Zillow Market Pulse: May 8, 2020

May 8, 2020

We knew it was coming, and still, the April jobs report was incredibly sobering. More than 20 million jobs were lost in April, with leisure and hospitality suffering massively. Almost 15% of the labor force is officially unemployed, a figure that almost certainly understates the amount of people actually out of work.

• A dark day for the U.S. labor market and broader economy

  •  20.5 million jobs were lost in April, the most in one month in recorded U.S. history.
  • 51.3% of the population has a job – also the lowest-ever recorded level.

• The official unemployment rate is 14.7%, but that is likely understated

  • Almost 10 million people employed in March were out of the labor force entirely in April.
  • If unemployment were calculated differently, the Bureau of Labor Statistics said, the unemployment rate would be closer to 20%.

• Job losses were highest amongst the nation's lowest-paid workers

  • 62% of April's loss in employment was felt by workers in industries paying below-average wages.
  • There are now fewer people working in leisure and hospitality than there were in 1990.

So what?

The devastation in the labor market we all witnessed in April and knew was coming was made official today. The 20.5 million net loss in jobs was more than ten times the previous record in the history of the U.S. employment report, while the official unemployment rate of 14.7% is nearly 50% higher than any other recorded level since World War II. Just over half of the population has a job – the lowest level on record – with only 44% of the population working full-time hours. The share of prime-working aged people with a job fell to just under 70%, the lowest level since 1975. Once again, the leisure and hospitality sectors bore the biggest brunt of the losses. Almost 8 million jobs were lost in April in those areas, almost half (47%) of the entire industry, bringing sector-specific unemployment rate to a whopping 39%. There are now fewer employed people in leisure and hospitality than there were 30 years ago. The astounding list of statistics is seemingly endless, but they all drive home the fact that the labor market has undergone a devastating stretch, and almost all of the job growth created since the end of the last recession has been erased.

Sadly, these numbers are likely to get worse in the coming months. The Bureau of Labor Statistics made a point in today's release of emphasizing the challenges of gathering accurate data in this difficult time, and the impact this has on the headline results. It is generally accepted that the reported 14.7% unemployment rate is understated, possibly by a lot. The unemployment rate measures the number of people who are unemployed as a percent of the entire labor force (those who are either working or looking for work) — not the entire working-aged population. About 9.5 million people left the labor force in April after being employed in March, a move that omits them from the official unemployment calculation. Also, the BLS was sure to point out that the number of people who are recorded as employed but absent from work for "other reasons" — a catch-all category generally defined as "reasons other than illness, vacation, weather or labor dispute" — are likely not working and should be counted as unemployed. Doing so would push the official unemployment rates up by almost 5 percentage points to between 19% and 20%. Other estimates suggest that today's overall job loss figures will be revised down sharply in the coming months, once more information is gathered.

The question now is when — and whether — the labor market can recover. One possible silver lining in today's report was that 80% of the increase in unemployment was due to layoffs labeled as temporary, and that those workers expect their jobs to resume in the coming months. Preventing these furloughs from becoming temporary layoffs is arguably the most crucial aspect of any path to recovery for the labor market. Even so, more than 60% of April's job losses occurred in occupations that generally pay below-average wages and/or offer more-limited hours. These sectors were already largely struggling to grow wages through the most recent economic expansion, and these workers were extremely vulnerable well before the crisis hit. As a result, calls are emerging for more direct government support for businesses, in order to prevent bankruptcies and ensure that temporarily laid off employees have a job to return to once this nightmare ends.

 

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