Massive Disruption in Labor Markets
Updated: Apr 5, 2020
The March employment report shows massive disruption in the labor market triggered by the coronavirus. And as awful as the payroll job loss numbers appear they pale in comparison to the record loss in household employment and surge in the number of people forced to work part-time.
In March, payroll employment fell 701,000, nearly 10 times greater than consensus estimates and far worse than the job loss of 27,000 in ADP employment released earlier in the week. The sharp drop in payroll employment last month was the largest monthly decline since the 800,000-job loss recorded in May 2009---near the end of the Great Financial Recession.
The employment statistics from the household survey were far worse. In March, household employment fell nearly 3 million. To put that in context, the drop in household employment in March 2020 was three times larger than any of the monthly job losses recorded during the Great Financial Recession.
Household employment is based on a survey of people, whereas payroll employment is a survey of business establishments. In other words, the household survey counts the number of people working, whereas the establishment survey counts the number of jobs (and many people hold more than one job).
At cyclical turning points, the household survey tends to flash “red” much sooner than the payroll survey. And that appears to be the case again in the current cycle.
Both surveys are conducted at the same time of each month: the payroll period that includes the 12th of the month. And what is noteworthy about the March household employment survey results is that people were losing jobs in record numbers even before the national emergency restrictions on work-life, social gatherings and travel were announced on March 13.
On top of the job loss, the household survey showed that 1.4 million workers in nonagricultural industries were forced to work part-time due to slack work or weak business conditions.
The 0.9 percentage point to 4.4% in the civilian unemployment understates the severity of the disruption in labor markets. That’s because of record number 1.6 million dropped out of the workforce. In other words, if all of the people that lost jobs in March remained in the labor force the jobless rate would have been nearly one percent higher at 5.3%.
The household employment results for March are a harbinger of what will appear in the payroll data in the coming months.