The jobs report for March was terrible, as expected. Employers slashed 701,000 jobs, the worst wipeout since March 2009—the depth of the Great Recession. But this is going to get way worse, with job losses for April likely to be 10 or 20 times the awful March figure.
Oxford Economics predicts job losses in April will total 24 million. “With much of the US economy at a standstill,” the firm wrote in a research note, “the labor market has entered a traumatic period. The labor market free-fall has only just begun.”
If that forecast turns out to be correct, total employment in the United States would fall from 151.8 million workers now to around 128 million—the same employment level as in early 1999. Wiping out 21 years of job-market growth is unprecedented in modern times. At the lowest point in the 2007-2009 Great Recession, employment only fell back by 11 years. During the 1982 recession—when unemployment hit a modern record of 10.8% – layoffs pushed employment back by only four years.
We aren’t back to the economy of 1999, even if that’s where jobs level off. The mix of jobs has changed since then, with many new jobs in technology, for instance, and fewer jobs in manufacturing. The bulk of the job losses so far are in the travel, hospitality, retail, construction and business-service sectors. Some lost jobs could come back quickly if the recession is short. But there’s no indication yet how long this meltdown will last.
The crucial questions in the current recession are how quickly states can contain the virus, allowing businesses to reopen, and how quickly the unemployed can get back to work. It’s a race against time, since a business that might be able to last 2 months with little or no cash flow might not make it to 4 or 6 months. And economic damage will compound every week businesses stay closed and workers stay home.
The most rapid job loss in our lifetime
Economists think businesses could recover quickly if it only takes a month or two to contain the virus and determine who’s sick and needs to be quarantined. The problem is a huge shortfall of tests for the virus and the processing capacity to widespread testing. Letting people return to work could require multiple coronavirus tests per person in hotspots, to check people on a recurring basis and assure they’re not infected. Public health experts also say it’ll be necessary to do random tests on samples of the entire U.S. population, to determine the prevalence of the virus and establish baselines for when it’s safe for people to move around.
We’re nowhere near the point yet. Abbott Labs and four other firms are now producing the kind of rapid test that will help to start containing the virus. But the United States is behind the curve, with only abut 1.3 million tests conducted so far. It will take months for test production to ramp up, meanwhile. And the University of Washington’s forecasting model doesn’t see death and infections flattening out until around June 1. Without aggressive new measures, it would be some time after that before businesses could comfortably reopen.
For President Trump, the unfolding disaster is a reelection nightmare. Just two months ago, Trump’s plan was to run on a strong economy, a booming stock market and expanding wealth. Now he has to explain away the most rapid job loss in anybody’s lifetime. Even during the Depression in the 1930s, jobs didn’t vanish as quickly as they are now.
Economists do see a recovery, as various virus countermeasures start to slow the spread. Economic output and employment could be back to pre-virus levels by next year or the year after. But there will be a lot more bad news before a recovery comes into focus.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. Confidential tip line: [email protected]. Encrypted communication available. Click here to get Rick’s stories by email.