the BLS primer on comparing the two surveys.) The household survey showed the number of people self-reporting as employed plunge by 3 million, driven by 1.4 million people reporting as unemployed and another 1.8 million people leaving the labor force (this would include retirees, but could also include workers who lost jobs but are not counted as unemployed because they are not actively looking for work, thinking they will be rehired). During the Great Recession the biggest one-month drop in employment, as measured by the CPS, was 1.2 million jobs lost in January 2009.

And a lot of workers still classified as employed reported being absent from work. From the BLS: “If the workers who were recorded as employed but absent from work due to “other reasons”… had been classified as unemployed on temporary layoff, the overall unemployment rate would have been almost 1 percentage point higher.”

The household survey also indicated a big, unwanted cutback in hours for those still retaining a job: The number of people involuntarily working part-time for economic reasons (i.e., they want full-time employment) jumped by 1.4 million as well.

In another important caveat, the BLS warned that both the method and response rates for this survey were adversely affected by the coronavirus: “Data collection for both surveys was affected by the coronavirus. The household survey is generally collected through in-person and telephone interviews, but personal interviews were suspended during the collection period for the safety of interviewers and respondents. The household survey response rate, at 73 percent, was about 10 percentage points lower than in recent months… The collection rate for the establishment survey, at 66 percent, was about 9 percentage points lower than average.” So these data may be noisier and less of a clean apples-to-apples comparison with recent reports than usual.

Big picture: The U.S. labor market was deteriorating at a frightening and much-worse-than-expected clip even before the widespread rollout of stay-at-home orders. The April report will be astronomically worse. And labor market data to date only underscore that Congress is woefully far behind the curve…

Related recommended reading:

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