COVID-19 Closures Slam Job Market; How Long Will it Take to Recover?

May 08, 2020

The number of payroll jobs fell by 20.5 million in April, with nearly every industry suffering historic job losses and the official unemployment rate skyrocketing to 14.7 percent.  Almost one-half of the working age population is now out of work.

The actual unemployment rate could be over 19 percent, according to the Bureau of Labor Statistics, if the workers who were recorded as employed but absent from work due to “other reasons” had been classified as being temporarily laid-off.

Just over one-half of the working age population is employed (51.3%), a level not seen since the Great Depression.  Job losses disproportionately impacted production and nonsupervisory employees and those under age 25.

Permanent job losers rose by 464,000 and those on temporary layoff jumped by 16.2 million.  The biggest question going forward is how many of those on temporary layoff will become permanent job losers this summer.

The number of people working part-time because full-time work is unavailable nearly doubled from 5.7 million to 10.9 million in April.

Only the federal government did not have a job loss—all other industries suffered significant losses except for utilities, which declined by only 3,300 jobs.

Damage not over yet:  The April report was for data obtained around the middle of the month and does not count layoffs that occurred towards the end of the month.  The longer states remain closed, the greater the long-term damage to the labor market will be.

Time to recovery?  Some economists are predicting it will take five years to restore all of the jobs lost in the past two months.  Economic growth may recover by the end of 2021, but businesses will likely seek some labor efficiencies to restore their balance sheets.  Bars and restaurants have shed 5.9 million jobs over the past two months, and even if most of them reopen—and many will not—social distancing restrictions and other business adaptations are likely to limit job growth well into the future.  Automation and AI implementation may also limit future job gains.