Private companies terminated 27,000 positions for the period through March 12, before the worst impact of the coronavirus outbreak was felt, according to the latest data from ADP and Moody’s Analytics. While these positions have likely been ended for the foreseeable future, the actual number of people out of work is much higher. Three million Americans applied for unemployment benefits in a single week earlier this month, the highest figure by far in the history of the country.
- US firms cut 27,000 jobs in March, before the coronavirus pandemic severely disrupted the economy.
- ADP reported 179,000 new jobs added in February, entirely preceding the US outbreak.
- The headline figure is far lower than expected, with a decline of up to 125,000 jobs forecast.
The period up to March 12 saw 27,000 jobs cut by private companies, much fewer than the 125,000 lost jobs expected. The ADP count for March, as well as Friday’s upcoming nonfarm payrolls report, cover the period of time before the US government implemented virus containment measures that led to many businesses shutting down or scaling back throughout the country. February ADP figures were revised down from 183,000 to 179,000.
While the ADP data does not reflect the current state of the market, it does indicate that there was already a mild downturn in the labor market which had been driving the longest ever period of economic expansion in US history.
— Noah, King Of The Troll Hunters (@NoahJamesBangs) April 1, 2020
That expansion is almost certainly due to come to a close with the explosion of the coronavirus in the US, now the global epicenter of the outbreak. Weekly initial jobless claims provides a more current reflection of the labor market, with over 3 million jobless claims last week and an additional 3 million expected this week. The St. Louis Federal Reserve has forecast layoffs of up to 47 million with an unemployment rate of 32%, although this is a less conservative outlook on the possible consequences of the coronavirus outbreak, and other forecasts are less extreme.
Small Businesses Were Already Struggling
The net reductions in the payroll were all in the small businesses category. Small businesses cut 90,000 jobs in the period through March 12, with 66,000 of those coming from very small businesses (VSBs) of 25 employees or fewer. Medium-sized businesses added 7,000 positions, and large businesses added 56,000 jobs before the outbreak.
Trade, transportation, and utilities lost 37,000 positions, followed by construction with 16,000 jobs cut and administrative and support services, which lost 12,000 jobs. Professional and technical services saw an increase of 11,000 positions, and manufacturing rose by 6,000. Overall, service industries cut 18,000 jobs and goods producers lost 9,000.
Gold prices have held steady following the release of the ADP data, having already slipped back below $1,600. Spot gold last traded at $1,580.64/oz, down -0.17% on the day with a high of $1,599.36/oz and a low of $1,570.72/oz. Gold met resistance at the crucial $1,600 mark earlier in today’s session despite fairly downbeat news and sentiment throughout the market.
US president Donald Trump acknowledged the severity of the coronavirus outbreak on Tuesday afternoon, stating that even with social distancing measures, an estimated 140,000 to 240,000 Americans will die from the illness. President Trump stated that it would be a “very rough” few weeks, and that the virus outbreak was expected to peak in mid-to-late April. The best case scenario for the US economy is a recovery beginning in May, arguably contributing to the use case for gold as a safe haven asset.