The nation’s lengthy streak of job growth has ground to an abrupt halt as the economic fallout from the ongoing coronavirus pandemic begins to become clear.
The Bureau of Labor Statistics (BLS) reported that total nonfarm payroll employment across the country plummeted by 701,000 in March. It was the first time the American economy lost jobs since September of 2010, bringing to an end a record 113 consecutive months of job creation, more than twice the previous high.
The unemployment rate likewise suffered, jumping to 4.4% after hovering around historically low levels for many of the last few months. It was the largest single-month jobless rate hike since 1975, bringing unemployment to its highest level since August 2017.
Overall, it was the worst month for jobs since the Great Recession, with the steepest monthly drop since 2009.
“Job losses spiked in March, led by almost half a million fewer jobs in restaurants and hospitality, clearly one of the hardest hit sectors in the economy thus far,” said Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association. “The jump in the unemployment rate by almost a full percentage point exceeded expectations, but only points to the level of distress among many households.”
Indeed, leisure and hospitality saw a stark decline, shedding 459,000 jobs between February and March. Other service-providing segments, like healthcare and social assistance, professional and business services, and retail trade likewise suffered heavy declines. Mark Fleming, chief economist for First American Financial Corp., called it “the Great Recession for the services industry.”
“One hundred thirty-one million workers in the overall service sector are 86 percent of total nonfarm employment,” he said. “Retail and restaurants are 10.3 percent and 8.1 percent of total non-farm employment respectively. A shock to the services sector this large is like nothing we’ve ever seen before.”
As for the impact on housing, the real estate industry will feel the effects of 29,000 lost jobs in construction. Employment in the industry had been on an upswing, growing by 211,000 over the previous 12 months. So far, though, residential construction has yet to feel the squeeze, with the bulk of March losses coming in nonresidential building, which bled 11,000 jobs, and heavy/civil engineering construction, which lost another 10,000.
“Although construction employment declined last month, there was a small increase in residential construction, with the decline driven by nonresidential builders. When housing demand recovers later this year, we will once again be facing a supply shortage, so it is good to see that homebuilders are continuing to hire,” Fratantoni said.
Fratantoni also noted that “the report showed almost an additional 1.5 million households now working part-time when they would rather have full-time hours. The decline in the participation rate already indicates that some workers are stepping back from even looking for a job as the pandemic crisis continues.”
The dismal employment numbers for the month compound the burgeoning wave of Americans applying for unemployment in the wake of coronavirus-related layoffs and furloughs.
“With yesterday’s jobless claims of 6.6 million added to last week’s 3.3 million claims, six percent of the labor force has claimed unemployment benefits,” Fleming observed.
Fratantoni found some solace in the fact that many of the layoffs reported by the BLS were indicated to be (hopefully) short-lived.
“Many respondents in the household survey indicated that they are on temporary furlough,” he said. “This does provide additional support for our forecast of a ‘V-shaped’ path for the economy, the job market, and the housing market. We do expect those unemployed to be called back to their jobs when the crisis abates.”
Still, economists generally agree that the job situation is likely to get worse before it gets better.
As bad as this month’s employment numbers were, given the rapid jumps in claims, we fully expect that next month will show even larger job losses,” Fratanoni said. “This weakness will result in a drop in demand for purchase mortgages, but we do expect continued strong demand for refinance loans over the next several months, given the record low level of mortgage rates.”
“This report doesn’t cover the most recent weeks and understates the current reality,” Fleming concurred. “This recession is unique in the speed of its development and that it is driven by the service sector, instead of business investment.”