US employers cut 701,000 jobs in the first two weeks March vs. just 10,000 expected, pushing the rate of unemployment from 3.5% to 4.4%. This data does not include almost 10 million people who filed for unemployment benefits in the last two weeks of March. The report indicates the beginning of a labor market collapse which is expected to push unemployment to record highs.
- The unemployment rate has risen 0.9% to 4.4% and is expected to rise to 16% by May with approximately 28 million jobs lost.
- For comparison, the Great Recession resulted in 8.7 million jobs lost over 25 months.
- The March jobs report does not cover the last two weeks of March and does not reflect the current situation, which has significantly worsened.
The coronavirus pandemic has led to a huge portion of the US economy entering a shutdown. With Las Vegas casinos closed for business as of March 18, 10% of the entire workforce of the state of Nevada has applied for unemployment benefits. Detroit auto manufacturers laid off 150,000 on the same day. Major companies like Marriot International, Macy’s Inc, Kohl’s Corp, and Gap Inc. have laid off or furloughed tens of thousands of workers in the last week, none of which is reflected in the March jobs report data.
New: America lost 701,000 jobs in March. This ends the country’s 10-year labor market expansion. The unemployment rate climbed to 4.4%, from 3.5%.
NB: The March jobs report does not yet reflect the past two weeks of record high jobless claims.
— Jim Sciutto (@jimsciutto) April 3, 2020
The Congressional Budget Office estimates unemployment rates in excess of 10% in Q2 220, with similar projections from S&P Global and other institutions. S&P Global’s chief economist Beth Ann Bovino projects 17 million jobs lost in the coming months however, with unemployment at 13.5%. She believes it the labor market will be unable to recover the lost jobs until 2022, and factoring in population growth, the unemployment rate will be unable to recover until 2023. Oxford Economics forecasting firm predicts a 16% rate of unemployment by May. The highest ever rate of monthly unemployment was 10.8% in 1982.
“There’s no comparison to this shock,” said Gregory Daco, Oxford’s chief U.S. economist. “The sudden drop in economic activity is like what you’d see in an area after a natural disaster or a terrorist attack, but it’s occurring across the entire country.”
IHS market forecasts less extreme labor market conditions, although predicts still above 14 million lost jobs by December. IHS Markit’s chief economist Joel Prakken concurs with the 10% unemployment rate estimate, but believes some businesses will fare better than others, offsetting some of the losses.
“I think there will be more of an offset than some realize,” he said, adding that “The recovery will be much faster than from past downturns.”
Gold prices have ticked upward following the news of massive job losses throughout the US labor market. Spot gold last traded at $1,615.44/oz, down -0.63% on the day with a high of $1,619.96/oz and a low of $1,608.38/oz. The reaction in the precious metals markets has been relatively muted, as the March jobs report is not a current reflection of the labor market, and many traders are likely waiting for the April report.
Nomura economists stated that “We do not expect that acute stress to be reflected in the employment report released on Friday. The March employment report is likely to be a poor preview of what lies ahead.”
"The April report will be far worse," said Adam Button, managing director at Forexlive.com